CTI INDUSTRIES CORPORATION
22160 North Pepper Road
Barrington, Illinois 60010
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO
BE HELD ON MAY 14, 1999
To: Shareholders of CTI Industries Corporation
The annual meeting of the shareholders of CTI Industries Corporation
will be held at 22222 North Pepper Road, Barrington, Illinois, on Friday, May
14, 1999, at 10:00 a.m., Central Daylight Savings Time, for the following
purposes:
1. To elect 5 directors to hold office during the year following
the annual meeting or until their successors are elected (Item
No. 1 on proxy card);
2. To approve the adoption of the CTI Industries Corporation 1999
Stock Option Plan (Item No. 2 on proxy card);
3. To ratify the appointment of PricewaterhouseCoopers, L.L.P. as
auditors of the Corporation for 1999 (Item No. 3 on proxy
card); and
4. To transact such other business as may properly come before
the meeting.
The close of business on March 22, 1999, has been fixed as the record
date for determining the shareholders entitled to receive notice of and to vote
at the annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS
April 6, 1999 /s/ Stephen M. Merrick
------------------------------
Stephen M. Merrick, Secretary
YOUR VOTE IS IMPORTANT
It is important that as many shares as possible be represented
at the annual meeting. Please date, sign, and promptly return
the proxy in the enclosed envelope. Your proxy may be revoked
by you at any time before it has been voted.
<PAGE>
CTI INDUSTRIES CORPORATION
22160 North Pepper Road
Barrington, Illinois 60010
PROXY STATEMENT
Information Concerning the Solicitation
This statement is furnished in connection with the solicitation of
proxies to be used at the Annual Shareholders Meeting (the "Annual Meeting") of
CTI Industries Corporation (the "Company"), a Delaware corporation, to be held
on May 14, 1999. The proxy materials are being mailed to shareholders of record
at the close of business on March 22, 1999.
The solicitation of proxies in the enclosed form is made on behalf of
the Board of Directors of the Company.
The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers, nominees and fiduciaries for the out-of-pocket and clerical
expenses of transmitting copies of the proxy material to the beneficial owners
of shares held of record by such persons will be borne by the Company. The
Company does not intend to solicit proxies otherwise than by use of the mail,
but certain officers and regular employees of the Company or its subsidiaries,
without additional compensation, may use their personal efforts, by telephone or
otherwise, to obtain proxies.
Quorum and Voting
Only shareholders of record at the close of business on March 22, 1999,
are entitled to vote at the Annual Meeting. On that day, there were issued and
outstanding 2,735,831 shares of Common Stock and 1,098,901 shares of Class B
Common Stock. Each share has one vote. A simple majority of the outstanding
shares of Common Stock and Class B Common Stock, as a single class, is required
to be present in person or by proxy at the meeting for there to be a quorum for
purposes of proceeding with the Annual Meeting. Holders of Class B Common Stock,
voting separately as a class, have the right to elect three of the Company's
five directors, and will vote together with holders of Class B Common Stock, as
a class, on the election of the remaining two directors. The Company's
Certificate of Incorporation grants the holders of Class B Common Stock the
right to elect four of seven total directors but only three directors shall be
elected by the Class B Common Stock at this meeting. The Company's Certificate
of Incorporation grants the holders of Common Stock the right to elect three of
seven total directors, but only two directors will be elected by the Company's
Common Stockholders at this meeting. The directors elected by the Class B Common
Stock reserve the right to appoint a director to fill the vacancy. Neither the
Common Stock or Class B Common Stock possess cumulative voting rights, and the
election of directors will be by the vote of a majority of shares of Common
Stock and/or Class B Common Stock, as the case may be, present in person or by
proxy at the Annual Meeting. On all other matters, including the approval of the
Company's 1999 Stock Option Plan and the ratification of auditors, a simple
majority of the shares of Common Stock and Class B Common Stock, voting together
as a class, will be required for approval. Abstentions and withheld votes have
the effect of votes against these matters. Broker non-votes (shares held of
record by a broker for which a proxy is not given) will be counted for purposes
of determining shares outstanding for purposes of a quorum, but will not be
counted as present for purposes of determining the vote on any matter considered
at the meeting.
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<PAGE>
A shareholder signing and returning a proxy on the enclosed form has
the power to revoke it at any time before the shares subject to it are voted by
notifying the Secretary of the Company in writing. If a shareholder specifies
how the proxy is to be voted with respect to any of the proposals for which a
choice is provided, the proxy will be voted in accordance with such
specifications. If a shareholder fails to so specify with respect to such
proposals, the proxy will be voted "FOR" the nominees for directors contained in
these proxy materials, "FOR" proposal 2, and "FOR" proposal 3.
Stock Ownership by Management and Others
The following table sets forth certain information with respect to the
beneficial ownership of the Company's capital stock, as of March 15, 1999 by (i)
each stockholder who is known by the Company to be the beneficial owner of more
than 5% of the Company's Common Stock or Class B Common Stock, (ii) each
director and executive officer of the Company who owns any shares of Common
Stock or Class B Common Stock, and (iii) all executive officers and directors as
a group. Except as otherwise indicated, the Company believes that the beneficial
owners of the shares listed below have sole investment and voting power with
respect to such shares.
<TABLE>
<CAPTION>
Shares of Class B Shares of Common
Common Stock Stock Beneficially Percent of
Name and Address(1) Beneficially Owned(2)(3) Owned(2) Common Stock(4)
- ----------------------------- ------------------------- ------------------------- ----------------
<S> <C> <C> <C>
Stephen M. Merrick 219,781 361,411(5) 14.37
John H. Schwan 329,670 216,707(6) 13.51
Howard W. Schwan 164,835 139,553(7) 7.67
John C. Davis -- 445,514(8) 11.47
Sharon Konny -- 12,000(9) *
Brent Anderson -- 12,000(9) *
Stanley M. Brown -- 10,000(10) *
747 Glenn Avenue
Wheeling, Illinois
Frances Ann Rohlen 274,725 -- 7.16
c/o Cheshire Partners
1504 Wells
Chicago, Illinois 60610
Philip W. Colburn 109,890 118,266(11) 5.95
Bret Tayne -- 8,510(12) *
6834 N. Kostner Avenue
Lincolnwood, Illinois 60646
All directors and executive 714,286 1,205,695 42.88
officers as a group (8 persons)
- --------------
<FN>
*less than one percent
(1) Except as otherwise indicated, the address of each stockholder listed
above is c/o CTI Industries Corporation, 22160 North Pepper Road,
Barrington, Illinois 60010.
(footnotes continued on next page)
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<PAGE>
(2) A person is deemed to be the beneficial owner of securities that can be
acquired within 60 days from the date set forth above through the
exercise of any option, warrant or right. Shares of Common Stock
subject to options, warrants or rights that are currently exercisable
or exercisable within 60 days are deemed outstanding for purposes of
computing the percentage ownership of the person holding such options,
warrants or rights, but are not deemed outstanding for purposes of
computing the percentage ownership of any other person.
3) Figures below represent all Class B Common Stock outstanding.
Beneficial ownership of shares of Class B Common Stock for Messrs.
Merrick, John Schwan, Howard Schwan and Ms. Rohlen include indirect
ownership of such shares through CTI Investors, L.L.C. See "Certain
Transactions."
(4) Assumes conversion of all shares of Class B Common Stock into shares of
Common Stock.
(5) Includes warrants to purchase up to 72,527 shares of Common Stock at
$.91 per share, warrants to purchase up to 100,961 shares of Common
Stock at $3.12 per share and options to purchase up to 36,000 shares of
Common stock at $2.75 per share granted under the Company's 1997 Stock
Option Plan.
(6) Includes warrants to purchase up to 61,923 of Common Stock at $.91 per
share, warrants to purchase up to 112,180 shares of Common Stock at
$3.12 per share and options to purchase up to 36,000 shares of Common
stock at $2.75 per share granted under the Company's 1997 Stock Option
Plan.
(7) Includes warrants to purchase up to 76,923 shares of Common Stock at
$.91 per share, warrants to purchase up to 16,026 shares of Common
Stock at $3.12 per share, and options to purchase up to 40,000 shares
of Common Stock at $2.50 per share granted under the Company's 1997
Stock Option Plan.
(8) Includes warrants to purchase up to 48,077 shares of Common Stock at
$3.12 per share, and 212,002 shares of Common Stock subject to
redemption by the Company. See "Certain Transactions."
(9) Includes options to purchase up to 12,000 shares of Common Stock at
$2.50 per share granted under the Company's 1997 Stock Option Plan.
(10) Includes options to purchase up to 5,000 shares of Common Stock at
$2.50 per share and options to purchase up to 5,000 shares of Common
Stock at $4.00 per share, both granted under the Company's 1997 Stock
Option Plan.
(11) Includes shares held by immediate family members.
(12) Includes options to purchase up to 5,000 shares of Common Stock at
$2.50 per share granted under the Company's 1997 Stock Option Plan.
</FN>
</TABLE>
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PROPOSAL ONE - ELECTION OF DIRECTORS
Five directors will be elected at the Annual Meeting to serve for terms
of one year expiring on the date of the Annual Meeting in 2000. Three directors
will be elected by holders of Class B Common Stock, voting separately as a
class, and the remaining two directors will be elected by the holders of the
Common Stock and Class B Common Stock, voting together as a class. Each director
elected will continue in office until a successor has been elected. If a nominee
is unable to serve, which the Board of Directors has no reason to expect, the
persons named in the accompanying proxy intend to vote for the balance of those
named and, if they deem it advisable, for a substitute nominee.
Information Concerning Nominees
The following is information concerning nominees for election as
directors of the Company. Each of such persons is presently a director of the
Company.
Class B Common Stock Nominees
John H. Schwan, age 54, Chairman. Mr. Schwan has been an officer and
director of the Company since January, 1996. Mr. Schwan has been the President
and principal executive officer of Packaging Systems, Inc. and affiliated
companies for over the last 11 years. Mr. Schwan has over 20 years of general
management experience, including manufacturing, marketing and sales. Mr. Schwan
served in the U.S. Army Infantry in Vietnam from 1966 to 1969, where he attained
the rank of First Lieutenant.
Stephen M. Merrick, age 57, Chief Executive Officer and Secretary. Mr.
Merrick was President of the Company from January, 1996 to June, 1997 when he
became Chief Executive Officer of the Company. Mr. Merrick is a principal of the
law firm of Merrick & Klimek, P.C. of Chicago, Illinois and has been engaged in
the practice of law for more than 30 years. He is also Senior Vice President,
Director and a member of the Management Committee of Reliv International, Inc.
(NASDAQ), a manufacturer and direct marketer of nutritional supplements and food
products.
Howard W. Schwan, age 44, President. Mr. Schwan has been associated
with the Company for 18 years principally in the management of the production
and engineering operations of the Company. Mr. Schwan was appointed as Vice
President of Manufacturing in November, 1990, was appointed as a director in
January, 1996, and was appointed as President in June, 1997.
John H. Schwan and Howard W. Schwan are brothers.
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<PAGE>
Common Stock and Class B Common Stock Nominees
Stanley M. Brown, age 52, Director. Mr. Brown was appointed as a
director of the Company in January, 1996. Mr. Brown has been President of
Inn-Room Systems, Inc., a manufacturer and lessor of in-room vending systems for
hotels since March, 1996 and, since 1990, has been President of Surface
Preparation Systems, Inc., a company engaged in the business of developing and
marketing equipment for the preparation, cleaning and profiling of concrete and
other surfaces. From 1968 to 1989, Mr. Brown was with the United States Navy as
a naval aviator, achieving the rank of Captain.
Bret Tayne, age 40, Director. Mr. Tayne was appointed as a director of
the Company in December, 1997. Mr. Tayne has been the President of Everede Tool
Company, a manufacturer of industrial cutting tools, since January, 1992. Prior
to that, Mr. Tayne was Executive Vice President of Unifin, a commercial finance
company, since 1986. Mr. Tayne received a Bachelor of Science degree from Tufts
University and an MBA from Northwestern University.
Executive Officers Other Than Nominees
Sharon Konny, age 40, Manager of Finance and Administration. Ms. Konny
has been Manager of Finance and Administration at the Company since October,
1996. From November of 1992 to 1996, she was an Assistant Vice President of
First Chicago Corporation, initially as Loan Servicing Manager of the Mortgage
Services Division and in December, 1994, achieving the position of Manager of
Financial Administration for the First Card Division. She became a Certified
Public Accountant in 1992.
Brent Anderson, age 32, Vice President of Manufacturing. Mr. Anderson
has been employed by the Company since January, 1989, and has held a number of
engineering positions with the Company including Plant Engineer and Plant
Manager. In such capacities Mr. Anderson was responsible for the design and
manufacture of much of the Company's manufacturing equipment. Mr. Anderson was
appointed Vice President of Manufacturing in June, 1997.
Committees of the Board of Directors
The Company's Board of Directors has a standing Audit Committee. The
Company has no standing nominating committee.
The Audit Committee is composed of Mr. Brown, Mr. Tayne and Mr.
Merrick. The Audit Committee reviews and makes recommendations to the Company
about its financial reporting requirements. The Audit Committee did not meet
during fiscal 1998.
The Board of Directors met two times during fiscal 1998. Each director
attended all meetings of the Board of Directors.
5
<PAGE>
Executive Compensation
The following table sets forth certain information with respect to the
compensation paid or accrued by the Company to its President, Chief Executive
Officer and any other officer who received compensation in excess of $100,000
("Named Executive Officers").
Summary Compensation Table
Long Term
Annual Compensation Compensation
-------------------- ------------
Securities All Other
Name and Salary Other Annual Underlying Compensation
Principal Position Year ($) Compensation Options ($)
------------------ ---- -------- ------------ ---------- -----------
Stephen M. Merrick 1998 $ 75,000 ---- 40,000(3) ----
Chief Executive 1997 $ 63,750 ---- ---- ----
Officer 1996 $ 45,000 ---- ---- ----
Howard W. Schwan 1998 $135,000 $ 6,145(1) 40,000(4) $ 1,551(5)
President 1997 $121,600 $ 6,145(1) ---- $ 1,115(5)
1996 $108,500 $ 6,957(1) ---- $ 1,250(5)
John C. Davis 1998 $132,115 $ 6,562(2) ---- $ 1,800(5)
Executive Vice 1997 $150,000 $ 8,374(2) ---- $ 1,666(5)
President-Sales 1996 $195,177 $11,438(2) ---- $ 3,252(5)
_____________________________
(1) Perquisites include country club membership ($5,000).
(2) Perquisites include country club membership ($5,000) and allocated
personal use of Company vehicles ($1,562 in 1998, $3,374 in 1997, and
$5,158 in 1996).
(3) Stock options to purchase 40,000 shares of the Company's Common stock
at $2.75 per share, 36,000 shares exercisable on grant and 4,000 shares
exercisable on September 15, 1999.
(4) Stock options to purchase 40,000 shares of the Company's Common Stock
at $2.50 per share.
(5) Company contribution to the Company 401(k) Plan as pre-tax salary
deferral.
Certain Named Executive Officers have received warrants to purchase
Common Stock of the Company in connection with their guarantee of certain bank
loans secured by the Company and in connection with their participation in a
private offering of notes and warrants conducted by the Company. See "Board of
Director Affiliations and Related Transactions" below. In addition to these
warrants, the following table sets forth those executive officers who were
granted individual grants of stock options in connection with their employment
under the terms of the Company's 1997 Stock Option Plan.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Name of Percent of
Securities Total Options
Name and Underlying Granted to Exercise or
Principal Options Employees in Base Price Expiration
Position Granted # Fiscal Year $/Share Date
- -------------------- --------- --------------- ------------- ----------
Stephen M. Merrick 40,000 17.86% $2.75 09/15/2003
Chief Executive
Officer
Howard W. Schwan 40,000 17.86% $2.50 09/15/2008
President
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-
Shares Value Unexercised Options at the-Money Options
Acquired on Realized Year End (#) at Fiscal Year End ($)
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------ ------------- -------- ---------------------------- --------------------------
<S> <C> <C> <C> <C>
Stephen M. Merrick 0 0 36,000/4,000 $0/0(1)
Howard W. Schwan 0 0 40,000/0 $0/0(1)
- -----------------------
<FN>
(1) The value of unexercised in-the-money options is based on the
difference between the exercise price and the fair market value of the
Company's Common Stock on October 31, 1998.
</FN>
</TABLE>
Employment Agreements
In April, 1996, the Company entered into an employment agreement with
John C. Davis as Executive Vice President-Sales, which provided for an annual
salary of $150,000. The term of the agreement was through January 31, 1998. On
June 27, 1997, the agreement was amended to extend the term through January 31,
2000, and to provide for an annual salary of $120,000 per year. The agreement
contains covenants of Mr. Davis not to use the Company's confidential
information while such information remains confidential and establishing the
Company's rights to inventions created by Mr. Davis during the term of
employment. Mr. Davis' agreement does not contain a covenant not to compete.
Effective February 1, 1999, Mr. Davis retired from his position as Executive
Vice President-Sales with the Company, and currently provides services to the
Company as a special project consultant under the terms of his Employment
Agreement, as it was amended on June 27, 1997.
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<PAGE>
In June, 1997, the Company entered into an Employment Agreement with
Howard W. Schwan as President, which provides for an annual salary of not less
than $135,000. The term of the Agreement is through June 30, 2002. The Agreement
contains covenants of Mr. Schwan with respect to the use of the Company's
confidential information, establishes the Company's right to inventions created
by Mr. Schwan during the term of his employment, and includes a covenant of Mr.
Schwan not to compete with the Company for a period of three years after the
date of termination of the Agreement.
Director Compensation
Directors are not compensated for their services as directors. John
Schwan was compensated in the amount of $48,000 in fiscal 1998 for his services
as Chairman of the Board of Directors. Mr. Schwan also received options to
purchase up to 40,000 shares of the Company's Common Stock at $2.75 per share
under the Company's 1997 Stock Option Plan. Mr. Tayne and Mr. Brown each
received options to purchase up to 5,000 shares of the Company's Common Stock at
$2.50 per share under the Company's 1997 Stock Option Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and with the NASDAQ Stock Market. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, or written representations that no Form 5's were required, the Company
believes that during fiscal 1998, all Section 16(a) filing requirements
applicable to the Company's officers, directors and ten-percent beneficial
owners were complied with.
Board of Directors Affiliations and Related Transactions
In March 1996, the Company entered into a Stock Redemption Agreement
with John C. Davis which was subsequently amended June 27, 1997. Under the
amended Stock Redemption Agreement the Company was obligated to redeem 102,564
shares of Common Stock and has the right, but not the obligation, to redeem up
to an additional 230,769 shares of Common Stock owned by Mr. Davis at the price
of $1.95 per share at any time through January 31, 1998. Commencing March 1,
1998 through February 28, 2000, the Company is obligated to pay to Mr. Davis,
for the redemption of shares at $1.95 per share (i) an amount equal to 2% of the
Company's pretax profits each fiscal quarter (beginning with the quarter ended
February 28, 1998) and (ii) an amount equal to 2% (but not to exceed $8,000) of
the amount by which latex and mylar balloon revenues exceed $1.3 million in any
month. The Company's obligations terminate once a total of 333,333 shares of
Common Stock have been redeemed under the Stock Redemption Agreement. The
Company also has the right to redeem additional shares of
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<PAGE>
Common Stock from Mr. Davis during this period at $1.95 per share, provided that
the total number of shares subject to redemption under the Stock Redemption
Agreement does not exceed 333,333. As of January 1, 1999, 121,331 shares of
Common Stock had been redeemed pursuant to the Stock Redemption Agreement.
In March and May of 1996, a group of investors made an equity
investment of $1,000,000 in the Company in return for 1,098,901 shares of
Preferred Stock, $.91 par value. Each share of Preferred Stock was entitled to
an annual cumulative dividend of 13% of the purchase price, and was convertible
into one share of Common Stock. The shares of Preferred Stock, voting separately
as a class, were entitled to elect four of the Company's directors. CTI
Investors, L.L.C., an Illinois limited liability company, invested $900,000 in
the shares of Preferred Stock. Members of CTI Investors, L.L.C. include Howard
W. Schwan, John H. Schwan and Stephen M. Merrick, members of management, and
Frances Ann Rohlen.
In December, 1996, Howard W. Schwan, John H. Schwan and Stephen M.
Merrick were each issued warrants to purchase 76,923 shares of the Company's
Common Stock at an exercise price of $.91 per share in consideration of their
facilitating and guaranteeing a bank loan to the Company in the amount of $6.3
million. The warrants have a term of six years. In July, 1998, John H. Schwan
and Stephen M. Merrick exercised 15,000 and 4,396 warrants, respectively.
In June, 1997, the Company issued in a private placement notes in the
principal amount of $865,000, together with warrants to purchase up to 277,244
shares of the Company's Common Stock at an exercise price of $3.12 per share.
The warrants have a term of five years. Howard W. Schwan, John H. Schwan and
Stephen M. Merrick, members of management, and John C. Davis purchased $50,000,
$350,000 and $315,000 and $150,000, respectively, of the notes and warrants. Mr.
John Schwan and Mr. Merrick applied advances of $200,000 each, made to the
Company in January, 1997, toward the purchase of notes and warrants.
Stephen M. Merrick, Chief Executive Officer of the Company, is a
principal of the law firm of Merrick & Klimek, P.C., which serves as general
counsel of the Company. Mr. Merrick was a principal in the law firm of Fishman,
Merrick, Miller, Genelly, Springer, Klimek & Anderson, P.C., which formerly
served as general counsel to the Company until December 1, 1998. In addition,
Mr. Merrick is a principal stockholder of the Company. Other principals of the
firm of Merrick & Klimek, P.C. own less than 1% of the Company's outstanding
Common Stock. Legal fees incurred from the firm of Fishman, Merrick, Miller,
Genelly, Springer, Klimek & Anderson, P.C. were $236,071 and $195,200 for the
years ended October 31, 1997 and October 31, 1998, respectively. No fees were
paid to Merrick & Klimek, P.C. during the years ended October 31, 1997 and
October 31, 1998. Mr. Merrick is also an officer and director of Reliv
International, Inc. (NASDAQ-RELV).
John H. Schwan is President and a shareholder of Packaging Systems,
Inc. and affiliated companies. The Company made purchases of packaging materials
from these entities in the amount of $233,842 and $458,347 during each of the
years ended October 31, 1997 and October 31, 1998, respectively.
9
<PAGE>
The Company believes that each of the transactions set forth above were
entered into, and any future related party transactions will be entered into, on
terms as fair as those obtainable from independent third parties. All related
party transactions, including loans and forgiveness of debt, must be approved by
a majority of disinterested directors.
PROPOSAL TWO -APPROVAL OF THE 1999 STOCK OPTION PLAN
General
In the opinion of the Board of Directors, the Company and its
stockholders will benefit substantially from having certain officers and key
employees acquire shares of the Company's Common Stock pursuant to options
granted under the Company's 1999 Stock Option Plan. Such options, in the opinion
of the Board, will be a highly effective incentive, and will create a
commonality of purpose between the Company's officers and key employees and its
shareholders with respect to the Company's strategies for profitable growth and
share-value appreciation. In the opinion of the Board, the Company's ability to
provide these stock options to its officers and other key employees in the
future will benefit the Company's long-term financial performance. In addition,
the Board believes the interests of the Company would be served if options could
be granted to consultants, advisors and other individuals who can contribute to
the success of the Company's business. The Board of Directors have previously
adopted the Company's 1997 Stock Option Plan. Virtually all of the 300,000
shares of Common Stock that were authorized for issuance under that plan have
been exhausted. Accordingly, the Board of Directors believes it is in the
Company's best interests to adopt a new stock option plan which, if adopted,
will authorize the Company to award stock options to its officers and other key
employees and permit the Company to offer options pursuant to the Plan to
certain consultants and advisors.
The Plan and Participants
On March 19, 1999, the Board of Directors approved for adoption,
effective May 6, 1999, the 1999 Stock Option Plan (the "Plan") which enables the
Company to grant "incentive stock options," as defined under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified stock
options. The Plan authorizes the grant of options to purchase up to an aggregate
of 400,000 shares of the Company's Common Stock, to (i) officers and other
full-time 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. As used herein with respect to the Plan, references to
the Company include subsidiaries of the Company.
The purposes of the Plan are to enable the Company to attract and
retain persons of ability as 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 by providing them with an equity participation in the Company. The
full text of the Plan is set forth in Appendix A hereto, and the following
description is qualified in its entirety by reference to Appendix A.
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<PAGE>
The Plan will be administered by the Committee, which will be appointed
by the Company's Board of Directors and must consist of two or more members of
the Board of Directors, each of whom must be a "disinterested" person within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934. Under the terms
of the Plan, the Committee will have the authority to determine, subject to the
terms and conditions of the Plan, and the persons to whom options are granted,
the number of options granted to each optionee and the terms and conditions of
each option, including its duration.
The Plan can be amended, suspended, reinstated or terminated by the
Board of Directors; provided, however, that without approval of the Company's
shareholders, no amendment shall be made which (i) increases the maximum number
of shares of Common Stock which may be subject to stock options granted under
the Plan, except for specified adjustment provisions, (ii) extends the term of
the Plan (iii) increases the period during which a stock option may be exercised
beyond ten years from the date of the grant, (iv) materially increases the
benefits accruing to optionees under the Plan, (v) materially modifies the
requirements as to eligibility for participation in the Plan or (vi) will cause
stock options granted under the Plan to fail to meet the requirements of Rule
16(b)-3. Unless previously terminated by the Board of Directors, the Plan will
terminate on May 6, 2009, and no additional options may be granted under the
Plan after that date.
Options Terms and Grants
Stock options may be granted to purchase Common Stock under the Plan at
not less than the fair market value of the shares as of the date of grant (or
110% of fair market value in the case of incentive stock options granted to any
officer or employee holding in excess of 10% of the combined voting power of all
classes of the Company's stock as of the date of grant). No optionee may be
granted incentive stock options under the Plan to purchase Common Stock having a
fair market value (determined as of the date of grant) which exceeds $100,000
with respect to incentive stock options which are exercisable for the first time
by such optionee in any calendar year, under all stock option plans of the
Company as of the date of grant. The maximum number of shares for which options
may be issued to an employee of the Company during any calendar year may not
exceed 100,000. Other than the limitations set forth above, there is no
limitation on the number of non-qualified stock options which may be granted to
any optionee pursuant to the Plan.
Incentive stock options may be granted for a term of up to five years
in the case of optionees who own in excess of 10% of the combined voting power
of all classes of the Company's stock and up to ten years, in the Committee's
sole discretion, in the case of all other optionees. Non-qualified stock options
may be granted for a term of up to ten years.
The Plan provides that if a stock option or portion thereof expires 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.
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Pursuant to the terms of the Plan, the option price for all options
must be paid in cash, by check, bank draft or money order, with Common Stock of
the Company owned by the optionee and having a fair market value on the date of
exercise equal to the aggregate exercise price of the shares to be so purchased,
or a combination thereof.
As of the date hereof, no options have been granted pursuant to the
Plan.
Options granted pursuant to the Plan will not be assignable or
transferable except by will or the laws on intestate succession. Options
acquired pursuant to the Plan may be exercised by the optionee (or the
optionee's legal representative) only while the optionee is employed by the
Company, or within six months after termination of employment due to a permanent
disability, or within three months after termination of employment due to
retirement. The executor or administrator of a deceased optionee's estate or the
person or persons to whom the deceased optionee's rights thereunder have passed
by will or by the laws of descent or distribution shall be entitled to exercise
the option within the sixth months after the decedent's death. Options expire
immediately in the event an optionee is terminated with or without cause or
resigns; provided, however, in the event the Company terminates the employment
of an optionee who at the time of such termination was an officer of the Company
and had been continuously employed by the Company during the two year period
immediately preceding such termination, for any reason except "good cause" (as
defined in the Plan), each stock option held by such optionee (which had not
then previously lapsed or terminated and which had been held by such optionee
for more than six (6) months prior to such termination) shall be exercisable for
a period of three months after such termination to the extent otherwise
exercisable during that period. All of the aforementioned exercise periods set
forth in this paragraph are subject to the further limitation that an option
shall not, in any case, be exercisable beyond its stated expiration date.
The purchase price and the number and kind of shares that may be
purchased upon exercise of options granted pursuant to the Plan, and the number
of shares which may be granted pursuant to the Plan, are subject to adjustment
in certain events, including stock splits, recapitalization and reorganizations.
Federal Tax Aspects of the Plan
Set forth below is a general summary of the Federal income tax
consequences associated with the Plan.
An employee will not be deemed to have received income upon the grant
of an incentive stock option or, except as noted below, upon the exercise of
such option. Unless Shares acquired upon exercise are disposed of within two
years of the date of grant or within one year of exercise, upon the sale of such
Shares, the optionee will generally recognize capital gain or loss measured by
the difference between the amount realized on the sale and the price paid for
the Shares. If a sale is made prior to either of such dates, an optionee's gain
on the sale of the Shares will be treated as ordinary income to the extent of
the lesser of the excess of the fair market value of the Shares at the time of
exercise over the option price and the excess of the amount realized on the sale
of stock over the option price. The Company will be allowed a deduction at the
time of sale
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in the amount of ordinary income recognized by the optionee. The balance of any
gain realized will be treated as long-term or short-term capital gain depending
upon the length of time the Shares were held by the optionee.
Generally, the excess of the fair market value of an incentive stock
option at the time of exercise (or, if the stock subject to the option is
restricted within the meaning of Code Section 83, at such time as the Shares
become transferable or are not longer subject to a substantial risk of
forfeiture) over the option price constitutes an item of tax preference for
purposes of calculating "alternative minimum taxable income" and may result in
imposition of the "alternative minimum tax" for the participant pursuant to
Section 55 of the Code.
Non-qualified options granted under the Plan are not intended to
qualify for the favorable Federal income tax treatment accorded to incentive
stock options under the Plan. An optionee should not recognize any income for
Federal income tax purposes at the time of the grant of non-qualified options
under the Plan. When non-qualified options are exercised, however, the excess of
the fair market value of the shares of Common Stock acquired pursuant to such
exercise, determined at the time of exercise, over the option price will
constitute ordinary income to the optionee. Subject to applicable limitations,
the Company is entitled to a corresponding income tax deduction equal to the
amount of such ordinary income for the taxable year in which the optionee is
required to recognize such income for Federal income tax purposes.
Vote Required for Approval of the Plan
The Company's Board of Directors has approved the Plan. However, the
Plan will not be adopted unless the holders of at least a majority of the shares
of Common Stock present or represented at the meeting and entitled to vote
thereon vote "FOR" approval of the plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE PLAN.
PROPOSAL THREE - SELECTION OF AUDITORS
PricewaterhouseCoopers, L.L.P.
The Board of Directors have selected and approved
PricewaterhouseCoopers as the principal independent auditor to audit the
financial statements of the Company for 1999, subject to ratification by the
shareholders. It is expected that a representative of the firm of
PricewaterhouseCoopers, L.L.P. will be present at the annual meeting and will
have an opportunity to make a statement if they so desire and will be available
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE "FOR"
SUCH RATIFICATION.
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Stockholder Proposals for 2000 Proxy Statement
Proposals by shareholders for inclusion in the Company's Proxy
Statement and form of proxy relating to the 2000 Annual Meeting of Stockholders,
which is tentatively scheduled to be held on May 15, 2000, should be addressed
to the Secretary, CTI Industries Corporation, 22160 North Pepper Road,
Barrington, Illinois 60010, and must be received at such address no later than
December 31, 1999. Upon receipt of any such proposal, the Company will determine
whether or not to include such proposal in the Proxy Statement and proxy in
accordance with applicable law. It is suggested that such proposal be forwarded
by certified mail, return receipt requested.
Other Matters to Be Acted Upon at the Meeting
The management of the Company knows of no other matters to be presented
at the meeting. Should any other matter requiring a vote of the shareholders
arise at the meeting, the persons named in the proxy will vote the proxies in
accordance with their best judgment.
BY ORDER OF THE
BOARD OF DIRECTORS
Dated: April 6, 1999 /s/ Stephen M. Merrick
---------------------------------
Stephen M. Merrick, Secretary
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APPENDIX A
CTI INDUSTRIES CORPORATION
1999 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purposes of the CTI Industries Corporation 1999 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, $.065 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) "NASDAQ" means the NASDAQ SmallCap Market
(h) "Non-Qualified Stock Option" means an option granted under the
Plan which is not an Incentive Stock Option.
(i) "Participant" means a person to whom a Stock Option has been
granted under the Plan.
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(j) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended from time to time, or any
successor rule.
(k) "Stock Option" means an Incentive Stock Option or a
Non-Qualified Stock Option granted under the Plan.
(l) "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. Each member of
the Committee shall be a disinterested person (as such term is
defined in Rule 16b-3). 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.
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(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 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 on May 6, 1999 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 at such annual or special meeting or at any
adjournments thereof, 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 400,000. 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:
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(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
(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;
(e) Materially modifies the requirements as to eligibility for
participation in the Plan; or
(f) Will cause Stock options granted under the Plan to fail to
meet the requirements of Rule 16b-3.
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 Sections 2.5, 3.6 and 3.9)
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
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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%) 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 of a NonQualified 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
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(c) By a combination of both (a) and (b) above.
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
of its Subsidiaries, or (ii) shall voluntarily resign or
terminate his employment with the
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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.
3.9 Limitation on Number of Options Granted to Employees
The maximum number of shares for which options may be granted to an
employee of the Company during any calender year shall not exceed 100,000.
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
accelerate
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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 and with the rules of
NASDAQ and of all other domestic stock exchanges on which the Common Stock may
be listed. 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.
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
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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 Severability
If any of the terms or provisions of the Plan conflict with the
requirements of Rule 16b-3, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of Rule 16b-3.
4.9 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.
4.10 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.
4.11 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 March 19, 1999
SHAREHOLDER APPROVAL _____________________________
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REVOCABLE PROXY CTI INDUSTRIES CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON MAY 14, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Howard W. Schwan, John H. Schwan, Stephen M.
Merrick or any of them, with full powers of substitution, as proxies of the
undersigned, with the authority to vote upon and act with respect to all shares
of common stock, par value $.065 of CTI Industries Corporation (the "Company"),
which the undersigned is entitled to vote, at the Annual Meeting of Stockholders
of the Company, to be held at 22222 North Pepper Road, Barrington, Illinois,
commencing Friday, May 14, 1999, at 10:00 a.m., and at any and all adjournments
thereof, with all the powers the undersigned would possess if then and there
personally present, and especially (but without limiting the general
authorization and power hereby given) with the authority to vote on the
following:
Item 1. Election of two directors:
|_| FOR ALL NOMINEES (except as |_| WITHHOLD AUTHORITY
marked to the contrary on the line below) to vote for all
nominees listed below
Nominees (term, if elected, expires 2000):
Stanley M. Brown Bret Tayne
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE OR NOMINEES,
WRITE HIS OR THEIR NAME OR NAMES IN THE SPACE BELOW:
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Item 2. Proposal to approve the adoption of the Company's 1999 Stock
Option Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
Item 3. Proposal to ratify the appointment of PriceWaterhouseCoopers, L.L.P.
as auditors of Company for 1999.
|_| FOR |_| AGAINST |_| ABSTAIN
- --------------------------------------------------------------------------------
Item 4. In their discretion, on any and all other matters as may properly
come before the meeting.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to said stock and hereby ratifies and confirms all that
the proxies named herein and their substitutes, or any of them, may lawfully do
by virtue hereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED HEREIN. IF THIS
PROXY DOES NOT INDICATE A CONTRARY CHOICE, IT WILL BE VOTED FOR THE NOMINEES FOR
DIRECTOR AS LISTED IN ITEM 1, FOR ITEM 2, FOR ITEM 3, AND IN THE DISCRETION OF
THE PERSONS NAMED AS PROXIES HEREIN WITH RESPECT TO ANY AND ALL MATTERS REFERRED
TO IN ITEM 4 ABOVE.
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Signature of Stockholder
Dated:___________________________, 1999
NOTE: Please date proxy and sign it exactly as name or names appear above. All
joint owners of shares should sign. State full title when signing as executor,
administrator, trustee, guardian, et cetera. Please return signed proxy in the
enclosed envelope.
<PAGE>
REVOCABLE PROXY CTI INDUSTRIES CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON MAY 14, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Howard W. Schwan, John H. Schwan, Stephen M.
Merrick or any of them, with full powers of substitution, as proxies of the
undersigned, with the authority to vote upon and act with respect to all shares
of Class B common stock, par value $.91 of CTI Industries Corporation (the
"Company"), which the undersigned is entitled to vote, at the Annual Meeting of
Stockholders of the Company, to be held at 22222 North Pepper Road, Barrington,
Illinois, commencing May 14, 1999, at 10:00 a.m., and at any and all
adjournments thereof, with all the powers the undersigned would possess if then
and there personally present, and especially (but without limiting the general
authorization and power hereby given) with the authority to vote on the
following:
Item 1. Election of five directors:
|_| FOR ALL NOMINEES (except as |_| WITHHOLD AUTHORITY
marked to the contrary on the line below) to vote for all
nominees listed below
Nominees (term, if elected, expires 2000):
Class B Common Stock Nominees
Howard W. Schwan John H. Schwan Stephen M. Merrick
Class B Common Stock and Common Stock Nominees
Stanley M. Brown Bret Tayne
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE OR NOMINEES,
WRITE HIS OR THEIR NAME OR NAMES IN THE SPACE BELOW:
- --------------------------------------------------------------------------------
Item 2. Proposal to approve the adoption of the Company's 1999 Stock Option
Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
Item 3. Proposal to ratify the appointment of PriceWaterhouseCoopers, L.L.P.
as auditors of Company for 1999.
|_| FOR |_| AGAINST |_| ABSTAIN
- --------------------------------------------------------------------------------
Item 4. In their discretion, on any and all other matters as may properly
come before the meeting.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to said stock and hereby ratifies and confirms all that
the proxies named herein and their substitutes, or any of them, may lawfully do
by virtue hereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED HEREIN. IF THIS
PROXY DOES NOT INDICATE A CONTRARY CHOICE, IT WILL BE VOTED FOR THE NOMINEES FOR
DIRECTOR AS LISTED IN ITEM 1, FOR ITEM 2, FOR ITEM 3, AND IN THE DISCRETION OF
THE PERSONS NAMED AS PROXIES HEREIN WITH RESPECT TO ANY AND ALL MATTERS REFERRED
TO IN ITEM 4 ABOVE.
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Signature of Stockholder
Dated:___________________________, 1999
NOTE: Please date proxy and sign it exactly as name or names appear above. All
joint owners of shares should sign. State full title when signing as executor,
administrator, trustee, guardian, et cetera. Please return signed proxy in the
enclosed envelope.
