EXHIBIT 10.20

 

SUPPLY AGREEMENT

 

 

THIS SUPPLY AGREEMENT (this “Agreement”) is made and entered into this 30th day
of December, 2013 by and between Toray Plastics (America), Inc., a Rhode Island,
corporation (“Toray”) and CTI Industries Corporation, an Illinois corporation
(“CTI”).

 

WHEREAS, CTI is engaged in the development, production and sale of various
products utilizing polyester films, including foil balloons and storage pouches;

 

WHEREAS, Toray is engaged in the development, production, marketing and sale of,
among other things, polyester films;

 

WHEREAS, for some time, Toray has manufactured and supplied to CTI, and CTI has
purchased from Toray, certain polyester films utilized by CTI in certain of its
products;

 

WHEREAS, the parties desire to enter into an agreement pursuant to which, ,
Toray will produce and sell to CTI, and CTI will purchase from Toray, certain
polyester films.

 

NOW, THEREFORE, in consideration of the mutual promises and of the terms,
covenants and conditions hereinafter contained, the parties hereto agree as
follows:

 

1.          Definitions of Terms. The following terms shall, for purposes of
this Agreement, have the meanings set forth in this paragraph:

 

    1.1       “Affiliate” shall mean any person or entity controlling,
controlled by or under common control with a party to this Agreement.

 

    1.2       “Confidential Information” shall have the meaning provided in
Section 11.4 hereof;

 

    1.3       “Contract Period” shall mean the period from January 1, 2014 to
December 31, 2015.

 

    1.4       “CTI” shall mean CTI Industries Corporation and its Affiliates.

 

    1.5       “Film” shall mean and include (i) 36 gauge and 32 gauge metallized
polyester rolls and (ii) such film extrusion coated with polyethylene;

 

    1.6       “Toray” shall mean Toray Plastics (America), Inc., a Rhode Island
corporation and its Affiliates;

 

 

 

  

2.          Sale and Purchase of Film.

 

     2.1       Sale and Purchase. Subject to and on the terms and conditions of
this Agreement, and during the Contract Period , Toray agrees to produce, sell
and supply to CTI, and CTI agrees to purchase from Toray, Eighty Percent (80%)
of its Requirements for Film. This Agreement does not specify a minimum quantity
of Film to be purchased by CTI, nor does this Agreement obligate CTI to purchase
any specific quantity of Film. The purchase of Film pursuant to this Agreement
will be by purchase order issued from time to time by CTI.

 

     2.2       Requirements. For purposes of Section 2.1, “Requirements” shall
mean, for any six month period during the term of this Agreement, the aggregate
amount by pound of purchases of Film by CTI from Toray and other suppliers, less
the aggregate amount of Film returned by CTI to Toray during such period due to
a good faith determination by CTI that such Film is non-compliant under the
terms hereof during such period. Notwithstanding the provisions of Sections 2.1
or 2.2 hereof, CTI shall be entitled to purchase Film from suppliers other than
Toray without regard to quantity (i) if, for any six (6) month period during the
Contract Period Toray shall fail or refuse to deliver at least 90% of Film at
the times and in the quantities ordered by CTI in accordance with the delivery
schedule agreed to by the parties as set forth in Section 4.4 of this Agreement,
(ii) if, for any six month period during the Contract Period, the amount of Film
delivered to CTI by Toray that CTI determines in good faith does not meet the
Specifications set forth in Schedule A of this Agreement exceeds 10% of the
total amount of Film delivered during such period and that Toray does not
deliver replacement Film within five (5) business days’ written notice from CTI
regarding such non-conforming Film or (iii) if Toray shall reject any purchase
order submitted by CTI, or shall fail or refuse to deliver Film in accordance
with such purchase order, CTI shall be entitled to purchase such item from a
third party, in the amount specified in such purchase order to Toray.

 

     2.3       Pricing. The Film to be produced and sold by Toray to CTI under
this Agreement shall be Toray’s MA11 36 gauge and 32 gauge polyester sheeting
(“Toray Film). The initial purchase price for Toray Film sold to CTI hereunder
shall be:

 

     MA11-36 gauge sheeting

 

     MA11-32 gauge sheeting

 

2.3.1       For each Contract Quarter during the term hereof, the Current
Purchase Price for Film purchased by CTI hereunder shall be determined as
follows:

 

The Current Purchase Price shall be (i) the Current Purchase Price for the
immediately preceding Contract Quarter plus or minus (ii) the amount of the CDI
Index Adjustment Amount. The Current Purchase Price shall have effect and apply
to, and at the time of, all shipments of Film made to CTI during the Contract
Quarter for which the Current Purchase Price is determined, without regard to
when the Film is ordered or produced.

 

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2.3.2       For purposes of this Section 2.3:

 

(a)        “Contract Quarter” shall mean the following three month periods

 

May to July

August to October

November to January

February to April

 

(b)        “Current Purchase Price” shall mean the purchase price determined in
accordance with Section 2.3.1. The Current Purchase Price for the Contract
Quarter August to October 2013 shall be the initial purchase price.

 

(c)        “CDI Index Adjustment Amount” shall mean an amount determined as
follows:

 

    (i)        for each month during the Contract Quarter preceding the Contract
Quarter for which the Current Price is determined, an amount shall be determined
by multiplying the Chemical Index Price for PTA and EG published in such month
by a .87 with respect to PTA and .34 with respect to EG (the “Monthly Adjustment
Amount”)

 

    (ii)        the average of the Monthly Adjustment Amount for each of the
months of such Contract Quarter for each of PTA and EG shall be determined;

 

    (ii)        the CDI Index Adjustment Amount shall be the difference between
the sum of the averages of the Monthly Adjustment Amounts for PTA and EG and the
Current Purchase Price for the preceding Contract Quarter.

 

     2.4      Discounts. During the term of this Agreement, the price for Film
purchased by CTI hereunder shall be adjusted by the following discounts:

 

 

Film Type 2014 2015 MA11-36 ga $0.06/lb $0.09/lb MA11-32 ga $0.08/lb $0.09/lb

  

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        The amount of such discounts will be calculated as of each calendar
quarter for the Contract Period , and shall be paid or allowed to CTI on or
before the 15th day following the last day of each such calendar quarter.

 

     2.5       Rebates.

 

2.5.1       For each calendar quarter during the Contract Period, there shall be
allowed or paid as a Good Will Rebate against the purchase price of Film
purchased by CTI hereunder during the Contract Period an amount equal to Three
Cents ($0.03) per pound of Film purchased by CTI from Toray. The amount of such
Good Will Rebate will be calculated as of each calendar quarter during the
Contract Period and shall be paid or allowed to CTI on or before the 15th day
following the last day of each such calendar quarter.

 

2.5.2      For each calendar quarter during the Contract Period, there shall be
allowed or paid as a Volume Rebate against the purchase price of Film purchased
by CTI hereunder an amount equal to Fifteen Cents ($0.15) per pound of Film
purchased by CTI from Toray. For each calendar quarter during the Contract
Period in which CTI purchases 250,000 pounds or more of Film from Toray,
one-half of the rebate amount shall be earned and shall be allowed or paid to
CTI on or before the 15th day of the month following the last day of such
calendar quarter. If CTI purchases an aggregate of 2 million pounds or more of
Film from Toray during the Contract Period, the remaining one-half of the rebate
amount shall be deemed earned as of December 31, 2015 and shall be allowed or
paid as of January 15, 2016. Any rebate amount earned, when due, shall be
allowed against and deducted from any amount due to Toray from CTI; if no amount
shall be due to Toray from CTI when such rebate amount shall be due, Toray shall
promptly pay the full amount thereof to CTI.

 

2.5.3       On February 1, 2014, there shall be allowed or paid as a Business
Growth Incentive an amount equal to $168,000.

 

3.          Specifications.

 

     3.1      Attached hereto as Schedule A are specifications for the Film to
be supplied by Toray to CTI hereunder (the “Specifications”) and a quality plan
and procedure (the “Quality Plan”)

 

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     3.2      Toray agrees that all Film supplied by it to CTI hereunder shall
conform to the Specifications and to the Quality Plan..

 

4.         Terms of Manufacture, Sale and Delivery.

 

    4.1      Purchase Orders. From time to time, CTI shall place written
purchase orders with Toray for Film. Each purchase order shall specify with
respect to each item ordered (i) the item, (ii) the quantity of the item
ordered, (iii) the unit and total price, (iv) a delivery date and (v) a
destination for delivery. Subject to the provisions hereof, Toray shall use
reasonable commercial efforts to produce and deliver all items ordered pursuant
to purchase order. If Toray shall fail to reject a purchase order by written
notice to CTI given within 10 days after Toray’s receipt of the purchase order,
Toray shall be deemed to have accepted the same. No purchase order or invoice
shall vary the terms of this Agreement.

 

     4.2       Production. Toray shall produce Film in accordance with purchase
orders submitted by CTI to Toray from time to time, and accepted by Toray,
subject and pursuant to the terms of this Agreement.

 

     4.3       Delivery. The terms for all items produced by Toray and purchased
by CTI hereunder shall be F.O.B. CTI’s plant. Toray shall be responsible for all
costs of delivery and for insurance of all Film shipped during delivery. Toray
shall designate the means of shipping and arrange for shipping of the product to
the designated destination. Title and risk of loss for all product sold
hereunder shall pass to CTI when the Film is delivered to CTI’s plant..

 

     4.4       Lead Time. The parties shall develop and establish written
delivery schedules for Film based upon various quantity levels. Toray shall
utilize reasonable commercial efforts to produce and deliver Film, as ordered
from time to time by CTI, in accordance with such delivery schedules. Each
purchase order shall specify a delivery date for the goods ordered. If an item
ordered shall not be covered by a delivery schedule established hereunder or the
purchase order does not specify a delivery date, Toray shall, within 10 days
after receipt of such order, give notice to CTI of the date upon which delivery
of the items ordered can be made. If Toray shall fail to provide such notice,
Toray shall be deemed to have accepted the delivery date specified in the
purchase order.

 

     4.5      Cancellation or Modification of Orders. From and after the date of
receipt of a purchase order by Toray hereunder, CTI shall not be entitled to
cancel or modify a purchase order, without the express written consent of Toray,
and CTI shall be bound to accept delivery of, and make payment for, all items
ordered.

 

     4.6       Quality Control and Standards. Toray shall employ equipment,
machinery, production methods and manufacturing quality control procedures with
respect to all Film manufactured by Toray for CTI hereunder, including but not
limited to, inspections and testing from time to time as is customary in the
industry and shall maintain records of all such inspection and testing for a
period of no less than two (2) years. Toray shall maintain written quality
control procedures with respect to each product manufactured by Toray for CTI
hereunder, all as set forth in the Quality Plan, and shall employ such
procedures for its quality control inspection and testing.

 

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     4.7       Books and Records. Toray shall keep and maintain in its offices
accurate books and records relating to the production of Film, inspection and
testing thereof and performance of its obligations hereunder, including without
limitation, any and all licenses, permits, approvals and corporate documents
required or obtained in connection with this Agreement or the performance
thereof. All accounting books and records shall be maintained in accordance with
applicable generally accepted accounting principles consistently applied. All of
such books and records shall be deemed Confidential Information hereunder and
shall be treated as such in accordance with the provisions of this Agreement
relating to Confidential Information.

 

     4.9.      Insurance. Toray shall maintain commercial general liability
insurance, including a contractual liability endorsement, in the amount of
$1,000,000 per occurrence and $2,000,000 in the aggregate. Toray shall provide
CTI with evidence of such insurance together with a certificate naming CTI, its
affiliates, officers, directors, employees and agents as additional insureds.
The certificate shall specify that CTI shall be given at least thirty (30) days
prior written notice by the insurer in the event of any material modification,
cancellation or termination of coverage.

 

5.          Invoices, Payment Terms.

 

   5.1       Invoices. Toray shall be entitled to, and shall, issue and deliver
to CTI an invoice with respect to Film ordered by CTI, and produced by Toray, at
the time of shipment thereof to CTI. Unless otherwise agreed, all prices for
Film sold hereunder shall be exclusive of shipping costs and all national,
federal, state or local, use, sales, excise, occupational or other similar tax.
If Toray shall pay any amount for shipping or tax in connection with any
transaction, Toray shall be entitled to include the amount thereof on the
invoice to CTI and CTI shall pay all such amounts in accordance with Section 5.2
hereof.

 

     5.2       Payment Terms. Payment of all invoices issued by Toray hereunder
to CTI shall be due and payable within forty-five (45) days of the date of the
invoice. Payment of an invoice shall not constitute acceptance of the Film for
which payment is made and shall be subject to adjustment for errors, shortages,
defects in the products, damage to CTI for which Toray is partially or wholly
responsible or other failure of Toray to meet the requirements of this
Agreement.

 

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6.          Inspection;Acceptance.

 

     6.1      Notwithstanding any prior inspections or payments hereunder, all
products sold and delivered to CTI hereunder shall be subject to final
inspection, which may include measurement, testing or examination, and
acceptance at CTI’s facility within a reasonable time after receipt at
destination. The parties acknowledge that inspection may take place at the time
that Film purchased hereunder is used in production by CTI. Any inspection by
CTI shall not relieve Toray of any obligations or liabilities under this
Agreement.

 

     6.2      If CTI shall determine in good faith that any Film delivered does
not meet all of the requirements of this Agreement, CTI shall have the right to
reject such Film and return such Film at Supplier’s expense, including a
reasonable amount for CTI’s handling costs in the form of credits or free film.
At the time of such return, CTI shall be entitled to a credit for the purchase
price of the returned Film; provided that, if it shall ultimately be determined
by agreement, arbitration or otherwise that any portion of such returned Film
shall have conformed to the Specifications and the requirements of this
Agreement, (i) the Film shall be shipped to CTI at CTI’s expense, (ii) the
credit for the purchase price thereof shall be withdrawn and (iii) any credits
for roll charges shall be withdrawn. If CTI shall determine that any portion of
a roll of Film is non-conforming, CTI may elect to reject the entire roll
tendered even if only a portion thereof is non-conforming. If CTI elects to
accept non-conforming Flim, CTI, in addition to its other remedies, shall be
entitled to an appropriate reduction in price.

 

7.         Warranties

 

     7.1      Toray Warranties Toray warrants that all Film furnished hereunder
shall: (i) be free from latent and patent defects in workmanship, material,
manufacture, and design; (ii) comply with and conform to the requirements of
this Agreement, including the Specifications and the Quality Plan incorporated
herein, any description of the Film contained in the purchase order and any
samples furnished by Toray; (iii) be fit and sufficient for the use intended by
CTI; (iv) be free and clear of any lien, security interest or other adverse
claim against title; (v) comply with the laws of the states and of the United
States governing weights, measures and sizes; (vi) not infringe, including
without limitation their sale or use alone or in combination, any United States
or foreign patents, trademarks, trade secrets, copyrights or proprietary rights
of any third party.

 

     7.2      The foregoing warranties shall survive any delivery, inspection,
acceptance, or payment by CTI

 

     7.3      Toray’s warranties shall be effective for the period of time
either of one (1) year from the date of delivery of the product to CTI.

 

     7.4      If any Film furnished hereunder does not meet the warranties
specified in this Agreement, CTI may, at its option, any or all of the following
(which shall not be exclusive): (i) return such defective or nonconforming Film
to Toray at Toray’s expense t and recover from Toray the price thereof and a
roll charge as provided herein; (ii) accept the defective or nonconforming Film
at a reduced price, (iii) recover from Toray its damages incurred as the result
of the breach of warranty, including without limitation (a) cost and expenses
arising from the use or attempted use of the Film in its production processes,
(b) the cost of materials and production resulting from the use or attempted use
of the Film. Except as provided herein, Toray shall not be responsible or liable
to CTI, by reason of a breach of warranty, for exemplary damages or
consequential damages in the nature of lost profits, lost sales, diminished
goodwill, lost opportunity or similar economic damages. Aside from the foregoing
and other warranties set forth herein, TORAY MAKES NO OTHER REPRESENTATION OR
WARRANTY AND THE FOREGOING REFERENCED WARRANTIES ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, WHICH ARE HEREBY DISCLAIMED BY TORAY.

 

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8.         Term and Termination.

 

     8.1      This Agreement shall be effective for a term commencing on January
1, 2013 and expiring on December 31, 2015, the Contract Period. At the
expiration of the initial term the Agreement may be extended by mutual agreement
of the parties.

 

     8.2      Either party shall be entitled to terminate this Agreement prior
to the expiration of the initial term, or any renewal term, as follows:

 

        8.2.1       Upon written notice of termination to a party, effective on
the giving of such notice in the event of an Event of Default with respect to
the other party. An “Event of Default” shall mean a breach or failure to perform
by a party of any obligation of this Agreement on its part to be performed and
the failure of such party to cure such breach or non-performance within thirty
(30) days after notice thereof, specifying the breach or non-performance, shall
have been given to such party. A breach of warranty shall not constitute an
Event of Default if Toray shall provide credit or replacement for the product as
to which there shall be a breach of warranty.

 

        8.2.2       Upon five (5) days prior written notice to the other party
in the event of the other’s Bankruptcy, defined for purposes of this Agreement
as (i) an assignment for the benefit of creditors, (ii) the filing of an
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, (v) the filing of an answer or
other pleading admitting or failing to content 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.

 

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     8.3       Effect of Termination.

 

8.3.1       Upon the termination of this Agreement as provided herein, except as
provided herein, all rights and obligations of the parties hereto shall cease
and terminate; provided, however that:

 

a.          All rights and obligations hereunder providing or intended to
survive the termination of this Agreement shall survive such termination and
shall continue in full force and effect;

 

b.          All rights or obligations which shall have accrued to the date of
such termination shall survive the termination.

 

9.          Indemnity.

 

     9.1       Indemnity by Toray. Toray will at all times be deemed to be
performing as an independent contractor and not as an agent or employee of CTI.
The acts and omissions of Toray’s employees and agents and subcontractors of any
tier will be deemed to be those of Toray. ) Toray shall defend, indemnify and
hold CTI, its affiliated companies, and their respective shareholders, officers,
directors, employees, agents, successors, and assigns harmless from and against
any and all claims, suits, actions, liabilities, losses, costs, reasonable
attorneys’ fees, expenses, judgments or damages, whether ordinary, special or
consequential. arising directly or indirectly from or in connection with (i) the
acts, negligence, omissions or willful misconduct of Toray; (ii) products
supplied hereunder; (iii) a breach of any of Toray’s warranties or any other
term and condition of this Agreement; (iv) a claim that any products furnished
hereunder infringe upon or misappropriate any patent, copyright, trademark,
trade secret or other intellectual property interest of another; (v) a claim of
any lien, security interest or other encumbrance made by a third party; (vi) a
violation of federal or state law, regulation, statute or ordinance; or (vii)
failure to comply with the Confidentiality obligations set forth herein.
Notwithstanding the foregoing, Toray shall not hold CTI harmless from claims
arising out of the negligence, reckless actions or willful misconduct or
malfeasance of CTI, its officers, agents, or employees or any person or entity
not subject to Toray’s supervision or control.If a claim is filed against CTI
for which Toray is to be responsible under this provision, CTI will promptly
notify Toray in writing of such claim.

 

     9.2      Indemnity by CTI. CTI will at all times be deemed to be performing
as an independent contractor and not as an agent or employee of Toray. The acts,
negligence, omissions or willful misconduct of CTI’s employees and agents and
subcontractors of any tier will be deemed to be those of CTI. CTI will defend,
indemnify and hold harmless Toray, its directors, officers, employees, agents,
employees, successors and assigns from and against any and all liability,
damages, losses, claims (including without limitation third party intellectual
property infringement claims other than claims relating solely to Film supplied
by Toray to CTI), demands, judgments, costs and expenses of every nature and
kind by reason of injury to or death of any person or damage to or destruction
of property to the extent arising out of or incidental to or in any way
resulting from defects in the products produced by CTI, including products
utilizing Film supplied by Toray, as the result of the negligence or tortious
acts or omissions of CTI, its employees, subcontractors or agents. CTI will not
be responsible for any such losses, liabilities, claims, judgments, costs,
demands and expense to the extent caused by the negligence or willful misconduct
of Toray, its directors, officer or employees. If a claim is filed against Toray
for which CTI is to be responsible under this provision, Toray will promptly
notify CTI in writing of such claim.

 

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10.        Intellectual Property; Confidential Information.

 

     10.1     Intellectual Property. Each party expressly acknowledges and
agrees that, except as may be specifically provided in this or other agreement,
neither party shall acquire, retain or appropriate for its own use any right,
title, license or interest in or to any patent, trademark, tradename, copyright,
trade secret, Confidential Information or other intellectual property right of
the other party. Neither party shall take any action that might impair in any
way any right, title or interest of the other party in any such intellectual
property.

 

     10.2    Use of Trade Names and Marks. Neither party shall use any logo,
name, trademark, trade name or service mark of the other party except as may be
expressly authorized by the other party.

 

     10.3     Inventions; Developments. The parties acknowledge that each party
may engage in research and development, including without limitation with
respect to Flim. Except as expressly provided herein or in other written
agreement, the parties agree that each party shall be and remain the sole owner
of any and all patents (domestic or foreign), inventions, trade secrets,
trademarks, trade names or other intellectual property rights independently
made, conceived or developed by or for such party during the term hereof or
otherwise and, except as otherwise provided herein or in other written
agreement, neither party shall have any right, license, title or interest in or
to any such independently developed intellectual property arising from any such
developments.

 

     10.4    Confidential Information.

 

        10.4.1     “Confidential Information” shall mean and include
information, consisting of or concerning or relating to (i) product design or
composition, (ii) product components, (iii) methods of production, (iv)
equipment design or use, (v) sources of supply, (vi) research or development,
(vii) financial information or (vii) other information deemed by the party
providing the information to be confidential which (A) has been exchanged by the
parties prior to the date hereof, (B) is contained in a document market
“Confidential”, (C) is orally communicated by one party to another and is
identified by the party providing such information as being Confidential
Information by written communication to the other party given within ten (10)
days after the date the information is provided orally or (D) by reason of the
nature and treatment of the information as confidential by the disclosing party,
shall be deemed confidential. Information is not Confidential Information (a) if
it is already public on the date of this agreement; (b) if it becomes public
other than through a breach of this agreement; or (c) if it is information that
CTI or Toray develops independently without using the other party’s Confidential
Information. If CTI or Toray receives non-public information about the other
party from another source, it should assume that the information is Confidential
Information unless it has written confirmation to the contrary from the other
party.

 

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        10.4.2     During the term of this Agreement, and thereafter for so long
as the information remains confidential, each party agrees to maintain as
confidential all Confidential Information of the other party communicated to it
and not to use such information except as is authorized and appropriate in the
performance of this Agreement or to disclose such Confidential Information to
any person except (i) to its own employees and agents, who have a need to know
as required for performance of the party’s obligations hereunder or (ii) as
shall be expressly authorized in writing by the disclosing party.

 

        10.4.3     Each party shall take all steps necessary or appropriate to
protect Confidential Information of the other party against unauthorized
disclosure or use. It is further understood and agreed that money damages may
not be a sufficient remedy for any breach of this confidentiality agreement and
that the non-breaching party may be entitled to seek specific performance and
injunctive or other equitable relief as a remedy for any such breach. Each party
agrees to waive any requirement for the securing or posting of any bond in
connection with such remedy. Such remedy shall not be deemed to be the exclusive
remedy, but shall be in addition to all other remedies available at law or
equity.

 

11.        Arbitration.

 

    11.1      Agreement to Arbitrate. 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 (other than disputes
related to Confidential Information, intellectual property rights and
cross-claims or counterclaims arising in pending litigation), 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 New York, New York. The appointing authority
will be the AAA. The number of arbitrators will be three (3), who shall
constitute the “arbitral panel”.

 

    11.2      Notice of Arbitration. The arbitration will begin on the date on
which the notice of demand for arbitration is delivered to the responding party
(the “Respondent”) at the address appearing for that party for notices herein.
The party giving notice of the arbitration will 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 failure to perform an obligation under this Agreement and of the petitions
and amounts claimed.

 

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    11.3    Certain Procedures; Confidentiality. The arbitration shall be
conducted in accordance with the Commercial Rules of Arbitration of the AAA. The
parties shall be entitled to all discovery in accordance with the Federal Rules
of Civil Procedure, including document production, interrogatories and
depositions. At least fifteen (15) days prior to the date of the hearing, the
parties will deliver to the arbitrator: (i) the names and addresses of any
witness that they intend to present; (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 herein will be treated as Confidential
Information and any and all arbitrators will maintain its confidentiality.

 

     11.4     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.

 

     11.5     Arbitral Award. 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 tribunal
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 ward will (i) be granted and paid in Untied 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 then prevailing prime rate.

 

     11.6     Judgment on Award. Judgment upon the arbitral award may be entered
in any court of competent jurisdiction. The parties submit themselves to the
jurisdiction of the courts of the states of Illinois and Rhode Island 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.

 

     11.7     Expenses of Arbitration. 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, and all other fees and costs shall be allocated to the
parties to the arbitration as determined by the arbitral panel.

 

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     11.8     Law Applicable. Notwithstanding anything to the contrary contained
herein, the law applicable to the validity of this Section 11 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 Untied States Federal
Arbitration Act, 9 U.S.C Sec.1, et seq.

 

12.        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. Products will be
manufactured, labeled, packaged, sold and shipped in accordance with all
applicable laws, orders, rules and regulations.

 

13.        Legal Relationships. CTI and Toray 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 CTI and Toray 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 CTI and Toray’s employees. Toray’s employees will not be entitled as a
result of this Agreement to any benefits under any employee benefit plan CTI
presently has in effect or may put into effect nor will Toray employees be
considered employees of CTI 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.
CTI and Toray further covenant that no authorization will be given to any
employee to act for the other party. Without limiting the foregoing, Toray and
CTI 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.

 

14.        Waiver of Terms and Conditions, Survival.

 

     14.1     No Waiver. The failure of CTI or Toray 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 will not
be construed as thereafter waiving any such terms, conditions, rights or
privileges, and the same will continue and remain in force and effect as if no
waiver had occurred.

 

     14.2     Survival. Either party’s obligations under this Agreement which by
their nature or terms 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 7,
Warranties; Section 9, Indemnity; Section 10.4, Confidential Information; and
Section 11, Arbitration.

 

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15.        Miscellaneous.

 

     15.1     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.

 

     15.2     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 affected party. Any affected party will immediately
notify the other in writing if a force majeure event delays performance and will
state the revised date for performance. Should Toray be unable to perform
because of a force majeure event continues for a period in excess of 30 days,
CTI will not be obligated to purchase, at a later date, that portion of the
product ordered that Toray is unable to deliver because of a force majeure
event, and during the period of Toray’s inability to perform CTI will be free to
purchase any Film covered by this Agreement from another source.

 

     15.3     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.

 

     15.4     Assignment. Neither party will assign this Agreement or any
rights, responsibilities, or obligations in this Agreement, without the express
written approval of the other (which consent will not be unreasonably withheld)
and any attempted assignment in violation of this provision shall be void;
provided, however, that no consent will be required in the event of a transfer
of all or substantially all of the assets or business of either party to an
affiliate or as part of a reorganization, merger or spin off.

 

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     15.5     Notices. All notices required or permitted by or made pursuant to
this Agreement shall in writing and shall be sent by facsimile, electronic mail
with confirmation of receipt, commercial courier service for next day delivery,
or by delivery to a reliable international air courier to the addresses set
forth in this Section 16.5. Any notices shall be deemed effectively given when
received by the other party.

                         

 If to CTI:CTI Industries Corporation 22160 N. Pepper Road   Barrington, IL
60010   Attn: President   Fax: 847-382-1219

 

 If to Toray Toray Plastics (America), Inc. 50 Belver Avenue   North Kingston,
RI 02852   Fax 401-294-2154

 

     15.6    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.

 

     15.7    Counterparts. This Agreement may be executed in several duplicate
originals, each of which shall be deemed an original but all of which together
shall constitute one and the same instrument. Signatures transmitted
electronically or by facsimile shall have the effect of original signatures.

 

     15.8    Governing Law. This Agreement has been entered into within the
State of Illinois and this Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of that jurisdiction, as applicable to
contracts which are executed and delivered in that jurisdiction, and which are
to be performed wholly within that jurisdiction, without taking into account
provisions thereof regarding choice or conflict of laws.

 

     15.9    Entire Agreement and Modification. This Agreement and the
attachments to this Agreement and made a part of this Agreement sets forth the
entire Agreement 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.

 

 

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IN WITNESS WHEROF, the parties hereto have executed this Agreement as of the day
and year first above written.

 

 

TORAY PLASTICS (AMERICA), INC.               By:     Authorized Officer        
      CTI INDUSTRIES CORPORATION               By:     President  

  

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