Document:

FILM
      SUPPLY AGREEMENT

    
      
 

    

    between

    

    Rapak
      LLC (“Buyer”)

    
 

    and

    
 

    CTI
      Industries Corporation (“Seller”)

    
 

     

    December
      20, 2002

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    FILM
      SUPPLY AGREEMENT

    

    THIS
      FILM
      SUPPLY AGREEMENT (“Agreement”) is made effective as of December __, 2002, by and
      between CTI Industries Corporation, an Illinois corporation (“Seller”), and
      Rapak, LLC, an Illinois limited liability company (“Buyer”).

    

    RECITALS

     

    A.  Seller
      is
      a supplier of laminated film embossed using Buyer’s embossed chill roll and
      manufactured to Buyer’s Specifications (as defined below) (“Film”) and is
      willing and able to supply Buyer's requirements in the United States, Canada
      and
      Mexico for such Film subject to the terms and conditions set forth in this
      Agreement.

     

    B.  Buyer
      is
      willing to purchase from Seller its requirements for Film in the United States,
      Canada and Mexico.

     

    C.  Seller
      is
      manufacturing Film for Buyer in connection with Buyer’s production and sale of
      bags and/or pouches and/or packages (including form fill seal packages) with
      dispensing valves and/or fitments.

     

    D.  The
      parties desire to establish the terms and conditions under which Buyer will
      order and purchase Film from Seller, and Seller will sell and deliver Film
      to
      Buyer.

     

    NOW,
      THEREFORE, in consideration of the mutual promises and covenants contained
      herein and for other good and valuable consideration, the receipt of which
      is
      hereby acknowledged by both parties hereto, the parties hereto agree as
      follows:

    

    AGREEMENT

     

    1.  Definitions

     

    1.1  “Affiliate”
      means, with respect to a specified Person any Person that, directly or
      indirectly, through one or more intermediaries, alone or through an affiliated
      group, controls, is controlled by, or is under common control with such
      Person.

     

    1.2  “Change
      of Control” means (i) a sale, exchange or other disposition to an Independent
      Third Party or Independent Third Parties pursuant to which such Independent
      Third Party or Independent Third Parties acquire (whether by sale, merger or
      otherwise) 51% or more of the issued and outstanding capital stock of the
      Seller, (ii) an Independent Third Party individually acquires or Independent
      Third Parties collectively acquire the right, subsequent to the commencement
      of
      this Agreement, to appoint a majority of the directors to the board of the
      Seller or otherwise acquires or acquire de facto management and control of
      the
      Seller (iii) a sale of all or substantially all of the Seller’s assets (other
      than sales in the ordinary course of business); provided, however, that a merger
      or sale of all or substantially all of the business and assets of Seller, or
      a
      sale of stock of Seller in which the purchaser shall acquire 51% or more of
      the
      issued and outstanding stock of Seller, in which (i) the surviving entity or
      purchaser shall assume the obligations of Seller under this Agreement and (ii)
      the purchaser shall not be engaged in the manufacture or sale of bags (including
      but without limitation bag-in-box applications) and/or pouches and/or packages
      (including form fill seal packages for any liquid applications) , with
      dispensing valves and/or fitments, which compete at the relevant time with
      the
      business and/or customers of Buyer (“the Field”), shall not constitute a Change
      of Control.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

                                                                    

    
      1.3  “Independent
        Third Party” means any person who, is neither a Party nor an Affiliate of either
        of the Parties.

       

      1.4  “Party”
        means either Buyer or Seller and “Parties” shall be construed
        accordingly.

       

      1.5  “Person”
        means and includes any individual, corporation, partnership, association,
        limited liability company, trust, estate, or other entity.

       

      1.6  “Specifications”
        means the Film specifications set forth on Schedule
        1.6
        attached
        hereto or as varied by agreement between Buyer and Seller from time to
        time.

    

     

    2.  Sales
      and Purchase of Film.

     

    2.1  Sale
      and Purchase.
      Subject
      to the provisions of this Agreement, Seller agrees to sell and supply to Buyer
      and its Affiliates, and Buyer or its Affiliates agree to purchase from Seller,
      not less than Sixty-five Percent (65%) of all of Buyer’s requirements for
      Film used during the term of this Agreement for the manufacture, conversion
      or
      processing of certain products as set out in Recital C in the United
      States, Canada and Mexico, whether or not such manufacture, conversion or
      processing is by Buyer or any other Party. Notwithstanding the foregoing, this
      Agreement does not specify a minimum quantity of Film to be purchased by Buyer
      or its Affiliates, nor does this Agreement obligate Buyer or its Affiliates
      to
      purchase any quantity of Film. The purchase of Film pursuant to this Agreement
      will be by purchase order (each a “Purchase Order”) issued from time to time by
      Buyer or its Affiliates

     

    2.2  Forecasts;
      Maximum Quantity.
      Buyer
      will provide Seller one month prior to the commencement of each calendar quarter
      with forecasts of demand on a quarterly basis projecting the estimated amount
      of
      demand for the twelve (12) month period following the date of such forecast
      (the
“Rolling Forecasts”). The Parties acknowledge and agree that the Rolling
      Forecasts are intended solely for the purpose of assisting Seller in its
      planning and procurement of materials. Seller shall respond to the Rolling
      Forecasts within ten (10) business days by providing the Buyer with a
      detail of the impact on the utilization of Seller’s Egan laminator as used
      currently for manufacture of the Film or any additional or replacement
      laminators installed during the term of this Agreement (the “Laminator”) in
      relation to the capacity of the Laminator and with a written response setting
      out the maximum quantities which it is able to supply to Buyer for the period
      covered by the Rolling Forecast. Buyer will respond promptly and not later
      than
      five (5) business days with a written commitment of its demand for the
      quarter and its Purchase Order coverage. If the Buyer requires quantities of
      Film in excess of its written commitment during the quarter, Seller will use
      its
      best commercial efforts to manufacture such amounts of Film. The Parties hereby
      acknowledge and agree that the Buyer shall receive “most favored nation” status
      from the Seller with regard to the utilization of the Laminator’s capacity. For
      purposes hereof, “most favored nation” shall mean that the supply requirements
      of the Buyer under written Purchase Orders to Seller shall take precedence
      over
      the requirements of any and all other customers of the Seller which might
      involve the use of the Laminator; excluding commitments to customers by Seller
      under purchase orders received by Seller from such customers prior to the date
      of applicable written Purchase Orders from Buyer.

     

    
      
         

      

      
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    2.3  Inventory.
      Seller
      hereby agrees to maintain an inventory of Film at all times equal to an average
      of six (6) weeks’ consumption of Film by Buyer and its Affiliates as determined
      by the most recent quarterly forecast.

     

     

    2.4  Other
      Territories.
      Seller
      hereby agrees to assist the Buyer in (i) the selection of and (ii) the
      provision of technical support for alternative sources of supply of Film
      acceptable to Buyer in its sole discretion in North America and other
      territories designated by the Buyer. To that end, Seller undertakes to enter
      into licensing arrangements upon reasonable terms to enable competent third
      parties to manufacture Film at the request of Buyer in accordance with the
      following principles: (a) The alternative source nominated in North America
      shall be licensed for the duration of this Agreement on a royalty free basis;
      (b) Sources nominated outside North America shall pay a royalty of 1% to Seller
      based on the net sales value of Film supplied thereunder (subject to (d) below);
      (c) Seller will use its best endeavours to prosecute to grant and maintain
      at
      its own cost US patent application Serial No 10/042,955 filed on January 8,
      2002
      (“Patent Application”) (Buyer to provide reasonable assistance as appropriate);
      (c) Seller will use its best endeavours to prosecute to grant and maintain
      applications at its own cost based on the Patent Application in each of
      Australia, New Zealand, China, Japan and Europe and any other jurisdictions
      reasonably requested by Buyer; (e) All licenses granted by Seller will prohibit
      the third party manufacturer from supplying Film to third parties competing
      with
      Buyer in the Field.

     

     

    
      
         

      

      
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    2.5  Scope
      of Agreement.
      All
      Film purchased by Buyer from Seller during the term of this Agreement shall
      be
      subject to the terms of this Agreement.

     

    2.6  Sale
      to Other Companies.
      Seller
      agrees that during the term of this Agreement and any renewal term, Seller
      shall
      not sell Film to any company engaged in the Field. For the avoidance of doubt
      Seller will not sell Film to Liquibox Corporation, Scholle, Parrish
      Manufacturing, CDF, Arena or Shield Packaging or any of their Affiliates or
      to
      any other manufacturer or seller of bag-in-box bags without the prior written
      approval of Buyer.

     

    3.  Term
      of Agreement; Termination.
      

     

     

    3.1  Term.
      This
      Agreement will commence on the date first set forth above, and except as
      otherwise provided in this Agreement, shall continue for a fixed period until
      October 31, 2005 (the “Term”). This Agreement shall continue thereafter for
      further fixed periods (“renewal periods”) each of one year’s duration. During
      the first two renewal periods, Buyer only may terminate by giving Seller no
      less
      than 90 days’ prior written notice to expire on the first or second anniversary
      date of the expiry of the Term. Thereafter, either party shall be entitled
      to
      terminate this Agreement by giving the other Party no less than 90 days’ prior
      written notice to expire on the anniversary date of the expiry of the Term.
      

     

    3.2  Termination.
      Notwithstanding the provisions of Section 3.1 this Agreement may be terminated
      at any time immediately upon written notice in the following
      circumstances:

     

    (a)     by
      either
      Party upon the occurrence of an Event of Default (as defined herein in section
      15.1) with
      respect to the other Party; or,

    

    (b)     by
      Buyer
      in the event of a Change of Control with respect to Seller.

    

    

     

    3.3Post-Termination
      Obligations.
      Notwithstanding anything contained herein to the contrary, upon expiration
      or
      termination of this Agreement, at Buyer’s option, Seller shall diligently and
      timely complete the shipment of all Film ordered by Buyer prior to expiration
      or
      termination and shall submit same to Buyer in accordance with the agreed upon
      shipment and/or delivery dates. Expiration or termination of the Agreement
      shall
      not affect any obligation arising or to be performed prior thereto.

     

    4.  Prices
      and Terms of Payment.

     

     

    
      
         

      

      
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    4.1  Initial
      Pricing. The
      initial pricing for Film to be purchased under this Agreement shall be as set
      forth in Schedule
      4.1
      attached
      hereto.

     

    4.2  Changes
      in Pricing.
      The
      pricing for Film to be purchased hereunder shall be adjusted as described below
      to reflect changes in raw material costs. Pricing for Film shall only be
      adjusted in the event there is a change of at least five percent (5%)
      (increase or decrease) in the cost of the raw material element of the total
      cost
      of producing Film. The model of raw material costs within the total cost of
      producing Film is set forth on Schedule 4.1
      attached
      hereto along with an example of this change of pricing mechanism. Any such
      adjustment to price shall become effective two (2) months from the date of
      written notification by the Seller to the Buyer of such change in raw material
      costs. If, at any time during the Term, Buyer receives an offer from a third
      party supplier to purchase Film of like grade or quality in the same country
      at
      a lower price, or on more favorable terms and conditions than provided for
      in
      this Agreement, including any rebates, bonuses, discounts, free goods or other
      allowances which offer shall (i) include all of terms for the benefit of Buyer
      provided herein and (ii) a commitment for the term provided herein , Buyer
      will
      provide Seller with written notice of such superior offer. Seller shall have
      fifteen (15) days after receipt of such notice to match such lower price
      and/or more favorable terms and conditions presented in such superior offer.
      In
      the event Seller fails to match the terms of such superior offer, Buyer may
      purchase Film from such third party supplier, and the quantity of Film required
      to be purchased by Buyer as a minimum as set out in 2.1 shall be
      reduced.

     

    4.3  Improvement
      in Pricing.
      Throughout the Term, Seller and Buyer agree to use reasonable, ongoing efforts
      to achieve a collective reduction of the total supply chain costs as measured
      on
      an annual basis. “Total supply chain costs” represent both Seller's and Buyers
      costs. In an attempt to collectively reduce total supply chain costs, Seller
      agrees to: (i) establish annual cost reduction objectives, (ii) evaluate cost
      reduction proposals and set cost reduction priorities, (iii) assign resources
      and assure accountability for cost reduction procedures, and (iv) manage and
      monitor the progress and performance of achieving the cost reductions. Any
      direct material cost reductions realized by Seller, other than raw materials
      cost reductions as dealt with in section 4.2 hereof, will be immediately passed
      on to Buyer as a price reduction. Additionally, all other savings shall be
      split
      equally among Buyer and Seller.

     

    4.4  Terms.
      Payment
      terms for undisputed amounts owed hereunder are two percent (2%) discount for
      payment within 10 days, net forty-five (45) days after the later of Buyer’s
      receipt of the Film or Buyer’s receipt of Seller’s invoice. All applicable bills
      of lading and shipping notices will be forwarded with Seller’s invoice. Seller’s
      invoice will specify Buyer’s Purchase Order number. All amounts remaining due
      from Buyer to Seller with respect to Film purchased and delivered hereunder
      more
      than forty-five (45) days after the date of receipt of the Film by Buyer shall
      bear interest at the higher rate of either a flat 6% per annum or 3% per annum
      above the Bank of America base rate from time to time, until paid; provided,
      however, that interest shall not accrue with respect to any amount which is
      disputed, in good faith, by Buyer.

     

    
      
         

      

      
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    4.5  Claims.
      Buyer
      will notify Seller of any claims with respect to any Film shipped to Buyer
      within ninety (90) days from the date of Buyer’s receipt thereof.

     

    4.6  Taxes.
      Unless
      otherwise stated in writing by Seller, all prices quoted will be exclusive
      of
      all national, federal, state, local or any other governmental use, sales,
      excise, occupational, property (ad
      valorem)
      and
      similar taxes or duties now in force or enacted in the future. Whenever
      possible, Seller will apply for and take advantage of any and all available
      tax
      exemptions. If, however, any such tax, fee or charge of any nature whatsoever
      is
      imposed on the transaction, such tax will be paid by Buyer in addition to the
      prices quoted or invoiced. If Seller is required to pay any such tax (other
      than
      any federal, state or local income tax), fee or charge at the time of sale
      or
      thereafter, Buyer will promptly reimburse Seller after Seller provides Buyer
      with evidence of the amounts paid.

     

    4.7  Credits.
      Amounts
      owed to Buyer due to rejections of Film, or discrepancies on paid invoices
      will
      be, at Buyer’s option, fully credited against future invoices payable by Buyer,
      or paid by Seller within thirty (30) calendar days from Seller’s receipt of
      a debit memo or other written request for payment from Buyer.

     

    5.  Shipping.
      

     

    5.1  Shipping.
      Buyer
      reserves the right to designate means of shipping, which will be as stated
      on
      the Purchase Order. All
      Film
      ordered by Buyer or its Affiliates shall be shipped to a Buyer facility
      designated by Buyer or to some other location designated by Buyer or its
      Affiliates in writing. Risk of loss and title to Film shall transfer to Buyer
      or
      its Affiliates at the time of delivery to the location specified by Buyer in
      the
      purchase order for such Film subject in all cases to Buyer’s rights of
      inspection and acceptance pursuant to Section 8 hereof.

     

    5.2  Shipping
      Delays.
      In the
      event that Film ordered by Buyer has not been delivered to Buyer or to the
      designated location, as applicable, within five (5) business days after the
      delivery date specified in a Purchase Order under normal delivery conditions
      (which delivery date when ex stock shall be not less than two days after the
      date of the Purchase Order for deliveries to Romeoville and not less than five
      days after the date of the Purchase Order for deliveries to Union City) or,
      if
      no delivery date is specified in the Purchase Order no later than thirty-five
      (35) days following the issuance of the Purchase Order Buyer shall have the
      right, without limiting its other remedies hereunder, to cancel the order for
      the undelivered Film without liability. If Seller shall fail to deliver Film
      ordered by Buyer within 35 days after the date of Purchase Order and such
      failure shall not be excused pursuant to Section 20.2 hereof, Buyer Shall be
      entitled to purchase similar Film from alternate suppliers in quantities up
      to
      those ordered from and not delivered by Seller, and to obtain reimbursement
      from
      Seller of the cost differential between the cost of purchasing Film from Seller
      and from purchasing Film from alternate suppliers, including additional shipping
      and handling costs. If Seller delivers an order to Buyer or to the designated
      location after the order has been rightfully canceled by Buyer, Buyer shall
      have
      the right to refuse to accept such order, and shall not be responsible for
      any
      transportation or other charges incurred in connection with Seller’s delivery or
      return of the Film. The remedies provided herein for delay or nonperformance
      by
      Seller shall be the sole and exclusive remedies of Buyer for such delay or
      nonperformance.

     

    
      
         

      

      
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    5.3  Rejection
      of Shipped Film.
      Buyer
      reserves the right to reject and return, at Seller’s expense, Film delivered in
      excess of the quantity ordered.

     

    6.  Purchase
      Orders.

     

    6.1  Orders
      for Film.
      Buyer
      will order Film for delivery pursuant to this Agreement by submitting Purchase
      Orders in writing. Each Purchase Order will contain, for each category of Film
      ordered, the description, quantity, date for delivery or performance,
      destination, and total price. Seller will have five (5) days after receipt
      of a Purchase Order to reject the Purchase Order; provided,
      however,
      that
      Seller shall only be entitled to reject a Purchase Order in the event the
      capacity on the Laminator is exhausted under most favored nation (as described
      in Section 2.2). By not rejecting the Purchase Order within five (5) days,
      Seller will be deemed to have accepted the Purchase Order. Acceptance by Seller
      is limited to the provisions of this Agreement and the Purchase Order. No
      additional or different provisions proposed by Seller will apply. Seller will
      not ship any Film to Buyer without prior receipt of a Purchase
      Order.

     

    6.2  Lead
      Time.
      Seller
      acknowledges that time is of the essence under this Agreement. As such, Seller
      shall provide all deliveries to Buyer on time and in full, unless otherwise
      mutually agreed upon in writing.

     

    6.3  Terms
      and Conditions of Sale; Precedence.
      Each
      Purchase Order issued under this Agreement will be made part of, and be
      incorporated into, this Agreement. Unless otherwise specifically agreed to
      in
      writing between Buyer and Seller, the terms and conditions of this Agreement
      will take precedence over the Buyer’s standard terms and conditions, and this
      Agreement will govern any purchase and sale of Film pursuant to this Agreement,
      notwithstanding any contrary terms and conditions in the printed portion of
      any
      specific Purchase Order form or any of the Seller’s sales
      acknowledgments.

     

    6.4  Delays.
      Seller
      will notify Buyer immediately if, at any time, it appears that the delivery
      schedule set forth on the Purchase Order may not be met. Such notification
      will
      include the reasons for any anticipated delay (including, but not limited to,
      the reasons set forth in Section 20.2, force
      majeure)
      and the
      proposed revised delivery date.

     

    
      
         

      

      
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    6.5  Buyer’s
      Rights Upon Delivery.
      Film
      which is delivered in advance of schedule without authorization in writing
      from
      Buyer may, at Buyer’s option (i) be returned to Seller at Seller’s sole
      risk and expense (including freight charges and Buyer’s handling fee),
      (ii) be accepted by Buyer with payment withheld by Buyer until the date
      that the Film was actually scheduled for delivery, or (iii) be placed in
      storage, at Seller’s sole risk and expense, until the delivery date specified
      under Buyer’s delivery schedule.

     

    7.  Quality
      Assurance, Acceptance Testing.

     

    7.1  Inspection
      and Testing.
      All
      Film will be subject to inspection and testing by Buyer at reasonable times
      and
      places. If any inspection or test is made on the premises of Seller or Seller’s
      supplier, Seller, without additional charge, will provide all reasonable
      facilities and assistance for the safety and convenience of the inspectors
      in
      the performance of their duties. All inspections and tests on the premises
      of
      Seller or its supplier will be performed in such a manner as not to unduly
      delay
      the work of Seller or its suppliers.

     

    7.2  Seller
      Quality Control.
      Seller
      will provide and maintain an inspection and process control system covering
      the
      Film, and shall retain and maintain all records relating to the Film. Records
      of
      all inspection work done by Seller will be kept complete and will be made
      available to Buyer during the performance of this Agreement and for three
      (3) years or such longer periods as may be specified in a specific order.
      Such records shall include, but are not limited to, test sheets for each batch
      of Film that is provided to Buyer.

     

    8.  Inspection
      of Shipments.
      

     

    8.1  Inspection.
      Film
      purchased hereunder is subject to Buyer’s final inspection and approval
      notwithstanding the receipt of any Film by Buyer or payment therefor. If Film
      is
      rejected, it will be held subject to Seller’s direction and returned at Seller’s
      expense. Causes for rejection include, but are not limited to, (i) Film
      does not conform to Specifications or other terms set forth in the Purchase
      Order , or (ii) Film is of inferior quality or workmanship, as determined
      in Buyer’s reasonable discretion, or Seller has otherwise breached any of the
      warranties contained in Section 10 hereof. Upon Seller’s receipt of the
      rejected Film, one of the following courses of action shall be taken in Buyer’s
      sole discretion: (i) Seller shall promptly send replacement Film to Buyer,
      at no additional cost to Buyer, F.O.B. Buyer’s designated facility; or
      (ii) Seller shall promptly credit or refund (at Buyer’s sole option) Buyer
      for the full purchase price of the rejected Film.

     

    8.2  Failure
      to Inspect.
      Any
      failure by Buyer to inspect any particular shipment of Film shall neither
      preclude Buyer from exercising its rights and remedies under this Section 8
      with respect to any subsequent shipments nor be deemed a waiver of Buyer’s
      rights under this Agreement, with respect to the shipment in question or any
      other shipment. 

     

    
      
         

      

      
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    9.  Country
      of Origin, Export Authorization.

     

    9.1  Certificates
      of Origin.
      Seller
      will provide a separate certificate of origin, providing the country of
      manufacture, for all Film delivered to Buyer. Assuming no changes, the
      certificate will be considered valid for future releases against the same
      Purchase Order or this Agreement for up to one (1) year from the date of such
      certification. At the end of the year, or upon a change in the country of
      origin, Seller will immediately issue a new certificate. Buyer must at all
      times
      have accurate information regarding the country of origin of all Film purchased
      pursuant to this Agreement. 

     

    9.2  Export
      Requirements.
      Unless
      otherwise agreed to by Seller in writing, Buyer will assume all responsibility
      for obtaining any required export authorizations necessary to export from the
      United States any Film purchased pursuant to this Agreement or technical data
      or
      documents to be supplied pursuant to this Agreement by Seller. Buyer will not
      re-export Film or technical data or documentation supplied by Seller, directly
      or indirectly or through others, or the product of such data, except in
      compliance with U.S. Export Administration Regulations.

     

    10.  Warranties.

     

    10.1  Title.
      Seller
      warrants it shall deliver good and absolute title to the Film, free and clear
      of
      any and all liens or encumbrances, and further warrants that it has the right
      to
      convey the Film and that the Film is free of all defects in title, liens and
      encumbrances.

     

    10.2  Defects.
      Seller
      warrants and represents that all Film sold pursuant to this Agreement will
      be
      free from defects in design, workmanship and materials. Seller’s liability under
      this Section 10.2 shall include, but not be limited to, replacing any
      non-conforming Film and refunding any amounts paid by or lost by Buyer in
      respect of such Film, at Buyer’s sole option.

     

    10.3  Specifications
      Seller
      hereby represents and warrants to Buyer that the Film will conform to applicable
      Specifications, drawings, samples, and descriptions referred to in this
      Agreement . Seller further represents and warrants to Buyer that the Film sold
      under this Agreement is of such quality as would pass without objection in
      the
      trade and is fit for the ordinary purposes for which such goods are used and
      is
      of even kind, quality and quantity within each unit and among all units
      involved.

     

    10.4  Intellectual
      Property.

     

    (a) The
      Seller owns or has the right to use pursuant to license, sublicense, agreement
      or permission all Intellectual Property (as defined below) necessary or
      desirable for the manufacture and sale of Film.

    

    
      
         

      

      
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    (b) The
      Seller shall not interfere with, infringe upon, misappropriate, or otherwise
      come into conflict with, any Intellectual Property rights of any third party
      as
      a result of or in connection with the manufacture or sale of Film.

    

    (c) For
      purposes hereof, “Intellectual Property” means the entire right, title and
      interest in and to all proprietary rights of every kind and nature, including
      patents, copyrights, trademarks, mask works, trade secrets and proprietary
      information, all applications for any of the foregoing, and any license or
      agreements granting rights related to the foregoing (i) subsisting in,
      covering, reading on, directly applicable to or existing in the Film;
      (ii) that are owned, licensed or controlled in whole or in part by the
      Seller; (iii) that are used in or necessary to the development, manufacture
      or testing of the Film.

     

    10.5  Delivery.
      Seller
      hereby represents and warrants to Buyer that all Film ordered by Buyer shall
      be
      delivered in accordance with the specifications and standards stipulated by
      Buyer in accordance with this Agreement and with all federal, state and local
      laws and regulations applicable to the Film.

     

     

    10.6  Survival.
      These
      warranties will survive any inspection, delivery, payment, and termination
      of
      this Agreement, and the benefit thereof will run to Buyer, its Affiliates and
      their respective customers, successors, and assigns.

     

    10.7   Remedies.
      Buyer’s sole and exclusive remedy with respect to any breach of warranty
      hereunder shall be (i) the replacement by Seller of any defective or
      non-conforming Film supplied by Seller, or, at Buyer’s election, reimbursement
      or credit to Buyer for the purchase price thereof and (ii) recovery of Damages
      in an amount not to exceed $5,000,000 per occurrence or $6 million in the
      aggregate in any one year. In no event shall Seller be liable or responsible
      to
      Buyer for any lost profits, incidental, consequential, or exemplary loss or
      damage. Seller shall return to Buyer all Film as to which a claim of breach
      of
      warranty is made. “Damages” shall mean and include any actual loss or damage to
      property suffered by Buyer or any injury or death to any person caused by any
      breach of warranty hereunder.

     

    11.  Equipment;
      Embossed Chill Roll.

     

    11.1  Chill
      Roll. Buyer
      agrees to supply Seller with an embossed chill roll exclusively for use in
      manufacturing the Film. The Parties hereby acknowledge and agree that the
      embossed chill roll shall remain the sole property of the Buyer.

     

    11.2  Maintenance.
      Seller
      agrees to maintain the embossed chill roll such that the Film complies with
      Buyer's Specifications for the Film for Buyer’s benefit. Seller agrees to repair
      the embossed chill roll as necessary so as to enable the Film supply and
      inventory requirements. Such repairs shall be made at Seller's expense. Seller
      further agrees to procure comprehensive general liability insurance in relation
      to the embossed chill roll at Seller’s expense and provide at Buyer’s request a
      certificate of insurance to Buyer. 

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    11.3  Replacement.
      Buyer
      agrees to have available an additional embossed chill roll at the end of the
      embossed chill roll's economic life. In the event that the Agreement is
      terminated, Seller agrees to return the embossed chill roll in good working
      condition (fair wear and tear excepted) to Buyer within five (5) business
      days of accumulating Film as required of the Seller in accordance with
      Section 3.3 herein.

     

    12.  Insurance.
      Seller
      warrants to Buyer that it shall maintain Products Liability insurance in force
      at all times during the term of this Agreement in an amount of $1
      million
      per
      occurrence, $2
      million
      in the
      aggregate per annum together with umbrella and/or Commercial Catastrophe
      Liability coverage in the amount of $4 million per occurrence and in the
      aggregate per annum. Seller shall name Buyer as an additional insured under
      its
      policy. Seller shall provide Buyer with a certificate of insurance, evidencing
      compliance with this Section 12 within thirty (30) days of the
      execution by both Parties of this Agreement, shall maintain the insurance as
      required herein at all times during the term and any renewal term of this
      Agreement. In the event of the termination or cancellation of the insurance
      provided for herein, Seller shall provide notice thereof to Buyer within ten
      days after receiving notification of such termination or
      cancellation.

     

    13.  Indemnity.
      

     

    13.1  Indemnity
      by Seller.
      Seller
      will at all times be deemed to be performing as an independent contractor and
      not as an agent or employee of Buyer. The acts and omissions of Seller’s
      employees and agents and subcontractors of any tier will be deemed to be those
      of Seller. Seller will indemnify, defend and hold harmless Buyer and its
      directors, officers, employees, agents, employees, successors and assigns
      (“Buyer Indemnified Parties”) from and against any and all liability, damages,
      losses, claims, demands, judgments, reasonable costs and expenses of every
      nature and kind (“Losses”) by reason of injury to or death of any person or
      damage to or destruction of property to the extent arising out of the negligent,
      wrongful or tortuous acts or omissions of Seller, its employees, subcontractors
      or agents in performance under this Agreement; provided that the aggregate
      amount which Seller may be obligated to pay pursuant to this Section 13.1 with
      respect to any act or omission, shall not exceed the sum of One Million
      ($1,000,000) Dollars. Seller shall also indemnify, defend and hold harmless
      the
      Buyer Indemnified Parties for any and all Losses arising out of, related to,
      or
      in connection with a breach by the Seller of the representations and warranties
      contained in Section 10.4 hereof; provided, however, that the
      indemnification provided shall be solely with respect to Damages (as that term
      is defined in Section 10.7 hereof) and the amount of such indemnification shall
      not exceed the sum of $5,000,000 per occurrence or $6,000,000 in the aggregate
      for acts or omissions occurring in any one year. Seller will not, however,
      be
      responsible for any such losses, liabilities, claims, judgments, costs, demands
      and expense caused by the sole negligence or willful misconduct of Buyer, its
      directors, officers or employees. 

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    13.2  Indemnity
      by Buyer.
      Buyer
      will at all times be deemed to be performing as an independent contractor and
      not as an agent or employee of Seller. The acts and omissions of Buyer’s
      employees and agents and subcontractors of any tier will be deemed to be those
      of Buyer. Buyer will indemnify, defend and hold harmless Seller, its directors,
      officers, employees, agents, employees, successors and assigns from and against
      any and all Losses by reason of injury to or death of any person or damage
      to or
      destruction of property arising out of the negligent, wrongful or tortuous
      acts
      or omissions of Buyer, its employees, subcontractors or agents in performance
      under this Agreement; provided that the aggregate amount which Buyer may be
      obligated to pay pursuant to this Section 13.2 with respect to any one, or
      a
      series of related acts or omissions, shall not exceed the sum of One Million
      ($1,000,000) Dollars. Buyer will not, however, be responsible for any such
      losses, liabilities, claims, judgments, costs, demands and expense caused by
      the
      sole negligence or willful misconduct of Seller, its directors, officer or
      employees.

     

    13.3  Indemnification
      Procedure. 

     

    (a) A
      Party
      making a claim for indemnification under Section 13.1 or 13.2 (“Claim”) shall
      give notice to the indemnifying Party of such Claim, but the failure to notify
      the indemnifying Party will not relieve the indemnifying Party of any liability
      that it may have to any indemnified Party, except to the extent that the
      indemnifying Party demonstrates that the defense of such action is prejudiced
      by
      the indemnifying Party’s failure to give such notice. 

    

    (b) If
      any
      Claim is made against an indemnified Party and such indemnified Party gives
      notice to the indemnifying Party of such Claim, the indemnifying Party will
      be
      entitled to participate in the defense of such Claim and, if the indemnified
      Party consents (which consent may not be unreasonably withheld), assume the
      defense of such Claim. If the indemnifying Party assumes the defense of a Claim,
      (i) it will be conclusively established for purposes of this Agreement that
      the
      claims made in that Claim are within the scope of and subject to
      indemnification; (ii) no compromise or settlement of that Claim may be effected
      by the indemnifying Party without the indemnified Party’s consent (which consent
      may not be unreasonably withheld) unless (A) there is no finding or admission
      of
      any violation of law or any violation of the rights of any Person and no effect
      on any other Claims that may be made against the indemnified Party, and (B)
      the
      sole relief provided is monetary damages that are paid in full by the
      indemnifying Party; and (iii) the indemnifying Party will have no liability
      or
      future additional expense with respect to any compromise or settlement of such
      Claim effected without its consent. If notice is given to an indemnifying Party
      of a Claim and the indemnifying Party does not, within twenty (20) days after
      the indemnified Party’s notice is given, give notice to the indemnified Party of
      its willingness to assume the defense of such Claim, provided there is no
      dispute whether such Claim is within the scope of and subject to
      indemnification, the indemnifying Party will be bound by any determination
      with
      respect to said Claim or any compromise or settlement effected by the
      indemnified Party.

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (c) Notwithstanding
      the foregoing, if an indemnified Party determines in good faith that there
      is a
      reasonable probability that a Claim may adversely affect it or its Affiliates
      other than as a result of monetary damages for which it would be entitled to
      indemnification under this Agreement, the indemnified Party may, by notice
      to
      the indemnifying Party, assume the exclusive right to defend, compromise, or
      settle such Claim, but the indemnifying Party will not be bound by any
      determination of a Claim so defended or any compromise or settlement effected
      without its consent (which consent may not be unreasonably
      withheld).

     

    14.  Confidential
      Data and Disclosures.

     

    14.1  Confidentiality.
      Each
      Party (the "Receiving Party") agrees for the term of this Agreement and
      thereafter to keep confidential and not use for its own benefit or disclose
      to
      any other person or entity (other than employees of such Parties and their
      Affiliates who need to know such information in connection with the performance
      of this Agreement, which employees shall be notified of and bound by such
      confidentiality obligations) (i) the existence of, and the terms and provisions
      of, this Agreement, and (ii) any information concerning the business or affairs
      of the other Party or its Affiliates or customers. The Receiving Party will
      not,
      without prior written consent from the Party disclosing information under this
      Agreement (the “Disclosing Party”), disclose to any person or use for its own
      benefit any such information. This undertaking by Receiving Party will survive
      termination of this Agreement. Receiving Party will take all necessary
      precautions to ensure that all of its employees and employees of its
      subcontractors treat such material and information as confidential and do not
      divulge such material. All material provided to Receiving Party remains the
      property of Disclosing Party and will not be reproduced in any manner except
      as
      required for performance of this Agreement. 

     

    14.2  Exclusions.
      The
      Parties agree that the Receiving Party will have no obligations with respect
      to
      information which (i) is previously known to it or is independently
      developed by or for it; (ii) is or falls into the public domain through no
      wrongful act of the Receiving Party; (iii) is approved for release by the
      written authorization of the Disclosing Party; or is released by the Disclosing
      Party without restriction; or (iv) is required to be disclosed by law
provided,
      however,
      that
      where practicable or possible not less than ten (10) days’ prior written notice
      is given to the Disclosing Party before such disclosure is made.

     

    
      
         

      

      
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    15.  Default.

     

    15.1  Event
      of Default.
      Upon
      the occurrence of an Event of Default, either Party may avail itself of any
      and
      all remedies at law or in equity or otherwise including, without limitation,
      the
      right to terminate this Agreement by written notice to the other Party or to
      cancel any affected Purchase Order(s) without any charge, obligation or
      liability whatsoever, except as to the payment for services satisfactorily
      completed and/or for Film already received and accepted by Buyer. For the
      purposes of this Agreement, an Event of Default shall be deemed to have
      occurred:

     

    (a) in
      the
      event one of the Parties is in breach or default of any term, condition or
      covenant of its Agreement or any Purchase Order placed pursuant to this
      Agreement and such breach or default has continued for a period of
      sixty (60) days after the giving of written notice to the Party in breach;
provided,
      however,
      that,
      failure by Buyer to pay any amount allegedly due under any Purchase Order that
      is the subject of a good faith dispute will not be deemed to be a breach or
      default by Buyer; or

    

    (b) in
      the
      event of a Party’s Bankruptcy, defined for the purposes of this Agreement as
      (i) an assignment for the benefit of creditors, (ii) the filing of a
      voluntary petition in bankruptcy, (iii) an adjudication of bankruptcy or
      insolvency, (iv) the filing of a petition or answer seeking any
      reorganization, arrangement, composition, readjustment, liquidation, dissolution
      or similar relief under any statute, law or regulation (other than a solvent
      reorganisaton which has the prior approval of the other Party), (v) the
      filing of an answer or other pleading admitting or failing to contest the
      material allegations of a petition filed against any Party hereto in any
      bankruptcy proceeding, (vi) a Party seeking, consenting to or acquiescing
      in the appointment of a trustee, receiver or liquidator of all or any
      substantial part of the Party’s properties, or (vii) the failure to
      dismiss, within sixty (60) days after its commencement, any proceeding
      against such other Party seeking reorganization, arrangement composition,
      readjustment, liquidation, dissolution or similar relief under any statute,
      law
      or regulation. 

     

    16.  Arbitration.

     

    16.1  Agreement
      to Arbitrate.
      Unless
      Buyer formally requests a different approach to dispute resolution, which Seller
      undertakes to consider and respond to in a reasonable manner, the Parties agree
      that any dispute, controversy or claim arising out of or relating to this
      Agreement, or to the interpretation, performance, breach or termination thereof,
      shall be resolved by binding arbitration under the Commercial Rules and
      Regulations of American Arbitration Association (“AAA”), as amended from
      time to time. The arbitration will be conducted in the City of Chicago,
      Illinois, unless the Parties agree in writing to another location. The
      appointing authority will be the AAA. The number of arbitrators will be
      three (3), who shall constitute the “Arbitral Panel”.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    16.2  Notice
      of Arbitration.
      The
      arbitration will begin on the date on which a notice of demand for arbitration
      (“Notice of Demand”) is delivered in accordance with the terms of
      Section 20.5 hereof to the responding Party (the “Respondent”) at the
      address appearing for such Party in Section 20.5 hereof by the Party
      asserting a claim (the “Complainant”). The Notice of Demand shall include the
      following and any other information required by the AAA: (a) a demand that
      the dispute be submitted to arbitration; (b) the names and domiciles of the
      Parties; (c) a reference to this Agreement and this arbitration provision;
      (d) a description of the alleged failure to perform an obligation under
      this Agreement and of the petitions and amounts claimed.

     

    16.3  Certain
      Procedures; Confidentiality.
      The
      Respondent shall respond within fourteen (14) days of the date on which the
      Notice of Demand was received. If Respondent does not respond to the Notice
      of
      Demand within fourteen (14) days of receipt thereof, it will been deemed to
      have accepted all of the assertions made by the Complainant in the Notice of
      Demand. The Arbitral Panel will be designated by the AAA within
      fourteen (14) days following the delivery of the Notice of Demand. Within
      the seven (7) days next following the end of the fourteen (14) day
      period for answering the Notice of Demand, the Arbitral Panel will notify the
      parties as least thirty (30) days in advance of the date on which the
      hearing will be conducted for purposes of presenting evidence and arguments,
      indicating the date and time for the hearing. The hearing will be completed
      within three (3) days of starting, unless the Arbitral Panel determines
      that a longer period is required. At least fifteen (15) days prior to the
      date of the hearing, the parties will deliver to the Arbitral Panel:
      (i) the names and addresses of any witness that they intend to present and
      an affidavit duly signed by each such witness, which will detail the content
      of
      his or her testimony; (ii) the documents that will be submitted at the
      hearing; and (iii) a description of any other evidence to be presented in
      the arbitration. The Parties agree to continue performing their respective
      obligations under this Agreement during the resolution of any dispute regarding
      the Agreement. All the matters regarding or submitted to the Arbitral Panel
      during any arbitration proceeding described herein will be treated as
“confidential information” and any and all arbitrators will maintain its
      confidentiality.

     

    16.4  Interim
      Relief.
      The
      Parties expressly agree that prior to the selection of the Arbitral Panel,
      nothing in this Agreement shall prevent the Parties from applying to a court
      that would otherwise have jurisdiction for provisional or interim measures.
      After the Arbitral Panel is selected, it shall have sole jurisdiction to hear
      such applications, except that the Parties agree that any measure ordered by
      the
      Arbitral Panel may be immediately and specifically enforced by a court otherwise
      having jurisdiction over the Parties.

     

    16.5   Additional
      Recourse.
      The
      Arbitral Panel’s award will be issued no later than ten (10) days after the
      beginning of the arbitration hearing. The award will be final and binding,
      without additional recourse, and will be the exclusive remedy of the Parties
      for
      all claims, counterclaims, issues or accountings presented or pleaded to the
      Arbitral Panel. The Arbitral Panel will render its award strictly in accordance
      with this Agreement and does not have authority to change or diverge from any
      provision of this Agreement. The Arbitral Panel may impose indemnification
      measures as part of the award. The arbitral award will (i) be granted and
      paid in United States Dollars exclusive of any tax, deduction or offset and
      (ii) include interest from the date the award is rendered until it is fully
      paid, computed at the rate of ten percent per annum (10%).

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    16.6  Judgment
      on Award. Judgment
      upon the arbitral award may be entered in any court of competent jurisdiction.
      The parties submit themselves to the exclusive jurisdiction of the courts of
      the
      State of Illinois for purposes of enforcing any interim or final award of the
      Arbitral Panel. Any additional costs, fees or expenses incurred in enforcing
      the
      arbitral award shall be charged against the Party that resists its
      enforcement.

     

    16.7  Expenses
      of Arbitration; Attorneys’ Fees.
      In any
      arbitration proceeding hereunder, each Party shall bear the expenses of its
      witnesses. All other costs of arbitration, including, without limitation, the
      fees and expenses of the Arbitral Panel, the cost of the record or transcripts
      thereof, if any, administrative fees, the attorneys’ fees of the Parties, and
      all other fees and costs shall be allocated to the Parties to the arbitration
      as
      determined by the Arbitral Panel, except that the prevailing Party in such
      arbitration will be entitled to recover its reasonable attorneys’ fees and
      expenses.

     

    16.8  Law
      Applicable.
      Notwithstanding anything to the contrary contained herein, the law applicable
      to
      the validity of this Section 16 regarding arbitration, the conduct of the
      arbitration, including any resort to a court for provisional or interim
      remedies, the enforcement of any award and any other question of arbitration
      law
      or procedure, shall be the United States Federal Arbitration Act, 9 U.S.C
§§ 1, et
      seq.

     

    17.  Compliance
      with Laws.
      The
      parties will comply with the provisions of all laws and all orders, rules and
      regulations issued thereunder applicable to this Agreement and performance
      pursuant to this Agreement. Film will be manufactured, labeled, packaged, sold
      and shipped in accordance with all applicable laws, orders, rules and
      regulations.

     

    18.  Legal
      Relationships.
      Buyer
      and Seller each represents and warrants to the other that they have entered
      into
      no agreements, nor are subject to any obligations, which prevent them from
      entering into and performing this Agreement. It is understood and agreed that
      Buyer and Seller are, and at all times during the effective period of this
      Agreement will remain, independent contractors. This Agreement will not be
      construed as creating any relationship between Buyer and Seller’s employees.
      Seller’s employees will not be entitled as a result of this Agreement to any
      benefits under any employee benefit plan Buyer presently has in effect or may
      put into effect, nor will Seller’s employees be considered employees of Buyer
      for the purpose of any tax or contribution levied by any federal, state or
      local
      government. Buyer’s employees will not be entitled as a result of this Agreement
      to any benefits under any employee benefit plan Seller presently has in effect
      or may put into effect nor will Buyer’s employees be considered employees of
      Seller for the purpose of any tax or contribution levied by any federal, state
      or local government. At no time will either Party represent to any third Party
      that it is the agent of the other for any reason whatsoever. Buyer and Seller
      further covenant that no authorization will be given to any employee to act
      for
      the other Party. Without limiting the foregoing, Seller and Buyer agree that
      they will not, during or after the term of this Agreement, represent themselves
      as acting for the other Party or without the other Party’s name, or advertise
      its relationship with the other Party without the other Party’s express written
      consent in each instance.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    19.  Waiver
      of Terms and Conditions, Survival.

     

    19.1  No
      Waiver.
      The
      failure of Buyer or Seller in any one or more instances to insist upon
      performance of any of the terms and conditions of this Agreement, or to exercise
      any right or privilege contained in this Agreement or the waiver of any breach
      of the terms or conditions of this Agreement, shall not be construed as a waiver
      of any such terms, conditions, rights or privileges, and the same will continue
      and remain in force and effect as if no waiver had occurred. 

     

    19.2  Survival.
      Either
      Party’s obligations under this Agreement which by their nature would continue
      beyond the termination, expiration or cancellation of this Agreement will
      survive termination, expiration or cancellation of this Agreement including
      but
      not limited to Section 10, Warranties; Section 13, Indemnity;
      Section 14, Confidential Data and Disclosures; and Section 16,
      Arbitration.

     

    20.  Miscellaneous.

     

    20.1  Authority;
      No Conflict.
      Each
      Party executing this Agreement represents and warrants to the other Parties
      (i) that it has the absolute and unrestricted right, power, authority, and
      capacity to execute and deliver this Agreement and that, upon execution and
      delivery thereof by other parties, this Agreement will constitute the legal,
      valid and binding obligation of such Party, and (ii) that the execution and
      delivery of this Agreement and the performance of the transactions contemplated
      hereby, will not, directly or indirectly (with or without notice or lapse of
      time), contravene, conflict with, or result in a violation of any provision
      of
      the organizational documents or board or shareholder action of such Party,
      and
      (iii) that such Party is not, and will not be, required to give any notice
      to obtain any consent from any third Party in connection with the execution
      and
      delivery of this Agreement or the consummation or performance of any of the
      transactions contemplated hereby. 

     

    20.2  Force
      Majeure.
      The
      Parties will not be considered in default or liable for any failure to perform
      their obligations under this Agreement if such failure arises out of an act
      of
      nature, war, strikes, lockouts, trade disputes, fires, quarantine restrictions,
      Governmental action or by causes beyond the reasonable control of the Party
      whose performance is so affected, (the “Affected Party”). The Affected Party
      will immediately notify the other Party in writing of any such circumstances
      as
      promptly as possible after they occur. Any delays in performance of the Affected
      Party hereunder shall be extended by the amount of time lost due to any such
      circumstances. Performance hereunder shall resume promptly after the
      circumstances in question have abated. Should Seller’s inability to perform any
      such circumstances continue for a period in excess of thirty (30) days, Buyer
      will not be obligated to purchase, at a later date, that portion of the Film
      that Seller is unable to deliver because of any such circumstances.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    20.3  Severability.
      If any
      provision of this Agreement or the application of any such provision to any
      person or circumstance, is declared judicially to be invalid, unenforceable
      or
      void, such decision will not have the effect of invalidating or voiding the
      remainder of this Agreement, it being the intent and agreement of the parties
      that this Agreement will be deemed to have been amended by modifying such
      provision to the extent necessary to render it valid, legal and enforceable
      while preserving its intent or, if such modification is not possible, by
      substituting therefor another provision that is legal and enforceable and that
      achieves the same objective.

     

    20.4  Assignment.
      Neither
      Party will assign this Agreement or any rights, responsibilities, or obligations
      in this Agreement, without the express written approval of the other. However,
      Buyer will have the right to assign, all or part of this Agreement, to any
      Affiliate or in connection with the sale of a controlling interest of Buyer
      or
      substantially all of Buyer’s assets.

     

    20.5  Notices.
      All
      notices required or permitted by or made pursuant to this Agreement must be
      in
      writing and shall be deemed to have been duly given: (i) when delivered by
      hand; (ii) when sent by facsimile provided that a copy is mailed by
      Certified U.S. Mail, return receipt requested; (iii) three (3) days
      after being sent by Certified U.S. Mail, return receipt requested; or
      (iv) one (1) day after deposit with a nationally recognized overnight,
      commercial courier service for next day delivery, in each case to the
      appropriate address and facsimile numbers set forth below (or to such other
      address or facsimile numbers as a Party may designate by notice to the other
      Party):

     

    
      
        	 	
                If
                  to Buyer:

              	
                Rapak,
                  LLC

              
	 	 	
                727
                  Oakridge Drive

              
	 	 	
                Romeoville

              
	 	 	
                Illinois
                  60446

              
	 	 	
                USA

              
	 	 	
                Fax:
                  815-372-3638

              

      

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

      
        	 	
                If
                  to Seller:

              	
                CTI
                  Industries Corporation

              
	 	 	
                22160
                  N. Pepper Road

              
	 	 	
                Barrington,
                  IL 60010

              
	 	 	
                Attn:
                  President

              
	 	 	
                Fax:
                  847-382-1219

              

      

    

     

    20.6  Subject
      Headings.
      The
      subject headings of this Agreement are included for purposes of convenience
      only
      and shall not affect the construction or interpretation of any of its
      provisions.

     

    20.7  Counterparts.
      This
      Agreement may be executed in several counterparts, each of which shall be deemed
      an original but all of which together shall constitute one and the same
      instrument.

     

    20.8  Governing
      Law.
      This
      Agreement shall be governed by, and construed and interpreted in accordance
      with, the laws of the State of Illinois, without taking into account provisions
      thereof regarding choice or conflict of laws.

     

    20.9  Entire
      Agreement and Modification.
      This
      Agreement and the attachments to this Agreement and made a part of this
      Agreement sets forth the entire understanding of the Parties with respect to
      the
      subject matter of this Agreement and supersedes and merges all prior agreements
      and understandings, whether written or oral. No amendment, modification or
      waiver of any provisions of this Agreement or consent to any departure therefrom
      will be effective unless in writing signed by duly authorized officers or
      representatives of both parties.

     

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF,
      Seller
      and Buyer have caused this Agreement to be signed as of the date set forth
      above.

     

    
      	“BUYER”	 	 	“SELLER”
	 	 	 	 
	RAPAK
              LLC	 	 	 CTI
              INDUSTRIESCORPORATION
	 	 	 	 
	By: 
              /s/ John H. Schwan	 	 	By:
              /s/ Stephen M. Merrick
	
              

            	 	 	
              

            
	Name:
              John H.
              Schwan	 	 	Name:
              Stephen M.
              Merrick
	
              

            	 	 	
              

            
	Title: President	 	 	Title: Executive Vice-President
	
              
 	 	 	
              
 

    [SIGNATURE
      PAGE TO FILM SUPPLY AGREEMENT]

    

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    LIST
      OF SCHEDULES

    

    

    Schedule
      1.6  Product
      Specifications

    

    Schedule
      4.1  Seller’s
      Initial Price

    

     

    
      
         

      

      
        21EXHIBIT
      10.1

     

    RUBIO’S
      RESTAURANTS, INC.

    2006
      EXECUTIVE INCENTIVE PLAN

     

    The
      Board
      of Directors of Rubio’s Restaurants, Inc. (“Company”) adopted the 2006 Executive
      Incentive Plan (“Plan”), on April 27, 2006 effective on the date set forth in
      Section 14 below. The stockholders of the Company approved the Plan on
      ______, 2006.

     

    1      Purpose.

     

    The
      purpose of the Plan is to provide performance-based incentive compensation
      in
      the form of cash payments or stock awards to executive officers and other
      members of senior management of the Company and any of its subsidiaries which
      might subsequently adopt the Plan. The Plan is intended to qualify as
      performance-based compensation under Section 162(m) of the Internal Revenue
      Code
      (“Section 162(m)”).

     

    2.     
      Administration.

     

    The
      Plan
      shall be administered by the Compensation Committee, provided, however, that
      the
      Compensation Committee is composed solely of two or more outside directors
      as
      defined in Section 162(m). All determinations under the Plan, including
      those related to interpretation of the Plan and the forms of awards provided
      for
      hereunder, eligibility, or the payment or pro-ration of any payment shall be
      made by the Compensation Committee in its sole discretion, and such
      determinations shall be final and binding on all employees.

     

    3.    
      Stockholder
      Approval.

     

    The
      Plan
      shall be approved by the stockholders of the Company. To the extent necessary
      for the Plan to qualify as performance-based compensation under Section 162(m)
      or its successor under then applicable law, the material terms of the Plan
      shall
      be disclosed to and reapproved by the stockholders no later than the first
      stockholder meeting that occurs in the fifth year following the year in which
      stockholders previously approved the material terms of the Plan.

     

    4.    
      Participants.

     

    For
      each
      measurement period (which may but need not be a fiscal year of the Company
      or
      which may be different for different participants), the Compensation Committee
      will choose, in its sole discretion, those eligible employees who will
      participate in the Plan during that measurement period and will be eligible
      to
      receive payment under the Plan for that measurement period.

     

    (a) Eligible
      Employees.
      Persons
      who are eligible to participate in the Plan are all members of senior management
      of the Company and its subsidiaries. For purposes of the Plan, senior management
      is defined as any officer of the Company or its subsidiaries who is subject
      to
      the reporting requirements of Section 16(a) of the Securities Exchange Act
      of
      1934, or who is designated as eligible to participate in the Plan by the
      Compensation Committee in its sole discretion. 

     

    (b) Employment
      Criteria.
      In
      general, to participate in the Plan an eligible employee must be continuously
      employed by the Company or a subsidiary for the entire measurement period.
      In
      the event of death or disability, a participant shall be vested in a pro
      rata share of an award based upon services rendered during the measurement
      period.

     

    If
      a
      participant is on unpaid leave status for any portion of the measurement period,
      the Compensation Committee, in its discretion, may reduce the participant’s
      payment on a pro rata basis.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.    
      Awards.

     

    The
      Compensation Committee shall determine the size and terms of an individual
      award
      that can be made in cash or stock. Stock awards may be settled in shares of
      common stock of the Company reserved for issuance under (i) the Company’s 1999
      Stock Incentive Plan or (ii) any stock option, equity incentive or similar
      plan
      that may hereafter be adopted by the Company’s Board of Directors and approved
      by its stockholders. The stock awards may be settled in cash at the
      election of the Company. Stock awards granted pursuant to the Plan shall vest
      upon the attainment of performance goals established by the Compensation
      Committee under Section 6.

     

    6.    
      Business
      Criteria on Which Performance Goals Shall be Based.

     

    Payments
      in the form of cash and/or stock under the Plan shall be based on the Company’s
      attainment of performance goals based on one or more of the following business
      criteria:

     

    
      	·      	
              Return
                on equity, assets, or invested
                capital.

            

    

     

    
      	·      	
              Stockholder
                return, actual or relative to an appropriate index (including share
                price
                or market capitalization).

            

    

     

    
      	·      	
              Actual
                or growth in revenues, orders, operating income, or net income (with
                or
                without regard to amortization/impairment of
                goodwill).

            

    

     

    
      	·      	
              Free
                cash flow generation.

            

    

     

    
      	·      	
              Operational
                performance, including asset turns, revenues per employee or per
                square
                foot, or comparable store sales.

            

    

     

    
      	·      	
              Individually
                designed goals and objectives that are consistent with the participant’s
                specific duties and responsibilities, and that are designed to improve
                the
                financial performance of the Company or a specific division, region
                or
                subsidiary of the Company. The goals and objectives may be derived
                from and consistent with the operating plan(s) adopted by the Board
                of
                Directors of the Company for the Company, as a whole, or any division,
                region or subsidiary of the Company for the particular year or years
                to
                which the participant’s performance is
                measured.

            

    

     

    7.    
      Establishing
      Performance Goals.

     

    The
      Compensation Committee shall establish, for each measurement
      period:

     

    (a)the
      length of the measurement period;

     

    (b) the
      specific business criterion or criteria, or combination thereof, that will
      be
      used;

     

    (c) the
      specific performance targets that will be used for the selected business
      criterion or criteria;

     

    
      	
            	(d) 
              	
              any
                special adjustments that will be applied in calculating whether the
                performance targets have been met to factor out extraordinary or
                non
                recurring items;

            

    

     

    (e) the
      formula for calculating compensation eligible for payment under the Plan in
      relation to the performance targets;

     

    (f) the
      eligible employees who will participate in the Plan for that measurement period;
      and

     

    (g) if
      applicable, the target amounts for each participant for the measurement
      period.

     

    
      
        2

      

      
        
        

        
          

        

      

      
        
        

      

    

    The
      Compensation Committee shall make these determinations in writing no later
      than
      90 days after the start of each measurement period, but in no event later than
      the date 25% of the measurement period has elapsed, and while the outcome or
      results of such determinations are substantially uncertain. Cash awards to
      any
      one participant in any one fiscal or calendar year under the Plan shall not
      exceed $2,000,000. Stock awards or restricted stock unit awards granted to
      any
      one participant in any one fiscal or calendar year (which may vest over multiple
      years) under the Plan shall not exceed a maximum of 300,000 shares of the
      Company’s common stock. Such maximum amount of 300,000 shares shall be adjusted
      in the discretion of the Compensation Committee in the event of any stock
      dividend, stock split, extraordinary cash dividend, or similar recapitalization
      of the Company.

     

    Unless
      otherwise specified by the Compensation Committee in establishing the criteria
      for the particular measurement period, if the Company or its subsidiaries
      consummate one or more acquisitions during the measurement period that,
      individually or in the aggregate, constitute a “triggering acquisition”
(“Triggering Acquisition”), the measurement period shall end early, on the last
      day of the calendar quarter immediately before the consummation of the first
      acquisition that constitutes a Triggering Acquisition (either individually
      or
      when aggregated with prior acquisitions during the measurement period), and
      pro-rated payments shall be paid based on the degree of attainment of the
      performance goals during the shortened measurement period. For purposes of
      this
      paragraph, a Triggering Acquisition means an acquisition (or combination of
      acquisitions) in which the acquired entity’s operating earnings (earnings before
      transaction-related expense) for the four quarters completed immediately before
      consummation of the acquisition is equal to 10% or more of the pro-forma
      operating earnings for the same four quarters for the combination of the Company
      and its subsidiaries and the acquired entity. If either the Company and its
      subsidiaries or the entity being acquired had consummated other acquisitions
      during the four quarters in question, the calculation described in the prior
      sentence shall be done using pro-forma earnings for each combined
      entity.

     

    If
      an
      employee joins the Company or a subsidiary of the Company during any particular
      measurement period established for executive officers or other members of senior
      management of the Company and becomes an eligible employee pursuant to Section
      4(b) with respect to that measurement period, and if the employee is a “covered
      employee” within the meaning of Section 162(m), then to the extent necessary for
      the Plan to qualify as performance-based compensation under Section 162(m)
      or
      its successor under then applicable law, all relevant elements of the
      performance goals established pursuant to Sections 6 and 7 of this Plan for
      that
      employee must be established on or before the date on which 25% of the time
      from
      the commencement of employment to the end of the measurement period has elapsed,
      and the outcome or results under the performance goals for the measurement
      period must be substantially uncertain at the time those elements are
      established.

     

    8.    
      Determination
      of Attainment of Performance Goals.

     

    The
      Compensation Committee shall determine, pursuant to the performance goals and
      other elements established pursuant to Sections 6 and 7 of the Plan, the amounts
      to be paid to each employee for each measurement period or the extent to which
      awards have vested. The Compensation Committee’s determinations shall be
      final and binding on all participants and shall be memorialized in the minutes
      of the Compensation Committee. The Compensation Committee shall not have
      discretion to increase the amount of an award or accelerate the vesting of
      an
      award to any employee who is a “covered employee” within the meaning of Section
      162(m) if such action would cause the award or any part thereof to not be
      deductible under the Internal Revenue Code.

     

    9.    
      Amendments.

     

    The
      Compensation Committee may not amend or terminate the Plan so as to increase,
      reduce or eliminate awards under the Plan for any given measurement period
      retroactively, that is, on any date later than 90 days after the start of the
      measurement period. The Compensation Committee may amend or terminate the
      Plan at any time on a prospective basis and/or in any fashion that does not
      increase, reduce or eliminate awards retroactively. The foregoing
      notwithstanding, except as required by applicable law, the Compensation
      Committee shall not have the power to amend the Plan in any fashion that would
      cause the Plan to fail to qualify as performance-based compensation with respect
      to any “covered employee” as defined under Section 162(m) or its successor.
      Without limiting the generality of the foregoing, to the extent it would
      cause the Plan to fail to qualify as performance-based compensation with respect
      to any “covered employee” as defined under Section 162(m) or its successor under
      then applicable law, the Compensation Committee shall not have the power to
      change the material terms of the performance goals unless (i) the modified
      performance goals are established by the Compensation Committee no later than
      90
      days after the start of the applicable measurement period, on or before 25%
      of
      the measurement period has elapsed, and while the outcome or results are
      substantially uncertain; and (ii) no payments are made under the modified
      performance goals until after the material terms of the modified performance
      goals are disclosed to and approved by the Company’s stockholders.

     

    
      
        3

      

      
        
        

        
          

        

      

      
        
        

      

    

    10. 
      Rule
      10b5-1 Trading Plans; Stock Withholding.

     

    It
      is
      expected that participants under the Plan will establish or modify stock trading
      plans under Rule 10b5-1 of the Securities Exchange Act of 1934 to provide for
      the sale of Company shares and remit to the Company the proceeds to meet the
      Company’s withholding obligations in connection with stock awards hereunder. To
      the extent participants fail to establish or modify 10b5-1 plans in accordance
      with the foregoing, the Company shall at its election either require the
      participant to pay cash sufficient to meet the withholding obligations or the
      Company shall withhold the number of shares under a stock award sufficient
      (based on the fair market value of the Company’s common stock) to meet such
      withholding obligation.

     

    11. 
      Effect
      on Employment/Right to Receive.

     

    Nothing
      in the Plan shall interfere with or limit in any way the right of the Company
      or
      its subsidiaries to terminate any participant’s employment or service at any
      time, with or without cause or notice. Furthermore, the Company expressly
      reserves the right, which may be exercised at any time and without regard to
      any
      measurement period, to terminate any individual’s employment with or without
      cause, and to treat him or her without regard to the effect which such treatment
      might have upon him or her as a participant under the Plan. For purposes of
      the
      Plan, transfers of employment between the Company and/or its subsidiaries shall
      not be deemed a termination of employment. No person shall have the right to
      be
      selected to receive any award under the Plan, or, having been so selected,
      have
      the right to receive a future award.

     

    12. 
      Successors.

     

    All
      obligations of the Company under the Plan, with respect to awards granted
      hereunder, shall be binding on any successor to the Company, whether the
      existence of such successor is the result of a direct or indirect purchase,
      merger, consolidation, or otherwise, of all or substantially all the business
      or
      assets of the Company.

     

    13. 
      Nontransferability
      of Awards.

     

    No
      award
      granted under this Plan may be sold, transferred, pledged, assigned, or
      otherwise alienated or hypothecated, other than by will, by the laws of descent
      and distribution, or to the extent permitted by the Company’s 1999 Stock
      Incentive Plan, or other equity plan, to the extent an award is payable from
      such plans. All rights with respect to an award granted under this Plan
      shall be available during his or her lifetime only to the participant to whom
      the award is granted.

     

    14. Effectiveness;
      Prior Plans Superseded.

     

    The
      Plan
      shall be effective upon adoption by the Board of Directors of the Company,
      subject to stockholder approval within twelve months of its adoption by the
      Board of Directors. Any award granted under the Plan before it is approved
      by
      the stockholders of the Company shall be null and void and of no force and
      effect if the stockholders of the Company do not approve of the Plan within
      the
      twelve month period following adoption by the Board of Directors.

     

     

    
      
        4

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