Document:

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.

 

    	13

    	 

    

 

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.

 

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY
BLANK]

 

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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	 

  

    	16Exhibit 10.01

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This EXECUTIVE EMPLOYMENT
AGREEMENT (the “Agreement”) dated April 1, 2014 (the “Effective Date”) by and between Tonix
Pharmaceuticals Holding Corp., a company incorporated under the laws of Nevada (the “Company”), and Donald J.
Kellerman, Pharm.D., an individual (the “Executive”).

 

WHEREAS, Tonix Pharmaceuticals,
Inc., the Company’s wholly-owned subsidiary, previously entered into a consulting agreement with Executive, dated February
2, 2014 (the “Consulting Agreement”) relating to, among other things, compensation to be paid for services;
and

 

WHEREAS, the parties
wish to enter into this Agreement directly between Executive and the Company, on the terms and conditions contained in this Agreement,
which will supersede the Consulting Agreement (and which Consulting Agreement will terminate simultaneously with the execution
of this Agreement) and all prior agreements and understandings between Tonix Pharmaceuticals, Inc. (or the Company) and Executive,
oral or written with respect to its subject matter.

 

NOW THEREFORE, in consideration
of the mutual covenants contained herein, the parties, intending to be legally bound, agree as follows:

 

1.Definitions.
As used in this Agreement, the following terms shall have the following meanings:

 

(a) “Board”
means the Board of Directors of the Company.

 

(b) “Cause”
means any of the following:

 

		(i)	the commission of an act of fraud, embezzlement or dishonesty by Executive, or the commission of
some other illegal act by Executive (other than traffic violations or other offenses or violations outside of the course of Executive’s
employment), that has a demonstrable material adverse impact on the Company or any successor or affiliate thereof;

 

		(ii)	a conviction of, or plea of “guilty” or “no contest” to, a felony by Executive;

 

		(iii)	any unauthorized use or disclosure by Executive of confidential information or trade secrets of
the Company or any successor or affiliate thereof that has, or may reasonably be expected to have, a material adverse impact on
any such entity;

 

    	 

    	 

    

 

		(iv)	Executive’s gross negligence, failure to follow a material, lawful and reasonable request
of the Company or material violation of any duty of loyalty to the Company or any successor or affiliate thereof, or any other
demonstrable material misconduct on the part of Executive;

 

		(v)	Executive’s ongoing and repeated failure or refusal to perform or neglect of Executive’s
duties as required by this Agreement, which failure, refusal or neglect continues for thirty (30) days following Executive’s
receipt of written notice from the Company stating with specificity the nature of such failure, refusal or neglect; or

 

		(vi)	Executive’s breach of any Company policy or any material provision of this Agreement;

 

provided, however,
that prior to the determination that “Cause” under this Section 1(b) has occurred, the Company shall (A) provide to
Executive in writing, in reasonable detail, the reasons for the determination that such “Cause” exists, (B) only with
respect to clause (vi) above, afford Executive a reasonable opportunity to remedy any such breach, (C) provide Executive an opportunity
to be heard prior to the final decision to terminate Executive’s employment hereunder for such “Cause” and (D)
make any decision that such “Cause” exists in good faith.

 

The foregoing definition
shall not in any way preclude or restrict the right of the Company or any successor or affiliate thereof to discharge or dismiss
Executive for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of this Agreement,
to constitute grounds for termination for Cause.

 

(c) “Code”
means the Internal Revenue Code of 1986, as amended from time to time, and the Treasury Regulations and other interpretive guidance
issued thereunder.

 

(d) “Good
Reason” means the occurrence of any of the following events or conditions without Executive’s written consent:

 

		(i)	a material reduction of Executive’s title, authority, duties or responsibilities, or the
assignment to Executive of duties materially inconsistent with Executive’s positions with the Company as stated in Section
2(a) hereof;

 

		(ii)	a material diminution in Executive’s base compensation, unless a similar reduction is imposed
across-the-board to senior management of the Company;

 

		(iii)	a material change in the geographic location at which Executive must perform his duties (and the
parties acknowledge that a relocation of Executive’s principal office to a location more than fifty (50) miles from Executive’s
current residence (excepting reasonable travel on the Company’s business) shall constitute a material change for purposes
of this clause (iii));

 

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		(iv)	any other action or inaction that constitutes a material breach by the Company or any successor
or affiliate of its obligations to Executive under this Agreement; or

 

		(v)	the Company’s delivery of a Non-Renewal Notice (as hereinafter defined).

 

Executive must provide
written notice to the Company of the occurrence of any of the foregoing events or conditions without Executive’s written
consent within ninety (90) days of the occurrence of such event. The Company or any successor or affiliate shall have a period
of thirty (30) days to cure such event or condition after receipt of written notice of such event from Executive. “Good Reason”
shall not exist unless and until the Company fails to cure the condition within the allotted timeframe.

 

(e) “Involuntary
Termination” means (i) Executive’s Separation from Service by reason of Executive’s discharge by the Company
other than for Cause, or (ii) Executive’s Separation from Service by reason of Executive’s resignation of employment
with the Company for Good Reason. Executive’s Separation from Service by reason of Executive’s death or discharge by
the Company following Executive’s Permanent Disability shall not constitute an Involuntary Termination. Executive’s
Separation from Service by reason of resignation from employment with the Company for Good Reason shall be an “Involuntary
Termination” only if such Separation from Service occurs within six (6) months following the initial existence of the act
or failure to act constituting Good Reason, and then only after an opportunity to cure has been provided in accordance with Section
1(d).

 

(f) “Permanent
Disability” of Executive shall be deemed to have occurred if Executive shall become physically or mentally incapacitated
or disabled or otherwise unable fully to discharge his duties hereunder for a period of ninety (90) consecutive calendar days or
for one hundred twenty (120) calendar days in any one hundred eighty (180) calendar-day period. The existence of Executive’s
Permanent Disability shall be determined by the Company on the advice of a physician chosen by the Company and the Company reserves
the right to have Executive examined by a physician chosen by the Company at the Company’s expense.

 

(g) “Separation
from Service,” with respect to Executive, means Executive’s “separation from service,” as defined in
Treasury Regulation Section 1.409A-1(h).    

 

(h) “Stock
Awards” means all stock options, restricted stock and such other awards granted pursuant to the Company’s stock
option and equity incentive award plans or agreements and any shares of stock issued upon exercise thereof.

 

    	3

    	 

    

 

2.Services to
Be Rendered.

 

(a)Duties and
Responsibilities. Executive shall serve as the Senior Vice President Clinical Development and Regulatory Affairs of the Company.
In the performance of such duties, Executive shall report directly to and shall be subject to the direction of the President. Executive
shall be employed by the Company on a full time basis. Executive’s primary place of work shall be the Company’s branch
office in Cupertino, California, or such other location in the San Francisco Bay Area as may be designated by the Board from time
to time. Executive shall also render services at such other places within or outside the United States as the Company
may direct from time to time. Executive shall be subject to and comply with the policies and procedures generally applicable to
senior executives of the Company to the extent the same are not inconsistent with any term of this Agreement.

 

(b)Exclusive Services.
Executive shall at all times faithfully, industriously and to the best of his ability, experience and talent perform to the satisfaction
of the Company all of the duties that may be assigned to Executive hereunder and shall devote substantially all of his productive
time and efforts to the performance of such duties. Executive agrees that he will not join any boards, other than community and
civic boards (which do not interfere with his duties to the Company), without the prior approval of the Company. Except
as provided below, the Company shall be entitled to all benefits, profits or other issues arising from or incidental to all work,
services and advice performed or provided by Executive. Provided that the activities listed below do not interfere with the duties
and responsibilities under this Agreement, nothing in this Agreement shall preclude Employee from devoting reasonable periods required
for:

 

	 	(i)	Serving as a member or owner of any organization involving no conflict of interest with the Company, provided that Executive must obtain the prior approval of the Board;

 

		(ii)	Serving as a consultant in his area of expertise to government, commercial and academic panels
where it does not conflict with the interests of the Company; and

 

		(iii)	Managing his personal investments, including owning shares of companies whose securities are publicly
traded, so long as such securities do not constitute more than five percent (5%) of the outstanding securities of any such company.

 

3.Compensation
and Benefits. The Company shall pay or provide, as the case may be, to Executive the compensation and other benefits and rights
set forth in this Section 3.

 

(a)Base Salary.
The Company shall pay to Executive a base salary of $300,000 per year, payable in accordance with the Company’s usual pay
practices (and in any event no less frequently than monthly). Executive’s base salary shall be subject to review annually
by and at the sole discretion of the Compensation Committee of the Board or its designee.

 

(b)Signing Bonus.
The Company shall pay to Executive a lump sum signing bonus of $70,000 within thirty (30) days of the Effective Date.

 

    	4

    	 

    

 

(c) Annual Bonus.
Executive shall be entitled to participate in any bonus plan that the Board or its designee may approve for the senior executives
of the Company. Any bonus awarded under this Section 3(c) shall be calculated following the close of the fiscal year to which the
bonus relates, and paid in a lump sum by no later than two and one-half (2 1⁄2) months following the end of the fiscal year
in which such bonus award is earned, provided that Executive remains employed on the date of payment (and has not given notice
of resignation).

 

(d)Benefits.
Executive shall be entitled to participate in benefits under the Company’s benefit plans and arrangements, including, without
limitation, any employee benefit plan or arrangement made available in the future by the Company to its senior executives, subject
to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. The Company
shall have the right to amend or delete any such benefit plan or arrangement made available by the Company to its senior executives
and not otherwise specifically provided for herein.

 

(e)Expenses.
The Company shall reimburse Executive for reasonable out-of-pocket business expenses incurred in connection with the performance
of his duties hereunder, subject to (i) such policies as the Company may from time to time establish, (ii) Executive
furnishing the Company with evidence in the form of receipts satisfactory to the Company substantiating the claimed expenditures,
and (iii) Executive receiving advance approval from the President in the case of expenses (or a series of related expenses) in
excess of $5,000.

 

(f)Vacation.
Executive shall have the right to four weeks of vacation during each successive one year period of his employment by the Company,
which vacation time shall be taken at such time or times in each such one year period so as not to materially and adversely interfere
with the performance of his responsibilities under this Agreement. In addition, Executive shall be entitled to additional paid
time off in accordance with the policies of the Company applicable to senior management personnel from time to time.

 

(g)Withholding.
The Company shall be entitled to withhold from amounts payable or benefits accorded to Executive under this Agreement all federal,
state and local income, employment and other taxes, as and in such amounts as may be required by applicable law.

 

(h)Equity Awards.
Executive shall be entitled to participate in any equity or other employee benefit plan that is generally available to senior executive
officers, as distinguished from general management, of the Company. Except as otherwise provided in this Agreement, Executive’s
participation in and benefits under any such plan shall be on the terms and subject to the conditions specified in the governing
document of the particular plan.

 

4.Employment
Term. The term of this Agreement (as it may be extended by the following sentence or terminated earlier pursuant to Section
5, the “Employment Term”) shall begin on April 1, 2014 and end on the close of business on March 31, 2015. The
Employment Term shall be automatically extended for additional one-year periods unless, at least sixty (60) days prior to
the end of the expiration of the Employment Term, Executive or the Company notifies the other party in writing (a “Non-Renewal
Notice”) that it does not wish to extend such Employment Term. Executive’s employment hereunder shall be coterminous
with the Employment Term, unless sooner terminated as provided in Section 5.

 

    	5

    	 

    

 

5.Termination;
Severance. Executive shall be entitled to receive benefits upon a Separation from Service only as set forth in this Section
5:

 

(a)General.
Either the Company or Executive may terminate Executive’s employment hereunder, for any reason, at any time prior to the
expiration of the Employment Term, upon thirty (30) days prior written notice to the other party. Upon termination of Executive’s
employment hereunder for any reason, Executive shall be deemed simultaneously to have resigned from any position or office he may
at the time hold with the Company or any of its affiliates. In addition, upon expiration of the Employment Term, the Company shall
(i) reimburse Executive for any expenses properly incurred under Section 3(d) and which have not previously been reimbursed
as of the effective date of the termination, (ii) pay Executive for any accrued, but unused, vacation time as of the effective
date of the termination, and (iii) pay Executive for any accrued and unpaid base salary through and including the effective
date of termination (collectively, the “Accrued Compensation”). The Accrued Compensation will be paid in a lump
sum on the first regularly scheduled payroll date following the effective date of the termination of Executive’s employment
with the Company.

 

(b)Separation
from Service by Death or Following Permanent Disability. Subject to Sections 5(e) and 10(p) and Executive’s continued
compliance with Section 6, in the event of Executive’s Separation from Service as a result of Executive’s death or
discharge by the Company following Executive’s Permanent Disability, Executive or Executive’s estate, as applicable,
shall be entitled to receive his base salary through the end of the month in which Executive’s Separation from Service occurs
as a result of Executive’s death or Permanent Disability.

 

(c)Severance upon
Involuntary Termination. Subject to Sections 5(e) and 10(p) and Executive’s continued compliance with Section 6, if Executive’s
employment is Involuntarily Terminated, Executive shall be entitled to receive, in lieu of any severance benefits to which Executive
may otherwise be entitled under any severance plan or program of the Company, the benefits provided below, which, with respect
to clause (ii) and the last sentence of clause (iii) (if applicable) will be payable in a lump sum within ten (10) days following
the effective date of Executive’s Release (as hereinafter defined):

 

		(i)	the Company shall pay to Executive his fully earned but unpaid base salary, when due, through the
date of Executive’s Involuntary Termination at the rate then in effect (without regard to any reduction in salary that gave
rise to an event of Good Reason), plus all other benefits, if any, under any Company group retirement plan, nonqualified deferred
compensation plan, equity award plan or agreement, health benefits plan or other Company group benefit plan to which Executive
may be entitled pursuant to the terms of such plans or agreements at the time of Executive’s Involuntary Termination;

 

    	6

    	 

    

 

		(ii)	Executive shall be entitled to receive severance pay in an amount equal to the base salary payable
to Executive under Section 3(a) of this Agreement from the date of Executive’s Involuntary Termination until the one year
anniversary of such Involuntary Termination (the “Severance Period”);

 

		(iii)	During the Severance Period (or, if earlier, until the date on which the applicable continuation
period under COBRA expires), the Company shall arrange to provide Executive and his eligible dependents who were covered under
the Company’s health insurance plans as of the date of Executive’s Involuntary Termination with health (including medical,
dental and vision) insurance benefits substantially similar to those provided to Executive and his dependents immediately prior
to the date of such Involuntary Termination. If any of the Company’s health benefits are self-funded as of the date of Executive’s
Involuntary Termination, or if the Company cannot provide the foregoing benefits in a manner that is exempt from Section 409A (as
defined below) or that is otherwise compliant with applicable law (including, without limitation, Section 2716 of the Public Health
Service Act), instead of providing continued health insurance benefits as set forth above, the Company shall instead pay to Executive
an amount equal to (A) the number of months from the date of Executive’s Involuntary Termination until the end of the Employment
Term, as appropriate multiplied by (B) the monthly premium Executive would be required to pay for continuation coverage pursuant
to COBRA for Executive and his eligible dependents who were covered under the Company’s health plans as of the date of Executive’s
Involuntary Termination (calculated by reference to the premium as of the date of Involuntary Termination); and

 

		(iv)	That portion of the Stock Awards that would have vested over the Severance Period shall be automatically
accelerated so as to be immediately vested as of the date of Involuntary Termination and any vested options or similar award (e.g.,
a stock appreciation right) may be exercised at any time during the Severance Period (subject to earlier termination (A) in connection
with a recapitalization or similar transaction pursuant to the Company’s equity incentive plans governing such Stock Awards
or (B) the contractual term of the Stock Award), or if longer, through the date such vested options or similar award are exercisable
under the terms of the applicable Stock Award.

 

    	7

    	 

    

 

(d)Termination
for Cause or Voluntary Resignation Without Good Reason. In the event of Executive’s termination of employment as a result
of Executive’s discharge by the Company for Cause or Executive’s resignation without Good Reason (other than as a result
of Executive’s death or Separation from Service by reason of discharge by the Company following Executive’s Permanent
Disability), the Company shall not have any other or further obligations to Executive under this Agreement (including any financial
obligations) except that Executive shall be entitled to receive the Accrued Compensation. In addition, in the event of Executive’s
Separation from Service as a result of Executive’s discharge by the Company for Cause or Executive’s resignation without
Good Reason (other than as a result of Executive’s death or Separation from Service by reason of discharge by the Company
following Executive’s Permanent Disability), all vesting of Executive’s unvested Stock Awards previously granted to
him by the Company shall cease and none of such unvested Stock Awards shall be exercisable following the date of such termination.
The foregoing shall be in addition to, and not in lieu of, any and all other rights and remedies which may be available to the
Company under the circumstances, whether at law or in equity.

 

(e)Release.
As a condition to Executive’s receipt of any post-termination benefits pursuant to Sections 5(b) or (c) above, Executive
(or, in the event of Executive’s incapacity as a result of his Permanent Disability, Executive’s legal representative)
shall execute and not revoke a general release of all claims in favor of the Company (the “Release”) in a form
reasonably acceptable to the Company. In the event the Release does not become effective within the fifty-five (55) day period
following the date of Executive’s Separation from Service, Executive shall not be entitled to the aforesaid payments and
benefits.

 

(f)Exclusive Remedy.
Except as otherwise expressly required by law (e.g., COBRA) or as specifically provided herein, all of Executive’s rights
to salary, severance pay, benefits, bonuses and other amounts hereunder (if any) accruing after the termination of Executive’s
employment shall cease upon such termination. In the event of Executive’s termination of employment with the Company, Executive’s
sole remedy shall be to receive the payments and benefits described in this Section 5. In addition, Executive acknowledges and
agrees that he is not entitled to any reimbursement by the Company for any taxes payable by Executive as a result of the payments
and benefits received by Executive pursuant to this Section 5, including, without limitation, any excise tax imposed by Section
4999 of the Code.

 

(g)No Mitigation.
Executive shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for in this Section 5 be reduced by any compensation earned
by Executive as the result of employment by another employer or self-employment or by retirement benefits; provided, however,
that loans, advances or other amounts owed by Executive to the Company may be offset by the Company against amounts payable to
Executive under this Section 5.

 

(h)Return of the
Company’s Property. In the event of Executive’s termination of employment for any reason, the Company shall have
the right, at its option, to require Executive to vacate his offices prior to or on the effective date of separation and to cease
all activities on the Company’s behalf. Upon Executive’s termination of employment in any manner, as a condition to
Executive’s receipt of any severance benefits described in this Agreement, Executive shall immediately surrender to the Company
all lists, books and records of, or in connection with, the Company’s business, and all other property belonging to the Company,
it being distinctly understood that all such lists, books and records, and other documents, are the property of the Company. Executive
shall deliver to the Company a signed statement certifying compliance with this Section 5(h) prior to the receipt of any severance
benefits described in this Agreement.

 

    	8

    	 

    

 

6.Certain Covenants.

 

(a)Restrictive
Covenant. Executive hereby covenants and agrees that during the Employment Term and for a period of one year following the
end of the Employment Term (the “Restricted Period”), Executive will not, without the prior written consent
of the Company, directly or indirectly, on his own behalf or in the service or on behalf of others, whether or not for compensation,
engage in any business activity, or have any interest in any person, firm, corporation or business, through a subsidiary or parent
entity or other entity (whether as a shareholder, agent, joint venture, security holder, trustee, partner, executive, creditor
lending credit or money for the purpose of establishing or operating any such business, partner or otherwise) with any Competing
Business in the Covered Area. For the purpose of this Section 6(a), (i) "Competing Business" means any biotechnology
or pharmaceutical company, any contract manufacturer, any research laboratory or other company or entity (whether or not organized
for profit) that has, or is seeking to develop, one or more products or therapies that is related to (A) treatment of disorders
of the central nervous system, including fibromyalgia, post-traumatic stress disorder, headaches or (B) any other disorders that
are addressed by the Company’s pipeline programs and intellectual property portfolio and (ii) "Covered Area" means
all geographical areas of the United States and foreign jurisdictions where the Company (or its subsidiaries) then have offices
and/or is developing or selling its products directly or indirectly through distributors and/or other sales agents. Passive ownership
of less than five percent (5%) of a public company shall not be a violation of this Section 6(a).

 

(b)Confidential
Information. Executive recognizes and acknowledges that by reason of Executive’s employment by and service to the Company
before, during and, if applicable, after the Employment Term, Executive will have access to certain confidential and proprietary
information relating to the Company’s business, which may include, but is not limited to, unique business strategies, theories
and concepts, information regarding plans, strategies, opportunities, processes, ideas, research and know-how developed by or for
the Company, trade secrets, patents, other intellectual property, clinical studies, regulatory dossiers, manufacturing, marketing,
personnel, financial data, technical information, methods, processes, formulae and information which Company has obtained from
third parties (collectively referred to as “Confidential Information”). Executive acknowledges that such Confidential
Information is a valuable and unique asset of the Company and Executive covenants that he will not, unless expressly authorized
in writing by the Company, at any time during the course of Executive’s employment use any Confidential Information or divulge
or disclose any Confidential Information to any person, firm or corporation except in connection with the performance of Executive’s
duties for the Company and in a manner consistent with the Company’s policies regarding Confidential Information. Executive
also covenants that at any time after the termination of such employment, directly or indirectly, he will not use any Confidential
Information or divulge or disclose any Confidential Information to any person, firm or corporation, unless such information is
in the public domain through no fault of Executive or except when required to do so by a court of law, by any governmental agency
having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee
thereof) with apparent jurisdiction to order Executive to divulge, disclose or make accessible such information. All written Confidential
Information (including, without limitation, in any computer or other electronic format) which comes into Executive’s possession
during the course of Executive’s employment shall remain the property of the Company. Except as required in the performance
of Executive’s duties for the Company, or unless expressly authorized in writing by the Company, Executive shall not remove
any written Confidential Information from the Company's premises, except in connection with the performance of Executive’s
duties for the Company and in a manner consistent with the Company’s policies regarding Confidential Information. Upon termination
of Executive’s employment, Executive agrees to return immediately to the Company all written Confidential Information (including,
without limitation, in any computer or other electronic format) in Executive's possession. As a condition of Executive’s
continued employment with the Company and in order to protect the Company’s interest in such proprietary information, the
Company shall be allowed to require Executive’s execution of a confidentiality agreement and/or proprietary information and
inventions agreement, as reasonably requested by the Company.

 

    	9

    	 

    

 

(c)Solicitation
of Employees. During the Restricted Period, Executive shall not, directly or indirectly, solicit or encourage to leave the
employment of the Company or any of its affiliates, any employee of the Company or any of its affiliates.

 

(d)Solicitation
of Consultants and other Third Parties. During the Restricted Period, Executive shall not, directly or indirectly, hire, solicit
or encourage to cease work with the Company or any of its affiliates any consultant, distributor, licensee or other third party
partner then under contract with the Company or any of its affiliates.

 

(e)Rights and
Remedies Upon Breach. If Executive breaches or threatens to commit a breach of any of the provisions of this Section 6
(the “Restrictive Covenants”), the Company shall have the following rights and remedies, each of which rights
and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition
to, and not in lieu of, any other rights and remedies available to the Company under law or in equity:

 

		(i)	Specific Performance. The right and remedy to have the Restrictive Covenants specifically
enforced by any court having equity jurisdiction by way of a temporary restraining order, preliminary injunction, permanent injunction,
or other equitable remedy, all without the need to post a bond or any other security or to prove any amount of actual damage or
that money damages would not provide an adequate remedy, it being acknowledged and agreed that any such breach or threatened breach
may cause irreparable injury to the Company and that money damages will not provide adequate remedy to the Company; and

 

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		(ii)	Accounting and Indemnification. The right and remedy to require Executive (A) to account
for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by
Executive or any associated party deriving such benefits as a result of any such breach of the Restrictive Covenants; and (B) to
indemnify the Company against any other losses, damages (including special and consequential damages), costs and expenses, including
actual attorneys’ fees and court costs, which may be incurred by them and which result from or arise out of any such breach
or threatened breach of the Restrictive Covenants.

 

(f)Severability
of Covenants/Blue Penciling. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid
or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without
regard to the invalid portions. If any court determines that any of the Restrictive Covenants, or any part thereof, are unenforceable
because of the duration of such provision or the area or scope covered thereby, such court shall have the power to reduce the duration,
area or scope of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced. Executive
hereby waives any and all right to attack the validity of the Restrictive Covenants on the grounds of the breadth of their scope
or the length of their term.

 

(g)Definitions.
For purposes of this Section 6, the term “Company” means not only Tonix Pharmaceuticals Holding Corp., but also
any company, partnership or entity which, directly or indirectly, controls, is controlled by or is under common control with Tonix
Pharmaceuticals Holding Corp.

 

7.Insurance; Indemnification.

 

(a)Insurance.
The Company shall have the right to take out life, health, accident, “key-man” or other insurance covering Executive,
in the name of the Company and at the Company’s expense in any amount deemed appropriate by the Company. Executive shall
assist the Company in obtaining such insurance, including, without limitation, submitting to any required examinations and providing
information and data required by insurance companies.

 

(b)Indemnification.
Executive will be provided with indemnification against third party claims related to his work for the Company to the maximum extent
permitted by Nevada law. The Company shall provide Executive with directors and officers liability insurance coverage at least
as favorable as that which the Company may maintain from time to time for members of the Board and other executive officers.

 

8.General Relationship.
Executive shall be considered an employee of the Company within the meaning of all federal, state and local laws and regulations
including, but not limited to, laws and regulations governing unemployment insurance, workers’ compensation, industrial accident,
labor and taxes.

 

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9.Representations
and Warranties of Executive. Executive hereby represents and warrants to the Company that (a) the execution, delivery and performance
of this Agreement by Executive does not and shall not conflict with, breach, violate or cause a default under any agreement, contract
or instrument to which the Executive is a party or any judgment, order or decree to which Executive is subject, (b) Executive is
not a party to or bound by any employment agreement, (c) Executive is not a party to or bound by any consulting agreement, non-compete
agreement, confidentiality agreement or similar agreement with any other person or entity that would affect the Company or the
obligations of Executive hereunder and (d) upon the execution and delivery of this Agreement by the Company and Executive, this
Agreement will be a valid and binding obligation of Executive, enforceable in accordance with its terms.

 

10.Miscellaneous.

 

(a)Modification;
Prior Claims. This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter, including, without limitation, the Consulting Agreement.
This Agreement may be amended or modified only with the written consent of Executive and an authorized representative of the Company.
No oral waiver, amendment or modification will be effective under any circumstances whatsoever.

 

(b)Assignment;
Assumption by Successor. The rights of the Company under this Agreement may, without the consent of Executive, be assigned
by the Company, in its sole and unfettered discretion, to any person, firm, corporation or other business entity which at any time,
whether by purchase, merger or otherwise, directly or indirectly, acquires all or substantially all of the assets or business of
the Company. The Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially
all of the business or assets of the Company expressly to assume and to agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such succession had taken place; provided, however,
that no such assumption shall relieve the Company of its obligations hereunder.  As used in this Agreement, the “Company”
shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees
to perform this Agreement by operation of law or otherwise.

 

(c)Survival.
The covenants, agreements, representations and warranties contained in or made in Sections 3(f), 3(g), 5, 6, 7, 9 and 10 of
this Agreement shall survive the termination of Executive’s employment.

 

(d)Third-Party
Beneficiaries. This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person
not a party to this Agreement.

 

(e)Waiver.
The failure of either party hereto at any time to enforce performance by the other party of any provision of this Agreement shall
in no way affect such party’s rights thereafter to enforce the same, nor shall the waiver by either party of any breach of
any provision hereof be deemed to be a waiver by such party of any other breach of the same or any other provision hereof.

 

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(f)Section Headings.
The headings of the several sections in this Agreement are inserted solely for the convenience of the parties and are not a part
of and are not intended to govern, limit or aid in the construction of any term or provision hereof.

 

(g)Notices.
Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given
as indicated: (i) by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt;
(iii) by email, telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified
or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to Executive at the address listed
on the Company’s personnel records and to the Company at its principal place of business, or such other address as either
party may specify in writing.

      

(h)Severability.
All Sections, clauses and covenants contained in this Agreement are severable, and in the event any of them shall be held to be
invalid by any court, this Agreement shall be interpreted as if such invalid Sections, clauses or covenants were not contained
herein.

 

(i)Governing Law.
This Agreement shall be governed by, and construed in accordance with and subject to, the laws of the State of New York applicable
to agreements made and to be performed entirely within such state without regard to its conflicts of law rules.

 

(j)Jurisdiction
and Venue.

 

		(i)	The Company and Executive hereby irrevocably and unconditionally submit, for themselves and their
property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in
the City of New York and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement
or for recognition or enforcement of any judgment, and the Company and Executive hereby irrevocably and unconditionally agree that
all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the
extent permitted by law, in such federal court. The Company and Executive irrevocably waive, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. The Company and Executive
agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Executive agrees not to commence a claim or proceeding hereunder in
a court other than a New York State court or federal court located in the City of New York, except if Executive has first brought
such claim or proceeding in such New York State court or federal court located in the City of New York, and such court or courts
have denied jurisdiction over such claim or proceeding.

 

    	13

    	 

    

 

		(ii)	The Company and Executive irrevocably and unconditionally waive, to the fullest extent they may
legally and effectively do so, any objection that they may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any New York State court or federal court of the United States of America
sitting in the City of New York and any appellate court from any thereof.

 

		(iii)	The parties further agree that the mailing by certified or registered mail, return receipt requested
to both (x) the other party and (y) counsel for the other party (or such substitute counsel as such party may have given written
notice of prior to the date of such mailing), of any process required by any such court shall constitute valid and lawful service
of process against them, without the necessity for service by any other means provided by law. Notwithstanding the foregoing, if
and to the extent that a court holds such means to be unenforceable, each of the parties’ respective counsel (as referred
to above) shall be deemed to have been designated agent for service of process on behalf of its respective client, and any service
upon such respective counsel effected in a manner which is permitted by New York law shall constitute valid and lawful service
of process against the applicable party.

 

(k)Non-transferability
of Interest. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement shall be
assignable or transferable except through a testamentary disposition or by the laws of descent and distribution upon the death
of Executive. Any attempted assignment, transfer, conveyance, or other disposition (other than as aforesaid) of any interest in
the rights of Executive to receive any form of compensation to be made by the Company pursuant to this Agreement shall be void.

 

(l)Gender.
Where the context so requires, the use of the masculine gender shall include the feminine and/or neuter genders and the singular
shall include the plural, and vice versa, and the word “person” shall include any corporation, firm, partnership or
other form of association.

 

(m)Counterparts.
The parties may execute this Agreement in multiple counterparts, each of which constitutes an original as against the party that
signed it, and both of which together constitute one agreement. The signatures of both parties need not appear on the same counterpart.
In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

    	14

    	 

    

 

(n)Construction.
The language in all parts of this Agreement shall in all cases be construed simply, according to its fair meaning, and not strictly
for or against any of the parties hereto. Without limitation, there shall be no presumption against any party on the ground that
such party was responsible for drafting this Agreement or any part thereof.

 

(o)Withholding
and other Deductions. All compensation payable to Executive hereunder shall be subject to such deductions as the Company is
from time to time required to make pursuant to law, governmental regulation or order.

 

(p)Code Section
409A.

 

		(i)	This Agreement is not intended to provide for any deferral of compensation subject to Section 409A
of the Code, and, accordingly, the severance payments payable under Sections 5(c)(ii) and 5(c)(iii) shall be paid no later than
the later of: (A) the fifteenth (15th) day of the third month following Executive’s first taxable year in which such severance
benefit is no longer subject to a substantial risk of forfeiture, and (B) the fifteenth (15th) day of the third month following
first taxable year of the Company in which such severance benefit is no longer subject to substantial risk of forfeiture, as determined
in accordance with Code Section 409A and any Treasury Regulations and other guidance issued thereunder. To the extent applicable,
this Agreement shall be interpreted in accordance with Code Section 409A and Department of Treasury regulations and other interpretive
guidance issued thereunder.

 

		(ii)	If Executive is a “specified employee” (as defined in Section 409A of the Code), as
determined by the Company in accordance with Section 409A of the Code, on the date of Executive’s Separation from Service,
to the extent that the payments or benefits under this Agreement are subject to Section 409A of the Code and the delayed payment
or distribution of all or any portion of such amounts to which Executive is entitled under this Agreement is required in order
to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion deferred pursuant to this Section
9(p)(ii) shall be paid or distributed to Executive in a lump sum on the earlier of (A) the date that is six (6)-months following
Executive’s Separation from Service, (B) the date of Executive’s death or (C) the earliest date as is permitted under
Section 409A of the Code. Any remaining payments due under the Agreement shall be paid as otherwise provided herein.

 

    	15

    	 

    

 

		(iii)	To the extent applicable, this Agreement shall be interpreted in accordance with the applicable
exemptions from Section 409A of the Code. If Executive and the Company determine that any payments or benefits payable under this
Agreement intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, Executive
and the Company agree to amend this Agreement, or take such other actions as Executive and the Company deem reasonably necessary
or appropriate, to comply with the requirements of Section 409A of the Code and the Treasury Regulations thereunder (and any applicable
transition relief) while preserving the economic agreement of the parties. To the extent that any provision in this Agreement is
ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner that no payments payable
under this Agreement shall be subject to an “additional tax” as defined in Section 409A(a)(1)(B) of the Code.

 

		(iv)	Any reimbursement of expenses or in-kind benefits payable under this Agreement shall be made in
accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of Executive’s
taxable year following the taxable year in which Executive incurred the expenses. The amount of expenses reimbursed or in-kind
benefits payable in one year shall not affect the amount eligible for reimbursement or in-kind benefits payable in any other taxable
year of Executive’s, and Executive’s right to reimbursement for such amounts shall not be subject to liquidation or
exchange for any other benefit.

 

		(v)	In the event that the amounts payable under Sections 5(c)(ii) and 5(c)(iii) are subject to Section
409A of the Code and the timing of the delivery of Executive’s Release could cause such amounts to be paid in one or another
taxable year, then notwithstanding the payment timing set forth in such sections, such amounts shall not be payable until the later
of (A) the payment date specified in such Section or (B) the first business day of the taxable year following Executive’s
Separation from Service.

 

[Signature page follows]

 

    	16

    	 

    

 

IN WITNESS WHEREOF, the undersigned, intending
to be legally bound, have executed this Agreement as of the date first written above.

 

	EXECUTIVE:	 	TONIX PHARMACEUTICALS HOLDING CORP.
	 	 	 
	/s/ DONALD J. KELLERMAN	 	/s/ SETH LEDERMAN
	Donald J. Kellerman, Pharm.D.	 	Name:  Seth Lederman, MD
	18367 Baylor Avenue	 	Title: Chief Executive Officer
	Saratoga, CA 95070	 	 
	919 218-1448	 	 
	donald12kellerman@gmail.com	 	 

 

    	17

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