EXHIBIT 10.1
CTI INDUSTRIES CORPORATION
1997 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purposes of the CTI Industries Corporation 1997 Stock Option Plan
(the "Plan") are to enable the Company to attract and retain the services of
officers and other key employees with managerial, professional or supervisory
responsibilities, to retain able consultants and advisors and to motivate such
persons to use their best efforts on behalf of the Company.
2. GENERAL PROVISIONS
2.1 Definitions
As used in the Plan:
(a) "Board of Directors" means the Board of Directors of the
Company.
(b) "Code" means the Internal Revenue Code of 1986, including any
and all amendments thereto.
(c) "Committee" means the committee appointed by the Board of
Directors from time to time to administer the Plan pursuant to
Section 2.2.
(d) "Common Stock" means the Company's Common Stock, $.075 par
value.
(e) "Fair Market Value" means, with respect to a specific date,
the value of the Common Stock as determined in good faith by
the Committee on the basis of such quotations and other
considerations as the Committee deems appropriate.
(f) "Incentive Stock Option" means an option granted under the
Plan which is intended to qualify as an incentive stock option
under Section 422 of the Code.
(g) "Non-Qualified Stock Option" means an option granted under the
Plan which is not an Incentive Stock Option.
(h) "Participant" means a person to whom a Stock Option has been
granted under the Plan.
(i) "Stock Option" means an Incentive Stock Option or a
Non-Qualified Stock Option granted under the Plan.
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(j) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company
if, at the time of the granting of the Stock Option, each of
the corporations other than the last corporation in the
unbroken chain owns 50% or more of the total voting power of
all classes of stock in one of the other corporations in such
chain.
2.2 Administration of the Plan
(a) The Plan shall be administered by the Committee which shall at
all times consist of two (2) or more persons, each of whom
shall be a member of the Board of Directors. The Board of
Directors may from time to time remove members from, or add
members to, the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board of Directors.
The Committee shall select one of its members as Chairman, and
shall hold meetings at such times and places as it may
determine.
(b) The Committee shall have the full power, subject to and within
the limits of the Plan, to: (i) interpret and administer the
Plan, and Stock Options granted under it; (ii) make and
interpret rules and regulations for the administration of the
Plan and to make changes in and revoke such rules and
regulations (and in the exercise of this power, shall
generally determine all questions of policy and expediency
that may arise and may correct any defect, omission, or
inconsistency in the Plan or any agreement evidencing the
grant of any Stock Option in a manner and to the extent it
shall deem necessary to make the Plan fully effective); (iii)
determine those persons to whom Stock Options shall be granted
and the number of Stock Options to be granted to any person;
(iv) determine the terms of Stock Options granted under the
Plan, consistent with the provision of the Plan; and (v)
generally, exercise such powers and perform such acts in
connection with the Plan as are deemed necessary or expedient
to promote the best interests of the Company. The
interpretation and construction by the Committee of any
provision of the Plan or of any Stock Option shall be final,
binding and conclusive.
(c) The Committee may act only by a majority of its members then
in office; however, the Committee may authorize any one (1) or
more of its members or any officer of the Company to execute
and deliver documents on behalf of the Committee.
(d) No member of the Committee shall be liable for any action
taken or omitted to be taken or for any determination made by
him or her in good faith with respect to the Plan, and the
Company shall indemnify and hold harmless each member of the
Committee against any cost or expense (including counsel fees)
or liability (including any sum paid in settlement of a claim
with the approval of
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the Committee) arising out of any act or omission in
connection with the administration or interpretation of the
Plan, unless arising out of such person's own fraud or bad
faith.
2.3 Effective Date
The Plan shall become effective upon its adoption by the Board of
Directors, and Stock Options may be granted upon such adoption and from time to
time thereafter, subject, however, to approval of the Plan by affirmative vote
of the holders of a majority of the shares of the Common Stock, within 12 months
after the adoption of the Plan by the Board of Directors. If the Plan is not
approved, this Plan and all Stock Options previously granted thereunder shall
become null and void.
2.4 Duration
If approved by the shareholders of the Company, as provided in Section
2.3, unless sooner terminated by the Board of Directors, the Plan shall remain
in effect for a period of ten (10) years following its adoption by the Board of
Directors.
2.5 Shares Subject to the Plan
The maximum number of shares of Common Stock which may be subject to
Stock Options granted under the Plan shall be 300,000. The Stock Options shall
be subject to adjustment in accordance with Section 4.1, as appropriate, and
shares to be issued upon exercise of Stock Options may be either authorized and
unissued shares of Common Stock or authorized and issued shares of Common Stock
purchased or acquired by the Company for any purpose. If a Stock Option or
portion thereof shall expire or is terminated, cancelled or surrendered for any
reason without being exercised in full, the unpurchased shares of Common Stock
which were subject to such Stock Option or portion thereof shall be available
for future grants of Stock Options under the Plan.
2.6 Amendments
The Plan may be suspended, terminated or reinstated, in whole or in
part, at any time by the Board of Directors. The Board of Directors may from
time to time make such amendments to the Plan as it may deem advisable,
including, with respect to Incentive Stock Options, amendments deemed necessary
or desirable to comply with Section 422 of the Code and any regulations issued
thereunder; provided, however, that without the approval of the Company's
shareholders no amendment shall be made which:
(a) Increases the maximum number of shares of Common Stock which
may be subject to Stock Options granted under the Plan (other
than as provided in Section 4.1, as appropriate); or
(b) Extends the term of the Plan; or
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(c) Increases the period during which a Stock Option may be
exercised beyond ten (10) years from the date of grant; or
(d) Otherwise materially increases the benefits accruing to
Participants under the Plan; or
(e) Materially modifies the requirements as to eligibility for
participation in the Plan.
Except as otherwise provided herein, termination or amendment of the Plan shall
not, without the consent of a Participant, affect such Participant's rights
under any Stock Options previously granted to such Participant.
2.7 Participants and Grants
Stock Options may be granted by the Committee to (i) officers and other
salaried employees of the Company and its Subsidiaries with managerial,
professional or supervisory responsibilities and (ii) consultants and advisors
who render bona fide services to the Company and its Subsidiaries, in each case,
where the Committee determines that such officer, employee, consultant or
advisor has the capacity to make a substantial contribution to the success of
the Company. The Committee may grant Stock Options to purchase such number of
shares of Common Stock (subject to the limitations of Section 2.5) as the
Committee may, in its sole discretion, determine. In granting Stock Options
under the Plan, the Committee, on an individual basis, may vary the number of
Incentive Stock Options or Non-Qualified Stock Options as between Participants
and may grant Incentive Stock Options and/or Non-Qualified Stock Options to a
Participant in such amounts as the Committee may determine in its sole
discretion.
3. STOCK OPTIONS
3.1 General
All Stock Options granted under the Plan shall be evidenced by written
agreements executed by the Company and the Participant to whom granted, which
agreement shall state the number of shares of Common Stock which may be
purchased upon the exercise thereof and shall contain such investment
representations and other terms and conditions as the Committee may from time to
time determine, or, in the case of Incentive Stock Options, as may be required
by Section 422 of the Code, or any other applicable law.
3.2 Price
Subject to the provisions of Section 3.6(d) and 4.1, the purchase price
per share of Common Stock subject to a Stock Option shall, in no case, be less
than one hundred percent (100%)
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of the Fair Market Value of a share of Common Stock on the date the Stock Option
is granted; provided, however, that the Board of Directors may authorize the
grant a Non-Qualified Stock Option with a purchase price per share less than the
Fair Market Value if the amount of the difference between the option purchase
price and the Fair Market Value is designated in the resolution authorizing the
option.
3.3 Period
The duration or term of each Stock Option granted under the Plan shall
be for such period as the Committee shall determine but in no event more than
ten (10) years from the date of grant thereof.
3.4 Exercise
Subject to Section 4.4, Stock Options may be exercisable immediately
upon granting of the Stock Option or at such other time or times as the
Committee shall specify when granting the Stock Option. Once exercisable, a
Stock Option shall be exercisable, in whole or in part, by delivery of a written
notice of exercise to the Secretary of the Company at the principal office of
the Company specifying the number of shares of Common Stock as to which the
Stock Option is then being exercised together with payment of the full purchase
price for the shares being purchased upon such exercise. Until the shares of
Common Stock as to which a Stock Option is exercised are issued, the Participant
shall have none of the rights of a shareholder of the Company with respect to
such shares.
3.5 Payment
The purchase price for shares of Common Stock as to which a Stock
Option has been exercised and any amount required to be withheld, as
contemplated by Section 4.3, may be paid:
(a) In United States dollars in cash, or by check, bank draft or
money order payable in United States dollars to the order of
the Company; or
(b) By the delivery by the Participant to the Company of whole
shares of Common Stock having an aggregate Fair Market Value
on the date of payment equal to the aggregate of the purchase
price of Common Stock as to which the Stock Option is then
being exercised or by the withholding of whole shares of
Common Stock having such Fair Market Value upon the exercise
of such Stock Option; or
(c) By a combination of both (a) and (b) above.
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The Committee may, in its discretion, impose limitations, conditions and
prohibitions on the use by a Participant of shares of Common Stock to pay the
purchase price payable by such Participant upon the exercise of a Stock Option.
3.6 Special Rules for Incentive Stock Options
Notwithstanding any other provision of the Plan, the following
provisions shall apply to Incentive Stock Options granted under the Plan:
(a) Incentive Stock Options shall only be granted to Participants
who are employees of the Company or its Subsidiaries.
(b) To the extent that the aggregate Fair Market Value of Common
Stock, with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any
calendar year under this Plan and any other Plan of the
Company or a Subsidiary, exceeds $100,000, such Stock Options
shall be treated as Non-Qualified Stock Options.
(c) Any Participant who disposes of shares of Common Stock
acquired upon the exercise of an Incentive Stock Option by
sale or exchange either within two (2) years after the date of
the grant of the Incentive Stock Option under which the shares
were acquired or within one (1) year of the acquisition of
such shares, shall promptly notify the Secretary of the
Company at the principal office of the Company of such
disposition, the amount realized, the purchase price per share
paid upon the exercise and the date of disposition.
(d) No Incentive Stock Option shall be granted to a Participant
who, at the time of the grant, owns stock representing more
than ten percent (10%) of the total combined voting power of
all classes of stock either of the Company or any parent or
Subsidiary of the Company, unless the purchase price of the
shares of Common Stock purchasable upon exercise of such
Incentive Stock Option is at least one hundred ten percent
(110%) of the Fair Market Value (at the time the Incentive
Stock Option is granted) of the Common Stock and the Incentive
Stock Option is not exercisable more than five (5) years from
the date it is granted.
3.7 Termination of Employment
(a) In the event a Participant's employment by, or relationship
with, the Company shall terminate for any reason other than
those reasons specified in Sections 3.7(b), (c), (d) or (e)
hereof while such Participant holds Stock Options granted
under the Plan, then all rights of any kind under any
outstanding Option held by such Participant which shall not
have previously lapsed or terminated shall expire immediately.
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(b) If a Participant's employment by, or relationship with, the
Company or its Subsidiaries shall terminate as a result of
such Participant's total disability, each Stock Option held by
such Participant (which has not previously lapsed or
terminated) shall be exercisable by such Participant for a
period of six months after termination but only to the extent
the Option is otherwise exercisable during that period.
Notwithstanding the foregoing, the Committee may in the event
of such disability accelerate the date after which a Stock
Option is exercisable, in whole or in part, which change shall
be in the Committee's sole discretion and be final, binding
and conclusive. For purposes of this paragraph, "total
disability" shall mean permanent mental or physical disability
as determined by the Committee.
(c) In the event of the death of a Participant, each Stock Option
held by such Participant (which has not previously lapsed or
terminated) shall be exercisable by the executor or
administrator of the Participant's estate or by the person or
persons to whom the deceased Participant's rights thereunder
shall have passed by will or by the laws of descent or
distribution, for a period of six (6) months after such
Participant's death but only to the extent the Option is
otherwise exercisable during that period. Notwithstanding the
foregoing, the Committee may in the event of such death
accelerate the date after which a Stock Option is exercisable,
in whole or in part, which change shall be in the Committee's
sole discretion and be final, binding and conclusive.
(d) If a Participant's employment by the Company shall terminate
by reason of such Participant's retirement in accordance with
Company policies, each Stock Option held by such Participant
at the date of termination (which has not previously lapsed or
terminated) shall be exercisable for a period of three (3)
months after termination, but only to the extent the Option is
otherwise exercisable during that period.
(e) In the event the Company terminates the employment of a
Participant who at the time of such termination was an officer
of the Company and had been continuously employed by the
Company during the two (2) year period immediately preceding
such termination, for any reason except "good cause"
(hereafter defined) and except upon such Participant's death,
total disability or retirement in accordance with Company
policies, each Stock Option held by such Participant (which
has not previously lapsed or terminated and which has been
held by such Participant for more than six (6) months prior to
such termination) shall be exercisable for a period of three
(3) months after such termination, but only to the extent the
Option is otherwise exercisable during that period. A
termination for "good cause" shall be deemed to have occurred
only if the Participant in question (i) is terminated by
written notice for dishonesty, because of his conviction of a
felony, or because of his violation of any material provision
of any employment or other agreement with the Company or any
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of its Subsidiaries, or (ii) shall voluntarily resign or
terminate his employment with the company or any of its
Subsidiaries under or followed by such circumstances as would
constitute a breach of any material provision of any
employment or other agreement between him and the Company or
any of its Subsidiaries, or (iii) shall have committed an act
of dishonesty not discovered by the Company or any of its
Subsidiaries prior to the cessation of his employment with the
Company or any of its Subsidiaries, but which would have
resulted in his discharge if discovered prior to such
date, or (iv) shall, either before or after cessation of his
employment with the Company or any of its Subsidiaries,
without the written consent of the company or any of its
Subsidiaries, use (except for the benefit of the Company or
any of its Subsidiaries) or disclose to any other person any
confidential information relating to the business or any trade
secrets of the Company or any of its Subsidiaries obtained as
a result of or in connection with such employment.
3.8 Effect of Leaves of Absence
It shall not be considered a termination of employment when a
Participant is on military or sick leave or such other type leave of absence
which is considered as continuing intact the employment relationship of the
Participant with the Company or any of its Subsidiaries. In case of such leave
of absence, the employment relationship shall be deemed to have continued until
the later of (i) the date when such leave shall have lasted ninety (90) days in
duration, or (ii) the date as of which the Participant's right to employment
shall have no longer been guaranteed either by statute or contract.
4. MISCELLANEOUS PROVISIONS
4.1 Adjustments Upon Changes in Capitalization
(a) In the event of changes to the outstanding shares of Common
Stock of the Company through reorganization, merger,
consolidation, recapitalization, reclassification, stock
split-up, stock dividend, stock consolidation or otherwise, or
in the event of a sale of all or substantially all of the
assets of the Company, an appropriate and proportionate
adjustment shall be made in the number and kind of shares as
to which Stock Options may be granted. A corresponding
adjustment changing the number or kind of shares and/or the
purchase price per share of unexercised Stock Options or
portions thereof which shall have been granted prior to any
such change shall likewise be made.
(b) Notwithstanding the foregoing, in the case of a
reorganization, merger or consolidation, or sale of all or
substantially all of the assets of the Company, in lieu of
adjustments as aforesaid, the Committee may in its discretion
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accelerate the date after which a Stock Option may or may not
be exercised or the stated expiration date thereof.
Adjustments or changes under this Section shall be made by the
Committee, whose determination as to what adjustments or
changes shall be made, and the extent thereof, shall be final,
binding and conclusive.
4.2 Non-Transferability
No Stock Option shall be transferable except by will or the laws of
descent and distribution, nor shall any Stock Option be exercisable during the
Participant's lifetime by any person other than the Participant or his guardian
or legal representative.
4.3 Withholding
The Company's obligations under this Plan shall be subject to
applicable federal, state and local tax withholding requirements. Federal, state
and local withholding tax due at the time of a grant or upon the exercise of any
Stock Option may, in the discretion of the Committee, be paid in shares of
Common Stock already owned by the Participant or through the withholding of
shares otherwise issuable to such Participant, upon such terms and conditions as
the Committee shall determine. If the Participant shall fail to pay, or make
arrangements satisfactory to the Committee for the payment, to the Company of
all such federal, state and local taxes required to be withheld by the Company,
then the Company shall, to the extent permitted by law, have the right to deduct
from any payment of any kind otherwise due to such Participant an amount equal
to any federal, state or local taxes of any kind required to be withheld by the
Company.
4.4 Compliance with Law and Approval of Regulatory Bodies
No Stock Option shall be exercisable and no shares will be delivered
under the Plan except in compliance with all applicable federal and state laws
and regulations including, without limitation, compliance with all federal and
state securities laws and withholding tax requirements. Any share certificate
issued to evidence shares for which a Stock Option is exercised may bear legends
and statements the Committee shall deem advisable to assure compliance with
federal and state laws and regulations. No Stock Option shall be exercisable and
no shares will be delivered under the Plan, until the Company has obtained
consent or approval from regulatory bodies, federal or state, having
jurisdiction over such matters as the Committee may deem advisable. In the case
of the exercise of a Stock Option by a person or estate acquiring the right to
exercise the Stock Option as a result of the death of the Participant, the
Committee may require reasonable evidence as to the ownership of the Stock
Option and may require consents and releases of taxing authorities that it may
deem advisable.
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4.5 No Right to Employment
Neither the adoption of the Plan nor its operation, nor any document
describing or referring to the Plan, or any part thereof, nor the granting of
any Stock Options hereunder, shall confer upon any Participant under the Plan
any right to continue in the employ of the Company or any Subsidiary, or shall
in any way affect the right and power of the Company or any Subsidiary to
terminate the employment of any Participant at any time with or without
assigning a reason therefore, to the same extent as might have been done if the
Plan had not been adopted.
4.6 Exclusion from Pension Computations
By acceptance of a grant of a Stock Option under the Plan, the
recipient shall be deemed to agree that any income realized upon the receipt or
exercise thereof or upon the disposition of the shares received upon exercise
will not be taken into account as "base remuneration", "wages", "salary" or
"compensation" in determining the amount of any contribution to or payment or
any other benefit under any pension, retirement, incentive, profit-sharing or
deferred compensation plan of the Company or any Subsidiary.
4.7 Abandonment of Options
A Participant may at any time abandon a Stock Option prior to its
expiration date. The abandonment shall be evidenced in writing, in such form as
the Committee may from time to time prescribe. A Participant shall have no
further rights with respect to any Stock Option so abandoned.
4.8 Interpretation of the Plan
Headings are given to the Sections of the Plan solely as a convenience
to facilitate reference, such headings, numbering and paragraphing shall not in
any case be deemed in any way material or relevant to the construction of the
Plan or any provision hereof. The use of the masculine gender shall also include
within its meaning the feminine. The use of the singular shall also include
within its meaning the plural and vice versa.
4.9 Use of Proceeds
Funds received by the Company upon the exercise of Stock Options shall
be used for the general corporate purposes of the Company.
4.10 Construction of Plan
The place of administration of the Plan shall be in the State of
Illinois, and the validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined solely in accordance with the laws of the State of
Illinois.
BOARD OF DIRECTORS APPROVAL _____________________________
SHAREHOLDER APPROVAL _____________________________
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