Unassociated Document


    Exhibit
      10.1

    


    CTI
      INDUSTRIES CORPORATION

     

    
      

      

    

    


    INCENTIVE
      COMPENSATION PLAN

     

    
      

      

    

     

    This
      CTI
      Industries Corporation Incentive Compensation Plan (herein the “Plan”) sets
      forth the plan and program of CTI Industries Corporation (the “Company”) for
      incentive and bonus compensation to be paid to executive and managerial
      employees of the Company. This Plan has been developed and recommended by the
      Compensation Committee of the Board of Directors of the Company (“Compensation
      Committee”) and has been adopted and approved by the Board of Directors of the
      Company (“Board”) as of September 28, 2007 and shall remain in effect until
      terminated by act of the Board.

    


    ARTICLE
      I - ESTABLISHMENT AND PURPOSE

     

    1.1 Effective
      Date.
      This
      Plan shall be effective as of January 1, 2007 and shall remain in effect until
      terminated by resolution of the Board. This Plan may be modified in whole or
      in
      part, at any time or from time to time, by resolution of the Board.

    


    1.2 Purposes.
      The
      purposes of this Plan are:

     

    (i) reward
      key individuals who influence the profitability of the Company for performance
      affecting the profitability of the Company;

    


    (ii) provide
      an incentive opportunity based on achieving profitability of the Company which
      will enable the Company to attract, motivate and retain executives.

    


    ARTICLE
      II - DEFINITIONS AND CONSTRUCTION

     

    
      	2.1  	
              Definitions.
                The following terms shall have the meanings stated below unless the
                context clearly indicates
                otherwise:

            


    

    


    (a) “Board”
      shall mean the Board of Directors of the Company;

    


    (b) “Compensation
      Committee” shall mean the Compensation Committee of the Board.

    


    (c) “Employee”
      shall mean an individual who is in the employ of the Company.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    (iii) “ERISA”
      means the Employee Retirement Income Security Act of 1974, as now in effect
      or
      amended.

    


    (d) “Incentive
      Compensation” shall mean the amount to be paid, in the form of cash, to a
      Participant, under the terms of this Plan

    


    (e) “Net
      Income” shall mean the net income of the Company, on a consolidated basis,
      determined in accordance with generally accepted accounting principals
      consistently applied, before provision for income tax and before provision
      for
      any incentive compensation payable under this Plan. Net Income shall not include
      extraordinary or non-recurring income, expenses or events, such items and
      amounts to be determined by the Compensation Committee in their sole
      discretion.

    


    (f) “Participant”
      shall mean an employee, officer or director of the Company who shall be
      designated by the Compensation Committee as a Participant in this Plan.
      Participants shall be designated as participants either in Pool I or Pool
      II.

    


    (g) “Plan
      Year” shall mean a calendar year.

    

      2.2 Gender
        and Number.
        Except
        when otherwise indicated by the context, words in the masculine gender shall
        include the feminine gender, the plural shall include the singular and the
        singular shall include the plural.

      


      2.3 Rights
        of Participants.
        This
        Plan shall not, and shall not be construed to, give a Participant any right
        to
        be retained in the service or employment of the Company or the right to any
        benefit not provided by this Plan.

      


      2.4 Severability.
        In the
        event that any provision of this Plan shall be held invalid or illegal for
        any
        reason, any such invalidity or illegality shall not affect the remaining
        parts
        of this Plan, but this Plan shall be construed and enforced as if the illegal
        or
        invalid provision had not been included in the Plan, and the Company shall
        have
        the right to correct and remedy such illegal or invalid provision so as to
        make
        it valid, legal and enforceable.

      


      2.5 Applicable
        Law.
        This
        Plan is intended to be exempt from Title IV of ERISA. This Plan shall be
        governed and construed in accordance with the laws of the State of
        Illinois.

    

     

    ARTICLE
      III - PARTICIPATION

    


    3.1 Designation
      of Pool I Participants.
      Prior
      to the beginning of each Plan Year, the Compensation Committee shall recommend
      to the Board which persons shall become Pool I Participants in the Plan for
      such
      Plan Year and shall designate, in such recommendation, the Award Amount;
      provided, however, that, for the Plan Year commencing January 1, 2007, such
      recommendation and designation shall be made on or before April 30, 2007. The
      Participants and Award Amounts for a Plan Year shall be established by
      resolution of the Board.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    3.2 Designation
      of Pool II Participants.
      On or
      before November 30 of each Plan Year, management shall recommend to the Board
      of
      Directors and the Board of Directors shall designate and determine those
      employees of the Company who shall be Pool II Participants for such Plan Year
      and the relative amount of their participation in Pool II which shall may be
      expressed as a specific amount, or as a percentage of the Pool II Award Amount,
      as management and the Board of Directors shall determine.

    


    ARTICLE
      IV - INCENTIVE AWARDS

    


    4.1 Pool
      I
      Awards.

    


    (a) Incentive
      compensation awards for Participants in Pool I, and the amount of the incentive
      compensation to be paid to Pool II participants as a group, shall be expressed
      as a percent (“Award Amount”). Such Award Amount shall represent a percent of
      the Net Income of the Company for the period for which the incentive
      compensation is payable.

    


    (b) Pool
      I
      incentive compensation shall be determined and paid as follows:

    


    (i) Within
      15
      days after the filing of the Company’s Report on Form 10-Q for the quarters
      ended March 31, June 30 and September 30 of each Plan Year, the Company shall
      determine the amount of the Net Income for the quarter then ended and shall
      pay
      to each Pool I Participant, as incentive compensation, an amount equal to fifty
      (50%) percent of such Participant’s Award Amount with respect to the Net Profit
      of the Company for such quarter;

    


    (ii) Within
      15
      days after the filing of the Company’s Report on Form 10-K for each Plan Year,
      the Company shall determine the amount of the Net Income for the Plan Year
      and
      shall pay to each Pool I Participant, as incentive compensation, the full amount
      of the Participant’s Award Amount with respect to the Net Income of the Company
      for the Plan Year, less the aggregate amount of incentive compensation
      previously paid to such Participant under this Plan during such Plan Year;
      provided that the amount shall not be less than zero. 

    


    (c) No
      incentive compensation award shall be payable with respect to any calendar
      quarter in which the Net Income shall be less than $100,000 or for any Plan
      Year
      in which the Net Income shall be less than $250,000. The maximum amount of
      incentive compensation payable to any Participant shall be an amount equal
      to
      the annual base compensation of such Participant. In no event shall the
      aggregate amount of the Award Amounts exceed fifteen (15%) percent of the Net
      Income of the Company.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    4.2 Pool
      II Awards

    


    (a) The
      Award
      Amount for Pool II participants shall be determined on or before March 1 for
      the
      Plan Year.

    


    (b) On
      or
      before November 30 of each Plan Year, management of the Company shall make
      an
      estimate of the Net Income of the Company for the Plan Year and, on or before
      December 15 of each such Plan Year shall pay the Pool II Award Amount,
      determined on the basis of such estimated Net Profit, to Pool II Participants.
      The Pool II Award Amount shall be the amount determined by management in
      accordance with this paragraph and, neither such amount, or the amount of
      incentive compensation payable to Pool II Participants, shall be increased
      or
      decreased subsequent to such determination as the result of the actual Net
      Income for the Plan Year. 

    


    4.3 Termination
      of Employment.

    


    (a) Nothing
      herein shall, or shall be deemed to, establish and contract or agreement for
      employment of any Participant or to entitle Participant to continue in the
      employ of the Company for the Plan Year or for any other term, or to receive
      any
      notice of termination or severance payments upon termination of
      employment.

    


    (b) Except
      as
      expressly provided herein, no Participant shall have any right to receive any
      incentive compensation, or other compensation or payment, from the Company.
      Incentive compensation payments provided for in this Plan shall become payable
      at the time and upon the terms provided herein and no right to receive incentive
      compensation payments hereunder shall be established or accrue except as, and
      at
      the times, expressly provided herein.

    


    (c) Except
      as
      expressly provided herein, a Participant whose employment with the Company
      is
      terminated, for any reason, prior to the date that an incentive compensation
      payment becomes payable to such Participant hereunder, shall not be entitled
      to
      receive an incentive compensation payment which would or may have become payable
      subsequent to the date of such termination, whether during or after the Plan
      Year, had such employee’s employment with the Company continued. With respect to
      a Pool I Participant whose employment with the Company is terminated during
      a
      Plan Year (a) by the Company other than for cause or (b) by reason of the death,
      disability or retirement of Participant, such Participant shall be entitled
      (i)
      to retain incentive compensation payments actually made to such Participant
      during such Plan Year and (ii) to receive an incentive compensation payment
      45
      days after the end of the Plan Year equal to (A) the amount payable to the
      Participant for the Plan Year multiplied by a fraction the numerator of which
      is
      the number of days of the Plan Year during which the Participant was employed
      by
      the Company and the denominator of which is 365, (B) less the amount of
      incentive compensation previously paid to such Participant during such Plan
      Year. 

     

    
      
        
        

      

      
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    ARTICLE
      V - GENERAL PROVISIONS

    


    5.1 Funding.
      The
      Plan shall at all times be entirely unfunded and no provision shall at any
      time
      be made with respect to segregating assets of the Company or any subsidiary
      thereof for the payment of incentive compensation hereunder. No Participant
      or
      any other person shall have any interest in any particular assets of the Company
      or any subsidiary thereof by reason of the right to receive incentive
      compensation hereunder and all Participants shall have only the rights of a
      general unsecured creditor of the Company or any subsidiary with respect to
      any
      rights under the Plan.

    


    5.2 Delay
      or Denial of Award; Special Circumstances.
      The
      Compensation Committee shall retain the right, in their sole discretion, in
      connection with an actual or possible breach of duty or trust, or fraud, by
      a
      Participant (i) to delay the payment of incentive compensation hereunder to
      such
      Participant during the period of investigation thereof or (ii) to deny the
      payment of incentive compensation hereunder. Further, the Compensation Committee
      shall be entitled, in its sole discretion, to consider special circumstances,
      including but not limited to anticipated future results of operations or
      commitments of the Company, and to reduce or eliminate the amount of incentive
      compensation which may otherwise be payable hereunder.

    


    5.3 Interests
      Not Transferable.
      No
      incentive compensation payable under the Plan shall be subject in any manner
      to
      anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
      or
      charge prior to actual receipt thereof by the payee, and any attempt to so
      anticipate, alienate, sell, transfer, assign, pledge, encumber or charger prior
      to such receipt shall be void. The Company shall not be liable in any manner
      for
      or subject to the debts, contracts, liabilities, engagements or torts of any
      person entitled to any incentive compensation under the Plan.

    


    5.4 Administration
      of Plan.
      This
      Plan shall be administered by the Compensation Committee. The Compensation
      Committee shall have the full authority and discretion to adopt rules and
      regulations to carry out the purposes and provisions of this Plan. The
      Compensation Committee is specifically granted the authority to interpret,
      in
      its sole discretion, all terms and provisions of this Plan and such
      interpretation, and all decisions and actions of the Compensation Committee
      with
      respect to the Plan, shall be conclusive and binding on all Participants and
      the
      Company. The Compensation Committee shall make decisions according to a majority
      vote and maintain a written record of its decisions and actions.

    


    5.5 Indemnification
      and Exculpation.
      Each
      member of the Compensation Committee and of the Board and their agents, and
      all
      officers and employees of the Company acting with respect to the Plan, shall
      be
      indemnified and held harmless by the Company against and from any and all loss,
      cost, liability or expense which may be imposed upon or reasonably incurred
      by
      them in connection with or resulting from any claim, action, suit or proceeding
      to which they may be a party or in which they may be involved by reason of
      any
      action taken or failure to act under the Plan and against and from any and
      all
      amounts paid by them in settlement (with the Company’s approval) or paid by them
      in satisfaction of a judgment in any such action, suit or proceeding. The
      foregoing provision shall not be applicable to any person if the loss, cost,
      liability or expense is due to such person’s gross negligence or willful
      misconduct. The right of indemnification contained in this provision are in
      addition to and in no way affect any rights to indemnification otherwise
      provided under the Company’s by-laws or Certificate of
      Incorporation.

     

    
      
        
        

      

      
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    5.6 Effect
      on Other Benefit Plans.
      Amounts
      credited or paid under this Plan shall not be considered to be compensation
      for
      purposes of calculating benefits under any other employee benefit plans
      maintained by the Company, except as otherwise provided in any such benefit
      plan.

    


    5.7 Notices.
      Any
      notices, requests, demands, elections or other communications provided for
      or
      permitted by this Plan shall be sufficient if in writing and personally
      delivered or sent by registered or certified mail to the Participant at the
      last
      address for such Participant on the records of the Company, or, in the case
      of
      the Company, at its principal offices.

    


    5.8 Tax
      Liability.
      The
      Company may withhold from any payment of benefits hereunder any taxes required
      to be withheld and such sum as the Company may reasonably estimate to be
      necessary to cover any taxes for which the Company may be liable to withhold
      on
      behalf of the Participant and which may be assessed with regard to such
      payment.

    


    IN
      WITNESS WHEREOF, CTI Industries Corporation has caused this instrument to be
      executed by its duly authorized officers pursuant to resolution of the Board
      effective the 28th day of September, 2007.

     

    
      	 	 	 
	 	CTI
              INDUSTRIES
              CORPORATION
	 
 	 
 	
               

               

            
	
            	By:  	
              
                /s/ Howard W. Schwan

              

            
	  
ATTEST:	
                   
                President

            
	 	 

               

            
	 	 
	By: /s/
              Stephen M. Merrick_______ 	 
	
               Secretary 

            	 


    

     

    
      
        
        

      

      
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