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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR
12(g) OF THE SECURITIES AND EXCHANGE ACT OF 1934
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CREATIVE PRODUCTS INTERNATIONAL, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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DELAWARE 52-2158936
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
5843 WOODLAWN AVENUE, NORTH
SEATTLE, WA 98103
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(ADDRESS OF PRINCIPAL OFFICES) (ZIP CODE)
(206) 523-7065
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(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT:
COMMON STOCK
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(TITLE OF CLASS)
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Part I: Information Required in a Registration Statement
Item 1. Description of Business 2
Item 2. Management's Discussion and Analysis 6
Item 3. Description of Property 7
Item 4. Security Ownership of Certain Beneficial Owners and Management 8
Item 5. Directors, Executive Officers 9
Item 6. Executive and Director's Compensation 10
Item 7. Certain Relationships and Related Party Transactions 10
Item 8. Description of Securities 10
Part II
Item 1. Market Price of Our Securities, Our Dividend Policy and
Other Shareholder Matters 12
Item 2. Legal Proceedings 12
Item 3. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 12
Item 4. Recent Sales of Unregistered Securities 12
Item 5. Indemnification of Directors and Officers 12
Part F/S
Financial Statements 13
Part III
Index to Exhibits 18
</TABLE>
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INTRODUCTION
This is a Registration Statement on Form 10-SB for the common stock,
par value $0.01 per share (the "Common Stock"), of Creative Products
International, Inc., a Delaware corporation ("Creative Products" or the
"Company"). The Registration Statement contains the information required by
Alternative 3 of Form 10-SB. At the present time, there is no public market for
the Common Stock and the Common Stock is not traded on any exchange.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
The following statements are or may constitute forward-looking
statements:
- statements set forth in this Registration Statement or
statements incorporated by reference from documents Creative
Products has filed with the Securities and Exchange
Commission, including possible or assumed future results of
our operations, including but not limited to any statements
contained herein or therein concerning:
- revenues for the near term;
- Creative Products' expectations concerning Creative
Products' future profitability, Creative Products'
ability to generate positive cash flows in the
future, and Creative Products' ability to expand its
operations;
- any statements preceded by, followed by or that include the
words "believes," "expects," "predicts," "anticipates,"
"intends," "estimates," "should," "may" or similar
expressions; and
- other statements contained or incorporated by reference in
this Information Statement regarding matters that are not
historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Such factors include:
- general economic and business conditions;
- technology changes;
- competition;
- changes in business strategy or development plans;
- the ability to attract and retain qualified management and
staff;
- liability and other claims which might be asserted against
Creative Products;
You should not place undue reliance on such statements, which speak
only as of the date that they were made. Creative Products' independent public
accountant has not examined or compiled the forward-looking statements and,
accordingly, they do not provide any assurance with respect to such statements.
These cautionary statements should be considered in connection with any written
or oral forward-looking statements that Creative Products may issue in the
future. Creative Products does not undertake any obligation to release publicly
any revisions to such forward-looking statements after the effective date of
this Registration Statement.
<PAGE> 4
PART I: INFORMATION REQUIRED
IN A REGISTRATION STATEMENT
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY
Creative Products was incorporated in the State of Delaware on March
25, 1999 as a wholly-owned subsidiary of Caring Products International, Inc.
("Caring Products"). The common stock of Caring Products trades on the OTC
Bulletin Board under the ticker symbol "BDRY." Since its inception in 1992,
Caring Products has primarily been engaged in the development and marketing of
certain highly absorbent pad and reusable pant products for adults and
handicapped children who experience chronic urinary incontinence. Caring
Products sells its products to chain drug stores, surgical supply stores,
pharmacies, drug wholesalers, the veteran's hospitals and other
healthcare-related entities.
In 1993, Caring Products began development and testing of a toilet
training product line for use by children under the age of six. One of the
toilet training products utilized Caring Product's proprietary two-piece, pant
and liner technology. The first toilet training product, called BumberChute, was
test marketed in various national chain stores and regional stores located in
New England in late 1994 through 1995. Test results indicated the need for
product revisions to lower suggested retail cost. In addition, the test market
demonstrated that while the toilet training concept was favorably received among
parents, Caring Products would need substantial advertising and promotion
resources to distribute its products to chain grocery, drug and mass marketers
on a national basis and ultimately gain strong brand recognition among
consumers. Since 1995, Caring Products has continued, on a limited basis, to
research, test and refine the range of products under development to serve
parents with children under the age of six.
In June 1999, the Board of Directors of Caring Products approved the
spin-off all of the shares of Creative Products owned by Caring Products, which
now represents 80% of the issued and outstanding common stock of Creative
Products, to shareholders of record as of June 30, 1999. As part of the
spin-off, each shareholder of record will receive one-half share of Creative
Products' Common Stock for each share of Caring Products common stock owned on
June 30, 1999. In addition, Caring Products transferred certain intellectual
property, including copyrights, trademarks and a patent, which relate to the
family of development stage children's products, to Creative Products.
The purpose of the spin-off is to separate the two highly dissimilar
business lines and permit Creative Products to develop a management team and
capital structure to commercialize the children's products through retail,
catalog and internet distribution channels as well as pursue other internet
business opportunities.
Neither Caring Products nor Creative Products has been involved in any
bankruptcy, receivership or similar proceeding. Neither Caring Products nor
Creative Products has had any material reclassification, merger, consolidation,
or purchase or sale of a significant amount of assets outside the ordinary
conduct of business.
OVERVIEW
Creative Products is a development stage company. Creative Products is
attempting to become the first company with a brand, "Booster," synonymous with
helping parents teach young children all "the basics" of good habits and good
behavior in a highly consistent and reliable way. Creative Products intends to
provide parents with young children a broad range of coordinated consumer
products, educational books and toys, and parenting information that help teach
young children good hygiene habits, manners, safety and how to behave when in
public. Creative Products' line of learning programs is designed to motivate
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children to learn new skills and accept new responsibilities, such as toilet
training, with less frustration. Creative Products' teaching techniques are
incorporated in playful games, activities and storylines that feature several
highly appealing animated characters called the Booster Kids and other animated
Booster animal characters.
Creative Products intends to employ an innovative cross-media strategy
to market and promote the Booster Basics' brand of products to parents and the
Booster Kids and other Booster animated characters to young children. The
management of Creative Products intends to develop loyalty to the animated
characters through BoosterBasics.com, an on-line internet site that will offer
interactive games, stories and Booster Kids club activities. Each on-line story
will contain certain positive habit-forming messages that parents can endorse
and encourage for its underlying educational value. Creative Products also
anticipates making certain Booster Basics' products available for sale at its
web site. The management of Creative Products also intends to explore
opportunities for developing a presence for the animated stories on cable or
public television through media companies with experience in the production of
animation or children's programming.
Creative Products anticipates that its web site will contain various
parenting information including topic specific teaching tips, chat rooms and
featured articles written by pre-teachers, child psychologists, education
experts, pediatricians, parents and grandparents. The management of Creative
Products anticipates that it will develop content in-house as well as license
features from third parties. Given the targeted demographic orientation of
Creative Products' web site, the management of Creative Products also intends to
explore other revenue generating features of its web site, including banner
advertising, promotional features and coupon merchandising, sponsorship
arrangements and sale of other products that appeal to households with children
under the age of six.
PRODUCTS
Creative Products has developed a line of animated characters called
the Booster Kids and several animated animal characters including a bear, dog
and monkey which help the Booster Kids overcome fears, learn new skills,
recognize safety concerns, resolve disputes and promote good natured behavior at
home and in public. These characters are being incorporated into a library of
rhyming stories, various "kits" for learning new skills, such as toilet
training, song tapes and other educational products. In addition, Creative
Products intends to broaden its line of rhyming stories and develop
complementary song tapes, learning toy kits and videos that will be sold through
traditional retail outlets. Some of these learning toy kits will be topic
specific. For example, a toilet training kit may a child's first training pant,
guide book for parents, rhyming story for the child plus other purposeful games
and toys that promote faster toilet training.
Creative Products is also developing several parent guide books,
designed to help parents introduce new skills in sensible, child-friendly stages
to maximize child interest and retention. These books are designed for parent
convenience and do not contain gimmicks or untested parenting ideas or
activities.
Creative Products will seek to expand the range of products that
feature the Booster Kids and other Booster characters though licensing or
private label relationships with established consumer product companies and
media companies. Products that may be most conducive to licensing, private label
or promotional merchandising include bubble bath, soaps, sleepwear, wash cloths
and towels, bath toys, toothbrushes, birthday party ware and toy figurines.
PRODUCT MANUFACTURING AND SITE DEVELOPMENT
On December 4, 1998, Caring Products signed an agency agreement with
Janex Ltd., a Hong Kong based company for the identification of manufacturing
sources in China. The agreement expires on December 4, 2001. On August 25, 1999,
Caring Products and Janex agreed to transfer the agency
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agreement to Creative Products. As part of this agreement, Janex will receive an
immediately exercisable warrant to purchase 26,000 shares of Creative Products
common stock upon the first successful shipment of fully packaged product for
Creative Products by a manufacturing source identified by Janex. The exercise
price of the warrant will be determined based on the closing bid price of
Creative Products common stock on the date of final Board approval after product
shipment completion.
Creative Products believes that it can arrange the manufacture or
production of other non-toilet training products in the United States, Asia and
Mexico through other agents known to Creative Products or through potential
strategic partners, such as book publishers, which maintain their own
manufacturing facilities.
RAW MATERIALS
Creative Products does not have any raw material needs. Creative
Products expects that its products will be manufactured by third parties
pursuant to contractual relationships.
PRODUCT DISTRIBUTION
Creative Products is seeking marketing or strategic partner
relationships to distribute some or all of its Booster products to traditional
retail markets which include grocery chains, drug chains and mass merchandisers.
Other potential markets for Booster products include chain book stores,
catalogs, television home shopping networks and infomercials, independent
children's stores and the internet. Creative Products also may license some or
all of its characters for use on consumer products, soft goods and other items
in that animated characters help promote established product brands. As a
development stage company, Creative Products does not have any major customers.
COMPETITION
The market for children's books, video and song tapes is dominated by
large entertainment companies such as The Walt Disney Company and TimeWarner
Companies, Inc. Educational books for children under the age of six are also
offered by national and regional book publishers and imprints, such as Golden
Books Publishing Company, Inc., a subsidiary of Golden Books Family
Entertainment, Inc.; Scholastic, Inc.; Simon & Schuster, Inc.; Harcourt, Inc., a
subsidiary of Harcourt General; Nickelodeon, a Viacom International, Inc.
company; Red Wagon, L.L.C.; Little, Brown and Company, a Time Warner company;
The Walt Disney Company; Houghton Mifflin Company; and Random House, Inc. The
market for educational books and products is highly competitive requiring access
to national, regional and local chain books stores, children's books stores, and
internet-based book and video distributors such Amazon.com, Inc. Children's
books, videos and song tapes which feature a popular animated character
supported by advertising, national film presence, presence on commercial network
or public television, amusement park affiliation and other means of promotion
have a distinct advantage over new characters like the Booster Kids.
The market for internet-based activity centers for children under the
age of six is new. There are many sites under development and the market is
likely to become more competitive in the future. The management of Creative
Products believes that there is no single site which offers parents useful
parenting information and well-directed, topic specific learning programs as
well as an innovative on-line, interactive learning stories, games and other
activities which can capture and maintain a child's interest. The market for
banner and promotional advertising is becoming increasingly competitive as more
web sites seek revenues to support their internet operations.
The market for toilet training products as well as other consumer or
paper products geared to young children is highly competitive. Currently,
disposable and reusable training pants are produced and aggressively promoted by
Procter & Gamble Company ("Pampers Trainers"), Kimberly-Clark Corporation
("Pull-ups"), Gerbers, Inc. ("Gerbers") and Drypers Corporation ("Drypers").
There are several other
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manufacturers of disposable training pants including several regional and
national companies that produce private label products for grocery and mass
market retail chains. All of these competitors have significant operating and
financial advantages compared to Creative Products. These advantages include
greater financial, personnel, technical and marketing resources, superior
systems, stronger relationships with retailers and greater name recognition.
INTELLECTUAL PROPERTY
In November 1994, the U.S. Patent and Trademark Office issued a patent
to Caring Products covering a proprietary pant channel design. This patent
expires on July 30, 2012. Caring Products also has developed a series of
animated characters, rhyming stories, guide books for parents, other educational
print items. Many of these properties are protected under various copyright and
trademark laws. On June 30, 1999, Caring Products transferred the patent and
other intellectual property associated with the children's product line to
Creative Products. Creative Products has issued a perpetual, royalty free
license to Caring Products for use of the patented channel design in adult
incontinence products. Creative Products believes that its trademarks,
copyrights and logos are of considerable value to its future business and
intends to protect them to the fullest extent possible.
GOVERNMENTAL REGULATIONS
Creative Products is not subject to any governmental regulations other
than those generally applicable to all businesses.
EMPLOYEES
Creative Products currently has no employees, other than Susan
Schreter. Upon completion of the spin-off, Creative Products' success will
largely be dependent upon the decisions made by the Board of Directors of
Creative Products, until such time as a management team, independent of Caring
Products is organized. On September 24, 1999, Creative Products entered into a
three-year employment agreement with Susan Schreter, which is subject to
automatic one-year extensions unless terminated by Ms. Schreter or Creative
Products. Under the terms of the agreement, Ms. Schreter is to spend up to 25%
of her time working for Creative Products and is to receive a $25,000 salary for
her services to Creative Products. If in the opinion of Creative Product's Board
of Directors, Ms. Schreter needs to devote 100% of her efforts to the business
of Creative Products and Ms. Schreter is legally permitted to devote such effort
under the terms of her employment agreement with Caring Products, she will
receive a $150,000 salary. Also, as part of the employment agreement, Creative
Products sold 384,000 shares of its common stock to Ms. Schreter for an
aggregate cash consideration of $19,200. The 384,000 shares are being held in
escrow until the completion of the spin-off. In the event the spin-off is not
completed prior to March 31, 2000, Creative Products has the right to repurchase
for $19,200. Ms. Schreter is also entitled to participate in certain employee
benefit programs that are, or may in the future, be offered by Creative
Products. She is currently required to devote 75 percent of her time to the
business of Caring Products pursuant to an employment agreement between Ms.
Schreter and Caring Products. It is anticipated that she, and the other members
of the Board of Directors, will search for senior technical management, product
development, marketing and administrative staff to support Creative Products'
plans for growth after completion of the spin-off and as Creative Products'
capital resources permit.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
Creative Products is a development stage company organized to
commercialize certain educational and consumer products geared to children under
the age of six. The management of Creative Products anticipates that these
products, once developed, will be offered to consumers through retail, catalog
and the internet. Creative Products plans to seek to finance the development of
its business through strategic partnerships in the publishing, media, video
production and consumer products markets.
PLAN OF OPERATION
The management of Creative Products believes that while there are many
educational products on the market which help teach young children the alphabet
and beginning arithmetic, there is no single brand of products or collection of
animated characters synonymous with helping parent teach young children all the
"basics" of good habits and behavior in a highly consistent and reliable way.
Creative Products is attempting to be the first such company. Creative Products'
line of merchandise incorporate educational activities and teaching techniques
into playful games, activities and story lines which feature engaging, "cool"
animated characters. It is expected that these underlying positive behavior
themes will be a strong competitive advantage affecting parent purchasing
decisions and support of the brand.
Creative Products intends to employ an innovative cross-media strategy
to market and promote the selected products and brand names to parents as a
source of high quality parenting information and products. Creative Products
intends to develop several parent guide books, designed to help parents
introduce new skills in sensible, child-friendly stages to maximize child
interest and retention. These books and companion products will be designed to
be sold through retail, catalog, television and internet distribution channels.
Creative Products has developed a line of 28 animated children's
characters, called the Booster Kids and several animated animal characters that
help the Booster Kids overcome fears, learn new skills, recognize safety
concerns, resolve disputes and promote good natured behavior at home and in
public. These characters will be incorporated into a library of 30 rhyming
stories, song tapes, video and children's television concepts and various other
"kit" and learning skills development products. The management of Creative
Products intends to explore opportunities for developing a presence for its
animated characters and branded, positive educational themes on public, cable or
major network television.
Creative Products expects that it will seek to expand the range of
products that feature the Booster Kids and other Booster characters through
licensing or private label relationships with established consumer product
companies and media companies. Products that may be most conducive to licensing,
private label or promotional merchandising include bubble bath, soaps,
sleepwear, wash cloths and towels, bath toys, toothbrushes, birthday party ware
and toy figurines.
Additionally, Creative Products intends to contract a feasibility study
to determine the capital and technical requirements associated with Creative
Products internet plans. Creative Products has reserved the domain name
BoosterBasics.com as one of its first intended sites for the promotion of
various children's animated properties and the sale of related Booster Basics
consumer and educational products. Creative Products anticipates that it will
offer parenting information, featured articles written by pre-school teachers,
child psychologists, education experts, pediatricians, parents and grandparents,
step-by-step topic specific teaching programs, topic specific gift sets of
related consumer and educational products, and an on-line children's animated
activity center through BoosterBasics.com. This activity center plans to
introduce several highly innovative features including an on-line "read to me"
story section with topic-driven and character selection flexibility. Contests,
free "printables" and posters and other features may be developed to frequently
draw both parents and children to the site.
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Given the targeted demographic orientation of BoosterBasics.com's
audience, the management of Creative Products will explore other revenue
generating features of its web site including banner advertising, coupon
distribution, promotional feature merchandising, sponsorship arrangements and
sale of other products that have appeal to households with children under the
age of six.
RESULTS OF OPERATIONS
Since the conclusion of the first test market of the BumberChute
product line in 1994 and 1995, there have been very limited revenues and
expenses generated by Caring Products of non-adult incontinence related
products. Other than through the amortization of intellectual property, no
revenues or expenses have been incurred by Creative Products since its
organization on March 25, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Creative Products' primary source of liquidity are cash deposits of
$50,000 and $300,000 made by Caring Products on March 25, 1999 and on September
27, 1999 respectively. In addition, the Company received $19,200 from the sale
of 384,000 shares of its Common Stock to Susan Schreter in connection with her
employment contract with the Company. Creative Products has no long-term debt or
other contingent obligations.
Creative Products expects that it will seek to raise additional capital
through the sale of Common Stock or other securities to strategic product
distribution partners and investors. Creative Products also will seek to license
some or all of its animated characters and developed books and video concepts to
potential media or publishing partners. There is no assurance that Creative
Products will be able to secure additional financing, through debt or equity,
which is required to complete development of its products, organize a workable
internet web site that can accept product orders or ultimately implement its
retail product commercialization plan.
YEAR 2000 COMPLIANCE
Creative Products has no software, computer equipment or other
electronic equipment that could be adversely affected by the rollover to the
year 2000 in place. It intends to purchase software, products and information
systems in the future, which it expects will use a four-digit year code. As a
result, Creative Products believes that its software, products and information
systems will function properly with respect to dates in the Year 2000 and
thereafter. Creative Products cannot assure you, however, that its technology,
products, software and systems or the products, software, and systems of our
manufacturers, distributors, vendors, or customers will function properly with
respect to dates in the Year 2000 and thereafter. Any resulting system failures
could harm Creative Products' business. Creative Products has identified its
critical manufacturers, distributors, vendors, or customers and is monitoring
their Year 2000 compliance programs. Creative Products is also in the process of
establishing its contingency plans, which it expects to substantially complete
by November 1999. The failure of any of its manufacturers, distributors,
vendors, or customers to adequately address the Year 2000 problem or the failure
by Creative Products to successfully implement its contingency plans could harm
Creative Products' business. The cost of the Year 2000 monitoring of Creative
Products' critical manufacturers, distributors, vendors, or customers is not
expected to be material to our results of operations or financial position.
ITEM 3. DESCRIPTION OF PROPERTY
Creative Products currently does not own or lease any real property.
Creative Products will seek suitable office space in the Seattle area after the
spin-off.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of the expected based on
information obtained from the persons named below, with respect to the
beneficial ownership of the Common Stock by (i) each person known by Creative
Products to own beneficially 5% or more of the Common Stock, (ii) each director
and officer of Creative Products and all directors and officers as a group. The
number of shares of Common Stock owned are those "beneficially owned" as
determined under the rules of the Securities Exchange Commission, including any
shares of Common Stock as to which a person has sole or shared voting or
investment power and any shares of Common Stock which the person has the right
to acquire within 60 days through the exercise of any option, warrant or right.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
NUMBER OF %
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED OWNED
- ------------------------------------ ------------ -----
<S> <C> <C>
Susan A. Schreter 468,447* 24.5%
c/o Creative Products International, Inc.
5843 Woodlawn Ave. N
Seattle, WA 98103
</TABLE>
* This number includes 384,000 shares that were sold to Ms. Schreter on October
4, 1999 in connection with her employment agreement with Creative Products.
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
NUMBER OF %
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED OWNED
- ------------------------------------ ------------ -----
<S> <C> <C>
Susan A. Schreter 468,447* 24.5%
c/o Creative Products International, Inc.
5843 Woodlawn Ave. N
Seattle, WA 98103
Lisa Indovino -- --
118 Bellevue Ave
Upper Montclaire, NJ 07043
Joan Lundgren 32,500 1.7%
326 Prospect Ave.
Hackensack, NJ
All executive officers and directors as a group 500,947* 26.2%
</TABLE>
* This number includes 384,000 shares that were sold to Ms. Schreter on October
4, 1999 in connection with her employment agreement with Creative Products.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each
director and executive officer of Creative Products as of the date hereof.
<TABLE>
<S> <C> <C>
Susan A. Schreter 38 Chairman of the Board, CEO and Director
Lisa Indovino 37 Director
Joan Lundgren 46 Director
</TABLE>
Creative Products' by-laws provide that the size of the Board of
Directors shall initially be fixed by the Incorporator, and thereafter may be
changed by resolution of the Board. Creative Products' Board of Directors
currently is fixed at 3 members. Creative Products anticipates that it will name
other directors during the next 12 months. Members of the Board serve until the
next annual meeting of stockholders and until their successors are elected and
qualified. Meetings of the Board are held when and as deemed necessary or
appropriate. Officers are appointed by and serve at the discretion of the Board.
There are no family relationships among any of Creative Products' directors.
Susan A. Schreter has been president and a director of Caring Products
International, Inc. since January 1993 where she was responsible for the design
and commercialization of Caring Products' products as well as other executive
functions. She will continue to serve as president and a director of Caring
Products International, Inc. following the spin-off. From July 1985 to December
1992 she was president of Beta International, Inc., New York, New York, a firm
providing consulting services to growing companies, private business investors
and buy-out funds in the areas of acquisition due diligence, cash flow planning,
strategic business planning and capital investment. From February 1992 to
January 1995, Ms. Schreter served as a director of Omnicorp Limited, a provider
of environmental services.
Lisa Indovino is a telecommunications expert with over 15 years of
specialization in the commercialization planning and market introductions of new
internet and cellular technologies. Since 1997 she has been Director of Business
Development at Lucent Technologies where she is responsible for identifying
internet based acquisition and joint venture opportunities. From 1993 to 1996,
Ms. Indovino was Executive Vice President and a founding partner of Customer
Information, Inc. of Randallstown, Maryland, a firm which provided
telecommunications technology research and consulting to Fortune 500 companies
including IBM. From 1992 to 1993, Ms. Indovino was a Program Manager for
Mercedes-Benz of North America, Montvale, New Jersey where she was responsible
for the design and implementation of the company's first nationwide cellular
program to Mercedes dealerships.
Joan Lundgren served as Vice President of Retail Chain Sales for Caring Products
International, Inc. from February 1995 to August 1999 where she was responsible
for product introduction to retail chains and development of in-store
advertising programs and "roto's" promotional programs. From March 1988 to
January 1995, Ms. Lundgren worked as Senior Vice President for Yegen Associates
and an affiliate of Yegen Associates, Lion Associates, in Paramus, New Jersey.
Ms. Lundgren was responsible for the marketing program development and credit
quality standard review for a privately-held consumer lending organization which
had 75 offices nationwide. Ms. Lundgren has served in other marketing and sales
capacities in the financial services and banking sector.
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ITEM 6. EXECUTIVE AND DIRECTOR'S COMPENSATION
Creative Products has not paid any compensation to its current
directors and none is currently accrued. Creative Products expects to pay
reasonable compensation at such time as Creative Products' business develops.
On September 24, 1999, Creative Products entered into a three-year
employment agreement with Susan Schreter, which is subject to automatic one-year
extensions unless terminated by Ms. Schreter or Creative Products. Under the
terms of the agreement, Ms. Schreter is to spend up to 25% of her time working
for Creative Products and is to receive a $25,000 salary for her services to
Creative Products. If in the opinion of Creative Product's Board of Directors,
Ms. Schreter needs to devote 100% of her efforts to the business of Creative
Products and Ms. Schreter is legally permitted to devote such effort under the
terms of her employment agreement with Caring Products, she will receive a
$150,000 salary. Also, as part of the employment agreement, Creative Products
sold 384,000 shares of its common stock to Ms. Schreter for an aggregate cash
consideraton of $19,200. The 384,000 shares are being held in escrow until the
completion of the spin-off. In the event the spin-off is not completed prior to
March 31, 2000, Creative Products has the right to repurchase the 384,000 shares
for $19,200. Ms. Schreter is also entitled to participate in certain employee
benefit programs that are, or may in the future be, offered by Creative
Products.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
As part of the negotiation of Creative Products' employment agreement with Susan
Schreter, Creative Products sold 384,000 shares of its common stock to Ms.
Schreter on October 4, 1999 for $19,200, which consideration the independent
directors of Creative Products concluded represented no less than the fair value
of such shares. In reaching such conclusion, the independent directors took
into consideration, among other things, an appraisal of such shares that was
conducted by an independent valuation firm.
Creative Products currently receives office space on a rent free basis from
Caring Products. Upon the completion of the spin-off, Creative Products expects
to obtain its own office space in the Seattle area.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of Creative Products consists of
15,000,000 shares of common stock, $0.01 par value per share, of which 1,912,172
shares are issued or outstanding, and 1,000,000 shares of preferred stock (the
"Preferred Stock"), of which no shares are issued or outstanding. The issued and
outstanding common stock is fully-paid and nonassessable. Creative Products
issued a total of 1,528,172 shares to Caring Products in anticipation of the
spin-off, which will be distributed to Caring Products' shareholders as of the
June 30, 1999 record date. As discussed above, Caring Products also issued
384,000 shares of its common stock to Susan Schreter on October 4, 1999,
pursuant to the terms of her employment agreement.
PREFERRED STOCK
The Board of Directors is authorized, subject to limitations prescribed
by law, to provide for the issuance of the Preferred Stock in series and by
filing a certificate pursuant to the Delaware General Corporation Law to
establish the number of shares to be included in each series. The Preferred
Stock may be issued either as a class without series, or if so determined from
time to time by the Board of Directors, either in whole or in part in one or
more series, each series to be appropriately designated by a distinguishing
number, letter or title prior to the issue of any shares thereof.
The Board of Directors has the authority to fix the voting power, the
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions of the Preferred
Stock in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of the Preferred Stock.
10
<PAGE> 13
COMMON STOCK
Subject to the provisions of law and the preferences of the Preferred
Stock, dividends may be paid on the Common Stock at such time and in such
amounts as the Board of Directors may deem advisable.
The Board of Directors is authorized to effect the elimination of
shares of Common Stock purchased or otherwise reacquired by Creative Products
from the authorized capital stock or number of shares of Creative Products in
the manner provided for in the General Corporation Law of Delaware.
GENERAL PROVISIONS APPLICABLE TO BOTH COMMON AND PREFERRED STOCK
No holder of Common Stock or Preferred Stock has any pre-emptive right
to subscribe to stock, obligations, warrants, rights to subscribe to stock or
other securities of any class.
Subject to the provisions of law and the provisions of Creative
Products' Certificate of Incorporation, as amended, Creative Products may issue
shares of its Preferred Stock or Common Stock, from time to time for such
consideration (not less than the par value or stated value thereof) as may be
fixed by the Board of Directors. Shares so issued, for which the consideration
has been paid or delivered to Creative Products, shall be deemed fully paid
stock, and shall not be liable to any further call or assessments thereon, and
the holders of such shares shall not be liable for any further payments in
respect of such shares.
PENNY STOCK RULES
The Securities and Exchange Commission has adopted Rule 15g-9 which
established the definition of a "penny stock", for the purposes relevant to
Creative Products, as any equity security that has a market price of less than
$5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: (I) that a broker or dealer approve a person's
account for transactions in penny stocks; and (ii) the broker or dealer receive
from the investor a written agreement to the transaction, setting forth the
identity and quantity of the penny stock to be purchased. In order to approve a
person's account for transactions in penny stocks, the broker or dealer must (I)
obtain financial information and investment experience objectives of the person;
and (ii) make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight form, (I)
sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stocks in both public offerings and
in secondary trading and about the commissions payable to both the broker-dealer
and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks. If Creative Products' stock is listed at a price
of less that $5.00 the stock will be a penny stock. As a penny stock the shares
could be less liquid than if the stock was not so classified.
11
<PAGE> 14
PART II
ITEM 1. MARKET PRICE OF OUR SECURITIES, OUR DIVIDEND POLICY AND OTHER
SHAREHOLDER MATTERS
As of the date of this filing, there is no public market for Creative
Products' securities. Creative Products plans to file for trading on the OTC
Electronic Bulletin Board as soon as practicable following the completion of the
spin-off. There can be no assurance that the Common Stock will
be registered on the OTC Bulletin Board or, if registered, a market for the
Common Stock will develop or be maintained. Creative Products has paid no cash
dividends. As of the date of this filing, there is an outstanding obligation to
issue a warrant to purchase up to 26,000 shares of Creative Products' common
stock upon the occurrence of certain events. There are no issued, or outstanding
securities that are convertible into Creative Products' common stock or eligible
for sale pursuant to Rule 144 under the Securities Act of 1933, as amended.
Creative Products has no plans to register any of its securities under the
Securities Act for sale by security holders.
ITEM 2. LEGAL PROCEEDINGS
As of the date hereof, Creative Products is not a party to any legal
proceeding and is not aware of any threatened legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no change in principal independent accountants or
reported disagreements on any matter of accounting principles or procedures or
financial statement disclosures during Creative Products' history.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On October 4, 1999, Creative Products sold 384,000 shares of its common
stock to Susan A. Schreter for an aggregate cash consideration of $19,200,
subject to certain buy-back provisions, as part of her employment agreement with
Creative Products.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Creative Products' Certificate of Incorporation, as amended, provides
that Creative Products must, to the fullest extent permitted by the General
Corporation Law of the State of Delaware, indemnify all persons whom it has the
power to indemnify from and against all expenses, liability or other matters.
Creative Products' By-laws further provide that Creative Products must indemnify
its directors, officers, employees and agents to the fullest extent permitted by
the Delaware General Corporation Law and provides for the advancement of
expenses incurred by such persons in advance of final disposition of any civil
or criminal action, suit or proceeding, subject to repayment if it is ultimately
determined that he or she was not entitled to indemnification. The
indemnification and advancement of expenses provided in the By-laws are
expressly deemed to not be exclusive of any other rights to which a person
seeking indemnification or advancement of expenses may otherwise be entitled.
12
<PAGE> 15
PART F/S
The following financial statements of Creative Products International, Inc. are
included in this Part F/S.
[ON PETERSON SULLIVAN P.L.L.C. LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Creative Products International, Inc.
Seattle, Washington
We have audited the accompanying balance sheet of Creative Products
International, Inc. (a development stage company) as of September 30, 1999,
and the related statements of income, stockholder's equity, and cash flows
for the period March 25, 1999 (date of incorporation) to September 30, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of September
30, 1999, and the results of its operations and its cash flows for the period
from March 25, 1999 (date of incorporation) to September 30, 1999, in
conformity with generally accepted accounting principles.
/s/ PETERSON SULLIVAN P.L.L.C.
October 5, 1999
CREATIVE PRODUCTS INTERNATIONAL, INC.
(A Development Stage Company)
BALANCE SHEET
September 30, 1999
<TABLE>
<S> <C>
Current asset - cash $ 350,000
Intangible assets 160,981
---------
$ 510,981
=========
Stockholder's Equity
Common stock, par value $.01 per share, 15,000,000 shares
authorized, 1,528,172 shares issued and outstanding $ 15,282
Additional paid-in capital 500,370
Retained earnings (deficit) (4,671)
---------
$ 510,981
=========
</TABLE>
See Notes to Financial Statements
13
<PAGE> 16
CREATIVE PRODUCTS INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF INCOME
March 25, 1999 (Date of Incorporation) to September 30, 1999
<TABLE>
<S> <C>
Amortization expense $ 4,671
-------
Net (loss) $(4,671)
=======
Net (loss) per common share $ (0.14)
=======
</TABLE>
See Notes to Financial Statements
CREATIVE PRODUCTS INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S EQUITY
March 25, 1999 (Date of Incorporation) to September 30, 1999
<TABLE>
<CAPTION>
Common Stock
-----------------------
Additional Retained
Date of Number Paid-In Earnings
Transaction of Shares Par Value Capital (Deficit) Total
------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shares issued to parent
for cash March 25, 1999 1 $ -- $ 50,000 $ -- $ 50,000
Intangible assets contributed
by parent at historical cost June 30, 1999 -- -- 165,652 -- 165,652
Shares issued to parent
for cash September 27, 1999 1,528,171 15,282 284,718 -- 300,000
Net loss
-- -- -- (4,671) (4,671)
---------- ---------- ---------- ---------- ----------
1,528,172 $ 15,282 $ 500,370 $ (4,671) $ 510,981
========== ========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
14
<PAGE> 17
CREATIVE PRODUCTS INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS March 25,
1999 (Date of Incorporation) to September 30, 1999
<TABLE>
<S> <C>
Cash Flows from Operating Activities
Net loss $ (4,671)
Amortization expense 4,671
---------
Net cash provided from operating activities --
Cash Flows from Financing Activities, proceeds from issuance
of common stock to parent 350,000
Cash at March 25, 1999 (date of incorporation) --
---------
Cash at September 30, 1999 $ 350,000
=========
</TABLE>
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Description of Business
Creative Products International, Inc. ("the Company") was incorporated on March
25, 1999, in Delaware as a wholly-owned subsidiary of Caring Products
International, Inc. In June 1999, Caring Products International, Inc. announced
the spin-off of the Company's outstanding common shares as a dividend to its
shareholders. The spin-off is expected to occur prior to December 31, 1999.
The Company is in the development stage. The Company's objective is to
commercialize educational and consumer products for children under the age of
six, as well as other Internet-based promotion, marketing and merchandising.
Management anticipates that these products, once developed, will be offered to
consumers through retail, catalog and Internet sources. The Company plans to
seek additional financing through strategic partnerships in the publishing,
media, video production, consumer products and electronic commerce markets. At
June 30, 1999, Caring Products International, Inc. transferred its intellectual
property associated with toddler training products together with other
complementary items to the Company to assist in achieving its business
objective.
The Company's fiscal year will end annually on December 31.
15
<PAGE> 18
Note 2. Summary of Significant Accounting Policies
Cash
Cash consists of an amount held in a demand deposit account. The amount held in
this account at September 30, 1999, exceeds the Federally insured limit.
Intangible Assets
Intangible assets consist of the following:
<TABLE>
<S> <C>
Purchased technology $ 72,656
Patent 43,181
Copyright 29,583
Trademark 20,232
---------
165,652
Less accumulated amortization (4,761)
---------
$ 160,981
=========
</TABLE>
These assets were transferred to the Company by Caring Products International,
Inc. at historical cost at June 30, 1999. Amortization is recorded using the
straight-line method over the estimated useful lives of the assets which does
not exceed ten years.
The Company periodically reviews intangible assets to assess recoverability.
Impairment will be recognized in results of operations when intangible assets
are deemed unrecoverable. Management has determined that these intangible assets
will be recoverable.
Revenue Recognition
The Company will recognize revenue as contractual terms are satisfied.
Advertising
Advertising costs will be expensed during the period incurred.
Research and Development
Research and development costs will be expensed during the period incurred.
Stock-Based Compensation
Compensation expense for employee stock option or purchase plans is to be
measured by the excess, if any, of the market price of the Company's stock at
the measurement date over the amount an employee is required to pay for the
stock. There was no stock-based compensation for the period ended September 30,
1999.
Income Taxes
Income taxes are accounted for using the asset and liability approach, which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred income taxes will be provided for the
temporary differences between the financial reporting basis and the tax basis of
the Company's assets and
16
<PAGE> 19
liabilities. A valuation allowance will be recognized for deferred tax assets
not likely to be realized. Deferred taxes are to be measured by the provisions
of currently enacted tax laws. The deferred tax asset (approximately $1,400)
resulting from the loss at September 30, 1999, has been fully reserved.
Earnings Per Share
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. Diluted earnings per share takes into consideration common shares
outstanding (computed under basic earnings per share) and potentially dilutive
common shares; however, there are no dilutive securities. The weighted average
number of shares outstanding was 32,343 for the period ended September 30, 1999.
Preferred Stock
The Company has authorized 1,000,000 shares of preferred stock at a par value of
$.01 per share. No preferred shares had been issued nor had preferences been
determined as of September 30, 1999.
Use of Accounting Estimates in the Preparation of the Financial Statements
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Comprehensive Income
The Company had no elements of comprehensive income for the period ended
September 30, 1999. Further, there are no other new financial accounting
standards which would have an effect on these financial statements.
Note 3. Employment Agreement
On September 24, 1999, the Company entered into a three-year employment
agreement with its chairperson, Susan Schreter. The agreement may be extended in
one-year increments. Ms. Schreter is obligated to spend up to 25% of her time on
Company business at an annual compensation of $25,000. In the event she devotes
100% of her time to the Company, she will receive an annual salary of $150,000.
On October 4, 1999, the Company sold 384,000 shares of the Company's common
stock to Ms. Schreter for $19,200 in cash. As part of the employment agreement,
these shares are held in escrow until the spin-off discussed in Note 1 is
completed. If the spin-off is not completed before March 31, 2000, the Company
has the right to purchase the escrowed shares for $19,200.
Note 4. Warrant
On August 25, 1999, the Company entered into an agreement with a Hong Kong based
company for the identification of product manufacturing sources in China. As
part of the agreement, the Company is obligated to issue a warrant to purchase
26,000 shares of its common stock upon the first successful shipment of product
from China. The exercise price of the warrant is to be determined by the closing
bid price of the Company's shares on the date of approval of the product by the
Company's board of directors which is to occur within 30-days of shipment. The
warrant is for a five-year period beginning on the date of Board approval.
17
<PAGE> 20
PART III
See the attached Exhibit Index.
18
<PAGE> 21
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
October 11, 1999 CREATIVE PRODUCTS INTERNATIONAL, INC.
By: /s/ Susan A. Schreter
--------------------------------------------
Susan A. Schreter, its Chief Executive Officer
19
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.1 Certificate of Incorporation of Creative Products
3.2 Certificate of Amendment of Certificate of Incorporation of Creative
Products
3.3 By-laws of Creative Products
10.1 Assignment of Intellectual Property dated June 30, 1999 by and between
Creative Products and Caring Products International, Inc.
10.2 Employment Agreement dated September 24, 1999 by and between Creative
Products and Susan A. Schreter.
10.3 License Agreement dated as of June 30, 1999 by and between Creative
Products and Caring Products
10.4 Escrow Agreement dated October 4, 1999 by and Between Creative
Products, Susan A. Schreter, and Bryan Cave LLP.
23.1 Consent of Peterson Sullivan P.L.L.C.
</TABLE>
20
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
CREATIVE PRODUCTS INTERNATIONAL, INC.
THE UNDERSIGNED, in order to form a corporation for the purposes herein
stated, under and pursuant to the provisions of the General Corporation Law of
the State of Delaware, hereby certifies as follows:
FIRST: The name of the corporation is Creative Products International,
Inc. (hereinafter called the "Corporation").
SECOND: The registered office of the Corporation is to be located at 9
East Loockerman Street, in the City of Dover, in the County of Kent, in the
State of Delaware 19901. The name of its registered agent at that address is
National Corporate Research, Ltd.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is One Thousand (1,000) shares of common stock, par value
$.01 per share.
FIFTH: The name and mailing address of the incorporator is: Karen S.
Johnson, c/o Bryan Cave LLP, 245 Park Avenue, New York, New York 10167-0034.
SIXTH: The election of directors need not be by written ballot unless
the by-laws so provide.
SEVENTH: The Board of Directors of the Corporation is authorized and
empowered from time to time in its discretion to make, alter, amend or repeal
by-laws of the Corporation, except as such power may be restricted or limited by
the General Corporation Law of the State of Delaware.
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of this Corporation, as the case may be, and also on this
Corporation.
NINTH: Anything to the contrary in this Certificate of Incorporation
notwithstanding, no director shall be liable personally to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, provided however, that nothing in this paragraph shall eliminate or
limit the liability
<PAGE> 2
of a director (i) for any breach of such director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware, or (iv) for
any transaction from which such director derived an improper personal benefit.
The modification or repeal of this Article Ninth shall not affect the
restriction hereunder of a director's personal liability for any act or omission
occurring prior to such modification or repeal.
I, the undersigned, being the sole incorporator, for the purpose of
forming a corporation under the laws of the State of Delaware do make, file and
record this Certificate of Incorporation, do certify that the facts herein
stated are true, and accordingly, have hereto set my hand this 25th day of
March, 1999.
/s/ Karen S. Johnson
------------------------------------
Karen S. Johnson, Incorporator
c/o Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
2
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CREATIVE PRODUCTS INTERNATIONAL, INC.
Creative Products International, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by
unanimous written consent of its members, filed with the minutes of the
Board, adopted a resolution proposing and declaring advisable the
following amendment to the Certificate of Incorporation of said
corporation:
RESOLVED, that the Corporation's Certificate of
Incorporation, be amended by changing the Article Fourth
thereof so that, as amended, said Article shall be read in its
entirety as follows:
"The total number of shares of all classes of stock
which the Corporation shall have authority to issue shall be
16,000,000 shares of capital stock, of which 1,000,000 shares
shall be classified as Preferred Stock, par value $0.01 per
share, and 15,000,000 shares shall be classified as Common
Stock, par value $0.01 per share.
The designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions
thereof, of the Preferred Stock and the Common Stock of the
Corporation are set forth in the following provisions:
A. PREFERRED STOCK
I. The Board of Directors is authorized,
subject to limitations prescribed by law, to provide for the
issuance of the Preferred Stock in series and by filing a
certificate pursuant to the Delaware General Corporation Law
to establish the number of shares to be included in each
series. The Preferred Stock may be issued either as a class
without series, or if so determined from time to time by the
Board of Directors, either in whole or in part in one or more
series, each series to be appropriately designated by a
distinguishing number, letter or title prior to the issue of
any shares thereof. Whenever the term "Preferred Stock" is
used in this Certificate of Amendment of Certificate of
Incorporation, it shall be deemed to mean and include
Preferred Stock issued as a class without series, or one or
more series thereof, or both unless the context shall
otherwise require.
II. There is hereby expressly granted to the
Board of Directors authority to fix the voting power, the
designations,
<PAGE> 2
preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or
restrictions of said Preferred Stock in the resolution or
resolutions adopted by the Board of Directors providing for
the issuance of said Preferred Stock.
B. COMMON STOCK
I. Subject to the provisions of law and the
preferences of the Preferred Stock, dividends may be paid on
the Common Stock of the Corporation at such time and in such
amounts as the Board of Directors may deem advisable.
II. The Board of Directors of the
Corporation is authorized to effect the elimination of shares
of its Common Stock purchased or otherwise reacquired by the
Corporation from the authorized capital stock or number of
shares of the Corporation in the manner provided for in the
General Corporation Law of Delaware.
C. GENERAL
I. No holder of Common Stock or Preferred
Stock shall have any pre-emptive right to subscribe to stock,
obligations, warrants, rights to subscribe to stock or other
securities of any class, whether now or hereafter authorized.
II. Subject to the provisions of law and the
foregoing provisions of this Certificate of Amendment of
Certificate of Incorporation, the Corporation may issue shares
of its Preferred Stock or Common Stock, from time to time for
such consideration (not less than the par value or stated
value thereof) as may be fixed by the Board of Directors,
which is expressly authorized to fix the same in its absolute
and uncontrolled discretion, subject as aforesaid. Shares so
issued, for which the consideration has been paid or delivered
to the Corporation, shall be deemed fully paid stock, and
shall not be liable to any further call or assessments
thereon, and the holders of such shares shall not be liable
for any further payments in respect of such shares."
SECOND: That in lieu of a meeting and vote of stockholders,
the stockholder holding all of the outstanding shares of stock entitled
to vote on the amendment has given written consent.
THIRD: That said amendment was duly adopted in accordance with
the provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, Creative Products International, Inc. has
caused this certificate to be signed by Susan A. Schreter, its Chairman of the
Board of Directors and attested by Steven A. Saide, its Secretary this 24 day
of September, 1999.
By: /s/ Susan A. Schreter
-------------------------------------
Susan A. Schreter,
Chairman of the Board
ATTEST:
By: /s/ Steven A. Saide
----------------------------------
Steven A. Saide,
Secretary
2
<PAGE> 1
EXHIBIT 3.3
BY-LAWS
OF
CREATIVE PRODUCTS INTERNATIONAL, INC.
ARTICLE I
OFFICES
SECTION 1. Principal Office. The registered office of the corporation
shall be located in such place as may be provided from time to time in the
Certificate of Incorporation.
SECTION 2. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine or as the business of the corporation
may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the stockholders of
the corporation shall be held at such place, within or without the State of
Delaware, on such date and at such time as may be determined by the board of
directors and as shall be designated in the notice of said meeting.
SECTION 2. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be held at any place, within or without the
State of Delaware, and may be called by resolution of the board of directors, or
by the Chairman or the President, or by the holders of not less than one-quarter
of all of the shares entitled to vote at the meeting.
SECTION 3. Notice and Purpose of Meetings. Written or printed notice of
the meeting stating the place, day and hour of the meeting and, in case of a
special meeting, stating the purpose or purposes for which the meeting is
called, shall be delivered not less than ten nor more than sixty days before the
date of the meeting, either personally or by mail, by or at the direction of the
Chairman or the President, the Secretary, or the persons calling the meeting, to
each stockholder of record entitled to vote at such meeting.
SECTION 4. Quorum. The holders of a majority of the shares of capital
stock issued and outstanding and entitled to vote, represented in person or by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
SECTION 5. Voting Process. If a quorum is present or represented, the
affirmative vote of a majority of the shares of stock present or represented at
the meeting shall be the act of the stockholders unless the vote of a greater
number of shares of stock is required by law, by the Certificate of
Incorporation or by these by-laws. Each outstanding share of stock having voting
power, shall be entitled to one vote on each matter submitted to a vote at a
meeting of stockholders. A shareholder may vote either in person or by proxy
executed in writing by the stockholder or by his duly authorized
attorney-in-fact. The term, validity and enforceability of any proxy shall be
determined in accordance with the General Corporation Law of the State of
Delaware.
<PAGE> 2
SECTION 6. Written Consent of Stockholders Without a Meeting. Whenever
the stockholders are required or permitted to take any action by vote, such
action may be taken without a meeting, without prior notice and without a vote,
if a written consent, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting called for
such purpose.
ARTICLE III
DIRECTORS
SECTION 1. Powers. The business affairs of the corporation shall be
managed by its board of directors, which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these by-laws directed or required to be
exercised or done by the stockholders. The board of directors may adopt such
rules and regulations, not inconsistent with the Certificate of Incorporation or
these By-Laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation.
SECTION 2. Number, Qualifications, Term. The board of directors shall
consist of one or more members. The number of directors shall be fixed initially
by the Incorporator and may thereafter be changed from time to time by
resolution of the board of directors or of the shareholders. Directors need not
be residents of the State of Delaware nor stockholders of the corporation. The
directors shall be elected at the annual meeting of the stockholders, and each
director elected shall serve until the next succeeding annual meeting and until
his successor shall have been elected and qualified.
SECTION 3. Vacancies. Vacancies and newly created directorships
resulting from any increase in the number of directors may be filled by a
majority of the directors then in office, though less than a quorum, and the
directors so chosen shall hold office until the next annual election and until
their successors are duly elected and shall qualify. A vacancy created by the
removal of a director by the stockholders may be filled by the stockholders.
SECTION 4. Place of Meetings. Meetings of the board of directors,
regular or special, may be held either within or without the State of Delaware.
SECTION 5. First Meeting. The first meeting of each newly elected board
of directors shall be held immediately following and at the place of the annual
meeting of stockholders and no other notice of such meeting shall be necessary
to the newly elected directors in order legally to constitute the meeting,
provided a quorum shall be present, or it may convene at such place and time as
shall be fixed by the consent in writing of all the directors.
SECTION 6. Regular Meetings. Regular meetings of the board of directors
may be held upon such notice, or without notice, and at such time and at such
place as shall from time to time be determined by the board.
SECTION 7. Special Meetings. Special meetings of the board of directors
may be called by the Chairman or the President or by the number of directors who
then legally constitute a quorum. Notice of each special meeting shall, if
mailed, be addressed to each director at his last known address at least four
(4) days prior to the date on which the meeting is to be held; or such notice
shall be sent to each director at such address by telegram, telex, or facsimile,
or be delivered to him personally, not later than one full day before the date
on which such meeting is to be held.
SECTION 8. Notice; Waiver. Attendance of a director at any meeting
shall constitute a waiver of notice of such meeting, except where a director
attends for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
board of directors need be specified in the notice or waiver of notice of such
meeting.
SECTION 9. Quorum. One-third of the directors then in office shall
constitute a quorum for the transaction of business unless a greater number is
required by law, by the Certificate of Incorporation or by these by-laws. If
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<PAGE> 3
a quorum shall not be present at any meeting of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
SECTION 10. Action Without A Meeting. Any action required or permitted
to be taken at a meeting of the directors may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the directors entitled to vote with respect to the subject matter thereof. In
addition, meetings of the board may be held by means of conference telephone as
permitted by the General Corporation Law of the State of Delaware.
SECTION 11. Action. Except as otherwise provided by law or in the
Certificate of Incorporation or these by-laws, if a quorum is present, the
affirmative vote of a majority of the members of the board of directors will be
required for any action.
SECTION 12. Removal of Directors. Subject to any provisions of
applicable law, any or all of the directors may be removed (a) for cause, by
action of stockholders or by action of the remaining members of the board, and
(b) without cause, by vote of the stockholders.
ARTICLE IV
COMMITTEES
SECTION 1. Executive Committee. The board may, by resolution adopted by
a majority of the whole board, designate one or more of its members to
constitute members or alternate members of an Executive Committee.
SECTION 2. Powers and Authority of Executive Committee. The Executive
Committee shall have and may exercise, between meetings of the Board, all the
powers and authority of the Board in the management of the business and affairs
of the Company, including, the right to authorize the purchase of stock, except
that the Executive Committee shall not have such power or authority in reference
to amending the Certificate of Incorporation; adopting an agreement of merger or
consolidation; recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets; recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the by-laws of the Corporation or authorizing the
declaration of a dividend.
SECTION 3. Other Committees. The Board may, by resolution adopted by a
majority of the whole Board, designate one or more other committees, each of
which shall, except as otherwise prescribed by law, have such authority of the
Board as shall be specified in the resolution of the Board designating such
committee. A majority of all the members of such committee may determine its
action and fix the time and place of its meeting, unless the Board shall
otherwise provide. The Board shall have the power at any time to change the
membership of, to fill all vacancies in and to discharge any such committee,
either with or without cause.
SECTION 4. Procedure; Meetings; Quorum. Regular meetings of the
Executive Committee or any other committee of the Board, of which no notice
shall be necessary, may be held at such times and places as shall be fixed by
resolution adopted by a majority of the members thereof. Special meetings of the
Executive Committee or any other committee of the Board shall be called at the
request of any member thereof. So far as applicable, the provisions of Article
III of these By-laws relating to notice, quorum and voting requirements
applicable to meetings of the Board shall govern meetings of the Executive
Committee or any other committee of the Board. The Executive Committee and each
other committee of the Board shall keep written minutes of its proceedings and
circulate summaries of such written minutes to the Board before or at the next
meeting of the Board.
ARTICLE V
OFFICERS
SECTION 1. Number. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a President, a Secretary and a
Treasurer, none of whom need be a member of the board. The board of directors
may also choose a Chairman from among the directors, one or more Executive Vice
Presidents, one or
3
<PAGE> 4
more vice presidents, assistant secretaries and assistant treasurers. The board
of directors may appoint such other officers and agents as it shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
board of directors. More than two offices may be held by the same person.
SECTION 2. Compensation. The salaries or other compensation of all
officers of the corporation shall be fixed by the board of directors. No officer
shall be prevented from receiving a salary or other compensation by reason of
the fact that he is also a director.
SECTION 3. Term; Removal; Vacancy. The officers of the corporation
shall hold office until their successors are chosen and qualify. Any officer may
be removed at any time, with or without cause, by the affirmative vote of a
majority of the whole board of directors. Any vacancy occurring in any office of
the corporation shall be filled by the board of directors.
SECTION 4. Chairman. The Chairman shall, if one be elected, preside at
all meetings of the board of directors.
SECTION 5. President. The President shall be the chief executive
officer of the corporation, shall preside at all meetings of the stockholders
and the board of directors in the absence of the Chairman, shall have general
supervision over the business of the corporation and shall see that all
directions and resolutions of the board of directors are carried into effect.
SECTION 6. Vice President. The Executive Vice Presidents shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe. If there shall
be more than one Executive Vice President, the Executive Vice Presidents shall
perform such duties and exercise such powers in the absence or disability of the
President, in the order determined by the board of directors. The vice
presidents shall, in the absence or disability of the President and of the
Executive Vice Presidents, perform the duties and exercise the powers of the
President and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe. If there shall be more than
one vice president, the vice presidents shall perform such duties and exercise
such powers in the absence or disability of the President and of the Executive
Vice President, in the order determined by the board of directors.
SECTION 7. Secretary. The Secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or President, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have the authority to affix the same to an instrument requiring
it and when so affixed, it may be attested by his signature or by the signature
of such assistant secretary. The board of directors may give general authority
to any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
SECTION 8. Assistant Secretary. The assistant secretary, if there shall
be one, or if there shall be more than one, the assistant secretaries in the
order determined by the board of directors, shall, in the absence or disability
of the Secretary, perform the duties and exercise the powers of the Secretary
and shall perform such other duties and have such powers as the board of
directors may from time to time prescribe.
SECTION 9. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and shall
render to the Chairman, the President and the board of directors, at its regular
meetings, or when the board of directors so requires, an account of all of his
transactions as Treasurer and of the financial condition of the corporation.
4
<PAGE> 5
SECTION 10. Assistant Treasurer. The assistant treasurer, if there
shall be one, or, if there shall be more than one, the assistant treasurers in
the order determined by the board of directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE VI
CAPITAL STOCK
SECTION 1. Form. The shares of the capital stock of the corporation
shall be represented by certificates in such form as shall be approved by the
board of directors and shall be signed by the Chairman, the President, an
Executive Vice President or a vice president, and by the Treasurer or an
assistant treasurer or the Secretary or an assistant secretary of the
corporation, and may be sealed with the seal of the corporation or a facsimile
thereof.
SECTION 2. Lost and Destroyed Certificates. The board of directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the corporation alleged to have been lost or destroyed. When
authorizing such issue of a new certificate, the board of directors, in its
discretion and as a condition precedent to the issuance thereof, may prescribe
such terms and conditions as it deems expedient, and may require such
indemnities as it deems adequate, to protect the corporation from any claim that
may be made against it with respect to any such certificate alleged to have been
lost or destroyed.
SECTION 3. Transfer of Shares. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, a new certificate shall be issued to the person entitled
thereto, and the old certificate cancelled and the transaction recorded upon the
books of the corporation.
ARTICLE VII
INDEMNIFICATION
SECTION 1. (a) The Corporation shall indemnify, subject to the
requirements of subsection (d) of this Section, any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify, subject to the requirements of
subsection (d) of this Section, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability
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<PAGE> 6
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
of the State of Delaware or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
Section, or in defense of any claim, issue or matter therein, the Corporation
shall indemnify him against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this Section
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
Section. Such determination shall be made (1) by a majority vote of the
directors who were not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses incurred by a director, officer, employee or agent in
defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Section.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Section shall not limit the
Corporation from providing any other indemnification or advancement of expenses
permitted by law nor shall they be deemed exclusive of any other rights to which
a person seeking indemnification or advancement of expenses may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
(g) The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Section.
(h) For the purposes of this Section, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Section with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this Section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified by the board of directors, continue as to a person who
has ceased to be a director, officer, employee or agent of the Corporation and
shall inure to the benefit of the heirs executors and administrators of such a
person.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
SECTION 2. Fiscal Year. The fiscal year of the corporation shall be
determined, and may be changed, by resolution of the board of directors.
SECTION 3. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE IX
AMENDMENTS
SECTION 1. These by-laws may be altered, amended, supplemented or
repealed or new by-laws may be adopted (a) at any regular or special meeting of
stockholders at which a quorum is present or represented, by the affirmative
vote of the holders of a majority of the shares entitled to vote, provided
notice of the proposed alteration, amendment or repeal be contained in the
notice of such meeting, or (b) by a resolution adopted by a majority of the
whole board of directors at any regular or special meeting of the board. The
stockholders shall have authority to change or repeal any by-laws adopted by the
directors.
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<PAGE> 1
EXHIBIT 10.1
ASSIGNMENT OF INTELLECTUAL PROPERTY
WHEREAS, Caring Products International, Inc. a Delaware
Corporation with a principal place of business at 200 First Avenue West, 2nd
Floor, Seattle Washington 98119 ("Assignor") has used the patent, trademarks,
and copyrights identified on the attached Schedule A (collectively "the said
intellectual property"); and
WHEREAS, Creative Products International, Inc. a Delaware
Corporation with a principal place of business at P.O. Box 9288, Seattle,
Washington 98109 ("Assignee") is desirous of acquiring any and all rights that
Assignor may have in and to the said Intellectual Property, and all pending
applications and registrations therefor, together with the goodwill of the
business in connection with which the said Intellectual Property is used and
which is symbolized by the said Intellectual Property, along with the right to
recover for damages and profits for past infringements thereof; and all
extensions and renewals among the forgoing;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby assign unto Assignee all
right, title and interest in and to the said Intellectual Property and the
registrations therefor for the United States and throughout the world together
with the goodwill of the business in connection with which the said Intellectual
Property is used and which is symbolized by the said Intellectual Property,
along with the right to recover for damages and profits for past infringements
thereof;
Assignor agrees to execute and deliver at the request of the
Assignee, all papers, instruments, and assignments, and to perform any other
reasonable acts the Assignee may require in order to vest all Assignor's rights,
title, and interest in and to the said Intellectual Property in
<PAGE> 2
the Assignee and/or to provide evidence to support any of the foregoing in the
event such evidence is deemed necessary by the Assignee, to the extent such
evidence is in the possession or control of Assignor.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be
signed by its officer thereunto duly authorized as of this 30th day of June,
1999.
CARING PRODUCTS INTERNATIONAL, INC.
By /s/ Susan A. Schreter
--------------------------------
Name: Susan A. Schreter
Title: President
2
<PAGE> 3
SCHEDULE A
<TABLE>
<CAPTION>
PATENTS
PATENT REG. NO.
------ --------
<S> <C>
Washable diaper with liquid 5,360,422
impervious chanel for retaining
disposable absorbant insert
</TABLE>
<TABLE>
<CAPTION>
TRADEMARKS
MARK COUNTRY CLASS REG./APP.NO.
---- ------- ----- ------------
<S> <C> <C> <C>
BUMPERCHUTE U.S. 16, 25 2,198,356
WIZZ KIDZ U.S 16 75/475,333
WIZZ KIDZ (stylized) U.S. 25 75/475,334
WIZZ KIDZ (stylized) U.S. 25 75/475,335
WIZZ KIDZ U.S. 16 75/475,336
WAY TO GO (stylized) U.S. 16 75/475,337
WAY TO GO U.S. 16 75/475,338
BOOSTER U.S. 16 75/539,883
BOOSTER U.S. 25 75/539,884
BUMPERCHUTE Canada 16, 25 TMA462,271
BUMPERCHUTE Germany 5 2092109
BUMPERCHUTE U.K. 5 1563213
BUMPERCHUTE U.K. 16 1563214
BUMPERCHUTE U.K. 25 1563215
BUMPERCHUTE France 5, 16, 25 94 512437
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
COPYRIGHTS
TITLE REG. NO.
- ----- --------
<S> <C>
Way to Go Cody! TXU853688
Way to Go Sara! TXU853687
Way to Go! (and Toilet Training the TXU853411
BumperChute Way--a parent guide book)
Head to Toe, Way to Go pending
Booster Kid Characters: pending
- - Explore Ethan: Explorer in Training
- - Baseball Billy, Baseball Player in Training
- - Soccer Sophie, Soccer Player in Training
- - Cowboy Cody, Cowboy in Training
- - Dancer Darcy, Dancer in Training
- - Officer Oliver, Officer in Training
- - Jazzy Jill, Musician in Training
- - Jazzy Jeff, Musician in Training
- - Cookie Baker Brandy, Cookie Baker in Training
- - Cookie Baker Brandon, Cookie Baker in Training
- - Astro Andy, Astronaut in Training
- - Ranger Raina, Ranger in Training
- - Ranger Ryan, Ranger in Training
- - Gardner Gretchen, Gardener in Training
- - Gardener Griffin, Gardener in Training
- - Artist Annie, Artist in Training
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
- - Artist Aaron, Artist in Training
- - Fire Fighter Frankie, Fire Fighter in Training
- - Fire Fighter Francie, Fire Fighter in Training
- - Doctor Dylan, Doctor in Training
- - Doctor Danielle, Doctor in Training
- - Veterinarian Vinnie, Veterinarian in Training
- - Ballerina Becky, Ballerina in Training
- - Race Car Driver Renny, Race Car Driver in Training
- - Booster Bear
- - Traffic Cop Tracy, Traffic Cop in Training
</TABLE>
5
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
CREATIVE PRODUCTS INTERNATIONAL, INC.
WITH
SUSAN A. SCHRETER
AGREEMENT, dated September 24, 1999, between CREATIVE
PRODUCTS INTERNATIONAL, INC., a Delaware corporation having an address at
5843 Woodlawn Avenue, North Seattle, Washington 98103 (the "Company"), and
SUSAN A. SCHRETER, an individual residing at 5843 Woodlawn Avenue North,
Seattle, Washington 98103 (the "Executive").
W I T N E S S E T H
The Company desires to retain the Executive, and the Executive
is willing to serve, as the Chief Executive Officer and President of the
Company, all upon the terms and conditions set forth herein. Among other things,
the Company and the Executive believe it imperative that should the Company
receive proposals from third parties with respect to its future, the Executive
should, without being influenced by the uncertainties of her own situation,
assess and advise the Company whether such proposals would be in the best
interest of the Company. In addition, the Company believes it is in the best
interest of its shareholders that the Executive have an equity position in the
Company so as to incentivize the Executive and to insure that her interests will
be aligned with the shareholders.
Accordingly, the parties hereto agree as follows:
1. EMPLOYMENT TERM, DUTIES AND ACCEPTANCE.
(a) The Company hereby retains Executive as the Company's Chief
Executive Officer and President for a period of three (3) years, commencing on
the date hereof (the "Initial Period"), and thereafter the Executive's
employment under this Agreement shall automatically be extended for successive
periods of one (1) year (each, a "Renewal Period" and collectively, the
"Renewals;" the Initial Period and the Renewals are hereinafter collectively
referred to as the "Employment Period") unless no later than ninety (90) days
prior to the expiration of the Initial Period or any Renewal Period either party
hereto shall give written notice to the other as provided herein of its or her
election to terminate the employment hereunder whereupon such employment shall
terminate effective upon the expiration of the Initial Period or such Renewal
Period, as the case may be, subject to earlier termination as hereinafter
provided.
(b) In her capacity as Chief Executive Officer and President of the
Company, the Executive shall be responsible for the operations of the Company,
subject to the direction and control of the to the Board of Directors. The
Executive shall have the powers and privileges of
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<PAGE> 2
the Chief Executive Officer and President of the Company, as defined in the
By-Laws of the Company in effect on the date hereof and as currently
interpreted, and, to the extent not defined therein, as the same are customarily
performed and exercised by a president and chief executive officer of a publicly
owned corporation incorporated in one of the United States of America. If
elected, the Executive shall serve as a member of the Board of Directors (and of
any Executive Committee or similar committee having powers of the Board of
Directors now in existence or hereafter created) of the Company without any
additional compensation for such services. As used in this Agreement, the term
"Company" includes each Subsidiary of the Company, and the terms "Subsidiary"
and "Subsidiaries" shall mean each corporation of which more than 50% of the
outstanding stock entitled to vote for directors is owned directly or indirectly
by the Company. The Executive hereby accepts the foregoing employment and, so
long as she is the Chief Executive Officer and President of the Company, agrees
to devote such portion of her business time and attention to the performance of
her duties as hereinafter provided. The Company is in its early stage of
development and does not currently require the Executive's full business time
and attention. The Executive is also a party to an employment agreement with
Caring Products International, Inc. ("Caring"), pursuant to which she is
obligated to devote an average of 75% of her business time and attention to
Caring. Therefore, it is understood and agreed that during the Employment Period
the Executive shall not be required to devote more than an average of
twenty-five percent (25%) of her business time and attention to the affairs of
the Company. At such time during the Employment Period as in the reasonable
opinion of the Company's Board of Directors the Company's business and affairs
shall require the full business time and attention of the Executive and if she
is then legally permitted to do so, the Executive shall devote her full business
time and attention to the affairs of the Company. Such time as the Executive
shall be devoting her full business time and attention to the affairs of the
Company is hereinafter referred to as the "Full Employment Period
2. COMPENSATION; BENEFITS.
As compensation for all services to be rendered by Executive pursuant
to this Agreement, subject to the conditions stated herein, the Company
agrees to pay to Executive all of the foregoing:
(A) BASE SALARY. Beginning on October 1, 1999 and until the expiration
of the Employment Period the Company shall pay to the Executive a base salary
(the "Base Salary") at a minimum rate of Twenty Five Thousand Dollars ($25,000)
per annum, payable in accordance with the payroll practices of the Company as
from time to time in effect; provided, however, that upon commencement of the
Full Employment Period, the Base Salary shall be increased to One Hundred Fifty
Thousand Dollars ($150,000) per annum. On or as soon as practicable after each
yearly anniversary of the date hereof, the Board of Directors shall review the
services provided by Executive to determine the amount, if any, that Executive's
Base Salary shall be increased for the forthcoming year. This Agreement shall
not be deemed abrogated or terminated if the Company, in its discretion, shall
determine to increase the compensation to the Executive for any period of time
or if the Executive shall accept such increase, but nothing herein shall be
deemed to obligate the Company to make any such increase.
(B) BONUS. Executive shall be entitled to participate in any bonus or
profit sharing plan that may be adopted from time to time by the Company and to
receive a bonus or distribution thereunder (the "Bonus") .
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(C) FRINGE BENEFITS. Executive shall receive (subject to the terms and
conditions of particular plans and programs) all rights, privileges and fringe
benefits afforded to other senior executives of the Company, including, but not
by way of limitation, the right to participate in any pension, retirement, major
medical, group health, disability, accident and life insurance, relocation
reimbursement, and other employee benefit programs made generally available,
from time to time, by the Company.
(D) EXPENSE REIMBURSEMENT. The Company shall pay or reimburse Executive
for all reasonable expenses incurred in the performance of her services under
this Agreement during the Employment Period, upon presentation of expense
statements, vouchers or such other supporting documentation as may reasonably be
required.
3. TERMINATION OF EMPLOYMENT.
(a) Executive's employment hereunder shall terminate upon the earliest
of the following
(i) Executive's death or Retirement (as defined in Section 3(g)
hereof);
(ii) Thirty (30) days after delivery by the Company to Executive of
written notice that Executive has materially and substantially failed to perform
and discharge her duties hereunder for a period of at least three (3)
consecutive months or for an aggregate of four (4) months in any twelve (12)
month period as a result of physical or mental disability or incapacity (a
"Disability") unless the Executive shall have returned to full-time performance
of her duties hereunder during such thirty (30) day period;
(iii) Fifteen (15) days after delivery by the Company to Executive
of written notice of termination for "Objectionable Conduct" (as such term is
defined in Section 3 (c) hereof) , provided such Objectionable Conduct has not
been cured by Executive within such fifteen (15) day period (or such longer
period as is reasonably required provided that Executive has acted in good faith
to begin to cure such Objectionable Conduct within such fifteen (15) day
period);
(iv) Thirty (30) days after delivery by Executive to the Company of
written notice of termination other than pursuant to Sections 3 (a) (v) or 3 (a)
(vi) ;
(v) Fifteen (15) days after delivery by Executive to the Company of
written notice of termination for "Good Reason" (as such term is defined in
Section 3 (e) hereof, provided such Good Reason has not been cured by the
Company within such fifteen (15) day period (or such longer period as is
reasonably required provided the Company has acted in good faith to begin to
cure such Good Reason within such fifteen (15) day period);
(vi) Fifteen (15) days after delivery by Executive to the Company
of written notice of termination in the event of a "Change of Control" of the
company (as such term is defined in Section 3(d) hereof), such notice to
identify the change of control as the cause of the termination and to be
delivered to the Company no later than three (3) months following such Change of
Control.
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(vii) Fifteen (15) days after delivery by the Company to Executive
of written notice of termination for "Cause" (as defined in Section 3(f)
hereof).
(b) In the event of a dispute between the parties as to what
constitutes a Disability, such dispute shall be finally determined by a
physician mutually agreed upon by Executive and Company. If a mutually
acceptable physician cannot be selected, Executive and the Company shall each
choose a physician, and such physicians shall select a third physician, by
mutual agreement, whose determination shall be conclusive. Either party may
request that such a determination be made, in which event the parties agree to
cooperate fully with whatever procedures and examinations may be required in
order to allow such determination to be made. The cost of such examinations
shall be borne by the Company if such determination is that a Disability exists
or by the Executive if such determination is that no Disability exists.
(c) As used herein, "Objectionable Conduct" shall mean (i) the material
breach by Executive of her duties and obligations hereunder, or (ii) any act of
gross misconduct by Executive materially detrimental to the Company, including
without limitation, misappropriation of the Company's property, conviction of a
felony, or dishonesty or conflict of interest on the part of Executive
(d) As used herein, "Change in Control" of the Company shall mean the
happening of any of the following events:
(i) A change in control of the direction and administration of the
Company's business of a nature that if any securities of the Company were
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), such change would be required to be reported in response to (a) Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the Exchange Act, or (b)
Item 1(a) of Form 8-K under the Exchange Act as each is in effect on the date
hereof and any successor provision of such regulations under the Exchange Act,
irrespective of whether the Company is then subject to such reporting
requirements;
(ii) Any "person" or "group" (as such term is used in connection
with Section 13(d) and 14(d)(2) of the Exchange Act) but excluding any employee
benefit plan of the Company or any "affiliate" or "associate" of the Company (as
defined in Regulation 12b-2 under the Exchange Act) (a) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company's outstanding securities then
entitled ordinarily (and apart from rights accruing under special circumstances)
to vote for the election of directors or (b) acquires by proxy or otherwise 50%
or more of the combined voting securities of the Company having the right to
vote for the election of directors of the Company, for any merger or
consolidation of the Company, for the election of Directors, or for any other
matter; or
(iii) During any period of twenty-four (24) consecutive months, the
individuals who at the beginning of such period constitute the Board of
Directors of the Company or any individuals who would be "Continuing Directors"
(as hereinafter defined) cease for any reason to constitute at least a majority
thereof; or
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(iv) There shall be consummated (A) any consolidation, merger or
recapitalization of the Company or any similar transaction involving the
Company, irrespective of whether the Company is the continuing or surviving
corporation, pursuant to which shares of the Company's common stock, par value
$.01 per share ("Common Stock"), would be converted into cash, securities or
other property, other than a merger of the Company in which the holders of
Common Stock immediately prior to the merger have the same proportion and
ownership of common stock of the surviving corporation immediately after the
merger, (B) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the assets of
the Company or (C) the adoption of a plan of complete liquidation of the Company
(whether or not in connection with the sale of all or substantially all of the
Company's assets) or a series of partial liquidations of the Company that is de
jure or de facto part of a plan of complete liquidation of the Company;
provided, that the divestiture of less than substantially all of the assets of
the Company in one transaction or a series of related transactions, whether
effected by sale, lease, exchange, spin-off, sale of the stock or merger of a
Subsidiary or otherwise, or a transaction solely for the purpose of
reincorporating the Company in another jurisdiction, shall not constitute a
"Change in Control"; or
(v) The Board of Directors of the Company shall approve any merger,
consolidation or like business combination or reorganization of the Company, the
consummation of which would result in the occurrence of any event described in
Section 3(d)(i), (ii) or (iv) above.
(vi) For purposes of this Agreement, "Continuing Directors" shall
mean the directors of the Company in office on the date hereof and any successor
to any such director and any additional director who after the date hereof (i)
was nominated or selected by a majority of the Continuing Directors in office at
the time of his nomination or selection and (ii) who is not an "affiliate" or
"associate" (as defined in Regulation 12b-2 under the Exchange Act) of any
person who is the beneficial owner, directly or indirectly, of securities
representing ten percent (10%) or more of the combined voting power of the
Company's outstanding securities then entitled ordinarily to vote for the
election of directors.
(e) As used herein, "Good Reason" shall mean (i) the material breach by
the Company of any of its obligations hereunder, (ii) the assignment by the
Company to Executive of duties which are inconsistent with, or require travel
significantly more time-consuming or extensive than, Executive's duties and
business travel obligations on the date hereof, (iii) any diminution in the
duties or authority of the Executive as in effect on the date hereof, (iv) a
change in Executive's assigned site location without Executive's express written
consent, (v) the failure by the Company to pay (or reimburse Executive for) all
reasonable moving expenses incurred by Executive and relating to a change of her
principal residence and to indemnify Executive against any loss by Executive
and/or her spouse in the sale of Executive's principal residence in connection
with any such change of residence, all to the effect that Executive shall incur
no loss on an after-tax basis, (vi) the failure by the Company to obtain the
express written assumption of and agreement to perform this Agreement as
contemplated in Section 14 hereof, or (vii) a reduction by the Company of
Executive's Base Salary as the same may be increased from time to time
hereafter, (viii) the failure of the Company to continue to provide Executive
with substantially the same level of fringe benefits as contemplated in Section
2(c) hereof unless such fringe benefits shall
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cease to be provided to all senior executive officers and employees of the
Company or (ix) any purported termination of Executive's employment which is not
effected in accordance with the terms of this Agreement.
(f) As used herein, "Cause" shall mean, at any time during the one year
period following a Change of Control:
(i) The willful and continued failure by Executive to perform
substantially her duties with the Company (other than any such failure resulting
from the Executive's incapacity due to physical or mental illness or any such
actual or anticipated failure resulting from termination by the Executive for
Good Reason) which is not cured within thirty (30) days after a written demand
for substantial performance is delivered to the Executive by the Board of
Directors, which demand specifically identifies the manner in which the Board of
Directors believes that Executive has not substantially performed his duties; or
(ii) The willful engagement in conduct by Executive which is
demonstrably and materially injurious to the Company, monetarily or financially,
which is not discontinued within five (5) days after written demand to cease and
desist from such conduct is delivered to Executive by the Board of Directors,
which demand specifically identifies the conduct which the Board of Directors
believes is injurious to the Company; or
(iii) Conviction for a felony or other crime punishable by
imprisonment for more than one (1) year, or the entering of a plea of nolo
contendere thereto.
Notwithstanding any of the foregoing, Executive shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to Executive a resolution duly adopted by the affirmative vote of not
less than a majority of the entire membership of the Board of Directors (other
than Executive) at a meeting called and held for such purpose (after reasonable
notice to Executive and an opportunity for Executive, together with his counsel,
to be heard before the Board of Directors), finding that in the good faith
opinion of the Board of Directors Executive was guilty of conduct set forth
above in clause (i), (ii) or (iii) and specifying the particulars thereof in
detail. For purposes of this Section 3(f), no act, or failure to act, on
Executive's part shall be considered "willful" unless done, or omitted to be
done, by her knowing and with the intent that such action or inaction would not
be in the best interests of the Company or otherwise was done or omitted to be
done in bad faith.
(g) As used herein, the term "Retirement" shall mean that Executive
shall have retired after reaching the earliest normal or early retirement date
provided in the Company's retirement plans as then in effect (or if Executive
retires after a Change in control of the Company, as in effect on the date of
the change in Control).
(h) The date upon which Executive's employment terminates in accordance
with any of the provisions of Section 3(a) is referred to herein as the "date of
termination". In the event of a termination of this Agreement pursuant to
Section 3(a), the Company shall be obligated to pay to Executive, and Executive
shall be entitled to receive (i) any unpaid Base Salary through the date of
termination, (ii) reimbursement for expenses incurred by Executive through the
date of
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termination, subject to the procedures set forth in Section 2(d), (iii) any
unpaid Bonus in respect of fiscal years prior to the year in which the date of
termination occurs, and (iv) such additional compensation or benefits, if any,
as are set forth in Section 4 hereof. Except for the compensation and benefits
specified in this Section 3(h) and in Section 4, the Company shall have no
obligation to provide to Executive any compensation or benefits from and after
the date of termination. Executive agrees, upon any such termination, to resign
as an officer and director of the Company and each of its Subsidiaries as of the
date of termination
4. ADDITIONAL BENEFITS UPON TERMINATION.
(a) Bonus. (i) If Executive's employment hereunder terminates pursuant
to the provisions of Sections 3(a)(i), 3(a)(ii) or 3(a)(iv), and Executive has
served hereunder for at least one-half of the fiscal year in which the date of
termination occurs, Executive (or Executive's estate, in the event of a
termination due to death) will be entitled to receive a pro rata portion of the
Bonus paid to the Executive on account of the immediately preceding fiscal year
(the "Prior Bonus") based on that portion of the fiscal year for which Executive
was employed hereunder. Such amount will be payable to the Executive within
thirty (30) days following such date of termination.
(ii) If Executive's employment hereunder terminates pursuant to the
provisions of Section 3(a)(v) or 3(a)(vi), Executive will be entitled to receive
a bonus for the fiscal year in which the date of termination occurs equal to a
pro rata portion of the Prior Bonus, based on that portion of the current fiscal
year for which Executive was employed hereunder. Such sum will be payable within
thirty (30) days after the date of termination.
(iii) If Executive's employment hereunder terminates pursuant to
the provisions of Section 3(a)(iii) or 3(a)(vii), Executive will not be entitled
to receive any Bonus in respect of the fiscal year in which the date of
termination occurs.
(b) Options. (i) Upon any termination of this Agreement pursuant to
Sections 3(a)(i), 3(a)(ii), 3(a)(iii), 3(a)(iv), 3(a)(v), Executive will be
entitled to retain any options granted to her prior to the date of termination
and to hold and exercise such options in accordance with the terms thereof.
(ii) Upon any termination of this Agreement pursuant to Sections
3(a)(v) or 3(a)(vi), any options granted to Executive prior to the date of
termination shall be deemed immediately to vest (if not then vested) and
immediately to become exercisable (if not then exercisable), any exercise to be
on the terms specified in the applicable stock option plan. Additionally,
Executive may, in lieu of exercising such options, convert such options to
non-qualified stock options which will immediately vest in and be exercisable by
Executive. All other terms applicable to the options originally granted to
Executive will be applicable to such non-qualified stock options other than
terms limiting the Executive's ability to exercise the option to a period less
than ten (10) years from the date of grant.
(c) Additional Benefits. (i) If this Agreement is terminated due to
Executive's Disability pursuant to Section 3(a)(ii), Executive will be entitled
to receive, in addition to the
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other compensation and benefits described herein, Executive's then effective
Base Salary for a period of one year from the date of termination, less the
proceeds of any disability insurance policy on Executive purchased by the
Company and the Company will continue to provide Executive with, or will
reimburse Executive the cost of, major medical and health insurance for such one
year period. The Base Salary for such period will be payable in the same manner
as if Executive continued to be employed by the Company, and the insurance
proceeds will be payable, if at all, on the basis specified in the applicable
disability insurance policy.
(i) If within two (2) years after a Change in Control of the Company,
the Company shall terminate the Executive's employment other than by reason of
the Executive's death, Disability, voluntary Retirement or for Cause or if
Executive shall terminate his employment for Good Reason or pursuant to Section
3(a)(vi) hereof, in the manner provided in Section 3(a) hereof, then, in any
such event, the Company will pay to Executive as compensation for services
rendered, beginning not later than the fifth business day following completion
of the "Parachute Procedure" (as hereinafter defined) if the Company elects to
follow such procedure and not later than the fifteenth day after the date of
termination of Executive's employment hereunder and otherwise shall take such
action as follows:
(1) a severance payment (the "Severance Payment") equal to two
times the Executive's then effective Base Salary, plus all benefits (other than
Bonus and stock options) to which Executive would be entitled for a period of
two years or the value thereof, or if the Company is then subject to Section 280
of the Internal Revenue Code (the "Code"), then equal to two times the
Executive's average annual compensation during the Base Period (as hereinafter
defined) (subject to any applicable payroll or other taxes and charges required
to be withheld computed at the rate for supplemental payments), plus such of the
benefits provided for under Section 2(a) hereof or the value thereof for a
period of two years to the extent such benefits shall not be deemed to
constitute fringe benefits within the meaning of Section 280 of the Code,
provided that in no event shall "Total Payments" (as hereinafter defined) exceed
2.99 times the Executive's "Base Amount," as such term is defined in Section
28OG of the Code. The Severance Payment shall be paid in a single lump sum or,
at the election of the Executive (given to the Company in writing within seven
(7) days of the date of termination), in 23 substantially equal monthly
installments. The Executive's Base Amount shall be determined in accordance with
temporary or final regulations promulgated under Section 28OG of the Code then
in effect, if any. In the absence of such regulations, if the Executive was not
employed by the Company (or any corporation or partnership affiliated with the
Company (an "Affiliate") within the meaning of Section 1504 of the Code or a
predecessor of the Company) during the entire five calendar years (the "Base
Period") preceding the calendar year in which a Change in Control of the Company
occurred, the Executive's average annual compensation for the purposes of such
determination shall be the lesser of (1) the average of the Executive's annual
compensation for the complete calendar years during the Base Period during which
the Executive was so employed or (2) the average of the Executive's annual
compensation for both complete and partial calendar years during the Base Period
during which the Executive was so employed, determined by annualizing any
compensation (other than nonrecurring items) includible in the Executive's gross
income for any partial calendar year or (3) the annual average of the
Executive's total compensation for the Base Period during which the Executive
was so employed, determined by dividing such total compensation by the number of
whole and fractional years included in the Base Period.
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Compensation payable to the Executive by the Company or any Affiliate or
predecessor of the Company shall include every type and form of compensation
includible in the Executive's gross income in respect of the Executive's
employment by the Company or any Affiliate or predecessor of the Company,
including compensation income recognized as a result of the Executive's exercise
of stock options or sale of the stock so acquired, except to the extent
otherwise provided in temporary or final regulations promulgated under Section
28OG of the Code. For purposes of this Section 3(n) a "change in control of the
Company" shall have the meaning set forth in Section 28OG of the Code and any
temporary or final regulations promulgated thereunder, subject to the limitation
stated in Section 3(n)(iii) below; and
(2) Notwithstanding anything to the contrary contained herein,
if any portion of the aggregate payments and benefits (the "Total Payments")
received or to be received by the Executive, whether paid or payable pursuant to
the terms of this Agreement or any other plan, arrangement or agreement with the
Company, a Subsidiary or any other person or entity, would not be deductible in
whole or in part by the Company, a Subsidiary or by such other person or entity
in the calculation of its Federal income tax by reason of Section 28OG of the
Code, the Total Payments payable shall be reduced by the least amount necessary
so that no portion of the Total Payments would fail to be deductible by reason
of being an "excess parachute payment."
(3) At the option of the Company, no payments shall be made
pursuant to this section until the procedure described in this Section
4(c)(ii)(A)(3) is completed (the "Parachute Procedure"). If the Company elects
to comply with such procedure, the Company shall cause its independent auditors
to deliver to Executive, within fifteen (15) days after the date of termination,
a statement which shall indicate whether payment to Executive of the Total
Payments would cause any portion of the Total Payments not to be deductible in
whole or part in the calculation of Federal income tax by reason of Section 28OG
of the Code, or would cause, directly or indirectly, an "excess parachute
payment" to exist within the meaning of Section 28OG of the Code. Such statement
shall set forth the value, calculated in accordance with the principles of
Section 28OG of the Code and any temporary or final regulations promulgated
thereunder, of any non-cash benefits or any deferred or contingent payment or
benefit payable pursuant to the terms of this Agreement or any other plan,
arrangement or benefit, together with sufficient information to enable the
Employer to determine the payments that may be made to Executive without
resulting in a loss of deduction under Section 28OG of the Code or an "excess
parachute payment" to the Executive within the meaning of Section 28OG of the
Code. The Company warrants to Executive the accuracy of all information and
calculations supplied to Executive in such statement. If such statement
indicates that payment of the Total Payments would result in a loss of a
deduction by reason of Section 28OG of the Code or would cause an "excess
parachute payment" to exist within the meaning of Section 28OG of the Code, the
Executive shall, within thirty (30) days after receipt of the statement, deliver
to the Company a statement indicating which of the payments and benefits
specified in such auditor's statement Executive elects to receive; provided,
however, that the payments and benefits selected by Executive shall not result
in a loss of deduction under Section 28OG of the Code or an "excess parachute
payment" to Executive within the meaning of Section 28OG of the Code and,
provided, further, however, that if the Company does not comply with the
Parachute Procedure, it shall deliver the payments required by this Section
4(c)(ii)(A)(1) within fifteen (15) days after the date
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of termination or as Executive may elect as provided herein. Delivery of the
statement by Executive to the Company shall constitute completion of the
Parachute Procedures; and
(4) The Company shall contest any improper assessment of an
excise or other tax imposed as a result of determination that an "excess
parachute payment" has been made to Executive within the meaning of Section 28OG
of the Code. If it is established pursuant to a final determination of a court
of competent jurisdiction or an Internal Revenue Service proceeding that an
"excess parachute payment" does in fact exist, within the meaning of Section
28OG of the Code, then Executive shall pay to the Company, upon demand, an
amount not to exceed the sum of (i) the excess of the aggregate Total Payments
over the aggregate Total Payments that would have been paid without any portion
of such payment being deemed an "excess parachute payment" within the meaning of
Section 28OG of the Code.
(5) The Company shall, during the three year period following
the date of termination, advise Executive by written notice at least four (4)
weeks prior to the filing of a registration statement under the Securities Act
of 1933, as amended, (excluding registration on Form S-8, S-14, S-15, or any
successor forms thereto or such other forms required by the Vancouver Stock
Exchange) covering securities of the Company to be offered and sold to the
public generally and shall, upon the request of Executive, include in any such
registration statement, such shares and information as may be required to permit
a public offering of shares of Common Stock of the Company to which Executive is
entitled by way of exercise of stock options and/or exercise of warrants whether
or not such rights have been exercised. Executive shall furnish such information
to the Company as is reasonably requested by the Company. The Company shall
supply prospectuses and qualify such shares of Common Stock for sale in such
states or provinces as the Company qualifies its shares.
5. VOLUNTARY TERMINATION.
If any person or organization commences a tender or exchange offer,
circulates a proxy statement to the Company's stockholders, or takes other
steps designed to effect a Change in Control of the Company, Executive agrees
that in order to receive the benefits provided by this Agreement, she will not
voluntarily leave the employ of the Company or any of its Subsidiaries, and
will continue to perform her regular duties and to render the services
specified in the recitals to this Agreement, until such person or organization
has abandoned or terminated his or its efforts to effect a Change in Control or
until a Change in Control has occurred. Should Executive voluntarily terminate
her employment before any such effort to effect a Change in Control of the
Company has commenced, or after any such effort has been abandoned or
terminated without effecting a Change in Control and no such effort is then in
process, this Agreement shall lapse and be of no further force or effect.
Should Executive voluntarily terminate her employment with the Company or any
of its Subsidiaries during such time as any person or organization has
commenced, but has not yet abandoned, any steps designed to effect a Change in
Control of the Company, but at a time when a Change in Control has not been
effected, Executive shall not be entitled to receive any of the benefits of
Sections 4 hereof.
(i) Thirty (30) days after delivery by Executive to the Company of
written notice of termination other than pursuant to Sections 3 (a) (v) or 3 (a)
(vi);
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(ii) Fifteen (15) days after delivery by Executive to the Company
of written notice of termination for "Good Reason" (as such term is defined in
Section 3 (e) hereof, provided such Good Reason has not been cured by the
Company within such fifteen (15) day period (or such longer period as is
reasonably required provided the Company has acted in good faith to begin to
cure such Good Reason within such fifteen (15) day period);
(iii) Fifteen (15) days after delivery by the Company to Executive
of written notice of termination for "Cause" (as defined in Section 3(f)
hereof).
(b) In the event of a dispute between the parties as to what
constitutes a Disability, such dispute shall be finally determined by a
physician mutually agreed upon by Executive and Company. If a mutually
acceptable physician cannot be selected, Executive and the Company shall each
choose a physician, and such physicians shall select a third physician, by
mutual agreement, whose determination shall be conclusive. Either party may
request that such a determination be made, in which event the parties agree to
cooperate fully with whatever procedures and examinations may be required in
order to allow such determination to be made. The cost of such examinations
shall be borne by the Company if such determination is that a Disability exists
or by the Executive if such determination is that no Disability exists.
(c) As used herein, "Objectionable Conduct" shall mean (i) the material
breach by Executive of her duties and obligations hereunder, or (ii) any act of
gross misconduct by Executive materially detrimental to the Company, including
without limitation, misappropriation of the Company's property, conviction of a
felony, or dishonesty or conflict of interest on the part of Executive.
(d) As used herein, "Good Reason" shall mean (i) the material breach by
the Company of any of its obligations hereunder, (ii) the assignment by the
Company to Executive of duties which are inconsistent with, or require travel
significantly more time-consuming or extensive than, Executive's duties and
business travel obligations on the date hereof, (iii) any diminution in the
duties or authority of the Executive as in effect on the date hereof, (iv) a
change in Executive's assigned site location without Executive's express written
consent, (v) the failure by the Company to pay (or reimburse Executive for) all
reasonable moving expenses incurred by Executive and relating to a change of her
principal residence and to indemnify Executive against any loss by Executive
and/or her spouse in the sale of Executive's principal residence in connection
with any such change of residence, all to the effect that Executive shall incur
no loss on an after-tax basis, (vi) the failure by the Company to obtain the
express written assumption of and agreement to perform this Agreement as
contemplated in Section 14 hereof, or (vii) a reduction by the Company of
Executive's Base Salary as the same may be increased from time to time
hereafter, (viii) the failure of the Company to continue to provide Executive
with substantially the same level of fringe benefits as contemplated in Section
2(c) hereof unless such fringe benefits shall cease to be provided to all senior
executive officers and employees of the Company or (ix) any purported
termination of Executive's employment which is not effected in accordance with
the terms of this Agreement.
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(e) As used herein, the term "Retirement" shall mean that Executive
shall have retired after reaching the earliest normal or early retirement date
provided in the Company's retirement plans as then in effect.
(f) The date upon which Executive's employment terminates in accordance
with any of the provisions of Section 3 (a) is referred to herein as the "date
of termination". In the event of a termination of this Agreement pursuant to
Section 3(a), the Company shall be obligated to pay to Executive, and Executive
shall be entitled to receive (i) any unpaid Base Salary through the date of
termination, (ii) reimbursement for expenses incurred by Executive through the
date of termination, subject to the procedures set forth in Section 2(d), (iii)
any unpaid Bonus in respect of fiscal years prior to the year in which the date
of termination occurs, and (iv) such additional compensation or benefits, if
any, as are set forth in Section 4 hereof . Except for the compensation and
benefits specified in this Section 3 (f) and in Section 4, the Company shall
have no obligation to provide to Executive any compensation or benefits from and
after the date of termination. Executive agrees, upon any such termination, to
resign as an officer and director of the Company and each of its Subsidiaries as
of the date of termination.
6. TRADE SECRETS.
(a) Executive acknowledges that her employment by the Company, which is
in the business of marketing incontinence products, may enable her to obtain
confidential information concerning the Company, its subsidiaries and
affiliates, their products, services, concepts, businesses, trade secrets,
employees, customers, suppliers, vendors, venture partners, and strategic allies
(collectively, the "Confidential Information"). Executive further acknowledges
that the services to be performed under this Agreement are of a special, unique,
unusual and extraordinary character, that the Company's products will be
marketed and licensed throughout the United States and abroad, that the Company
will be competing with other organizations which are or could be located in any
part of the United States or abroad, and that the Confidential Information is of
great value to the Company. Accordingly, Executive agrees that she shall not
knowingly divulge any of the Confidential Information to anyone outside of the
Company except as expressly authorized by the Board of Directors of the Company,
or as is necessary to permit Executive to discharge her duties hereunder in good
faith and in the best interests of the company, or as is required by law.
(b) Except if this Agreement is terminated by way of breach of same by
the Company or for reasons specified in Sections 9(a) or 9(b), Executive's
covenants contained herein shall survive the termination or expiration of this
Agreement.
7. PURCHASE AND SALE OF SHARES.
In order to incentivize the Executive and insure that her interests are
aligned with those of the Company's shareholders, the Company hereby agrees to
sell to the Executive, and the Executive hereby agrees to purchase from the
Company, 384,000 shares of the Company's common stock (the "Shares") for a
consideration of $.05 per share. The Company and the Executive agree that such
purchase price represents the fair market value of the Shares, taking into
account the uncertainty regarding the spin-off of the Company's shares (the
"Spin-off") by its parent, Caring, and the price at which the Company' common
stock may trade, if at all, the
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limitations on the Executive's ability to sell or otherwise transfer the Shares
and other factors that the Company and the Executive have deemed relevant and
appropriate. If for any reason the Spin-off shall not occur on or before March
31, 2000, the Company shall have the option to repurchase the Shares at $.05 per
share. To evidence the foregoing, the parties hereto shall execute and deliver a
Subscription Agreement and an Escrow Agreement simultaneous with the execution
of this Agreement or as soon as practicable thereafter.
8. RIGHT TO INDEPENDENT COUNSEL.
The parties hereto recognize that this Agreement is a legal
document which may affect them adversely. Consequently, the parties acknowledge
that prior to executing this Agreement they were given the opportunity to seek
the advice of independent legal counsel regarding the provisions of this
Agreement and their legal involvement herein. By executing this Agreement, the
parties acknowledge that they have reviewed this Agreement with independent
counsel or have waived their opportunity to do so.
9. TERMINATION OF AGREEMENT.
This Agreement shall, in addition to other provisions
affecting termination, terminate on the occurrence of any of the following
events:
(a) cessation of the Company's business;
(b) dissolution of the Company; or
(c) the voluntary agreement of the parties hereto.
10. NOTICES.
All notices, requests, demands, deliveries and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if mailed, postage prepaid, registered or certified mail, return
receipt requested to the parties at the addresses (or at such other address for
a party as shall be specified by like notice) specified on the first page of
this Agreement.
11. WAIVER.
No course of dealing nor any delay on the part of the Company
or Executive in exercising any rights hereunder shall operate as a waiver of any
such rights. No waiver of any default or breach of this Agreement shall be
deemed a continuing waiver or a waiver of any other breach or default.
12. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of
New York. Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration in New York, New York, in
accordance with the rules of the American Arbitration Association then in force.
Any award rendered in any such proceeding shall be final
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<PAGE> 14
and binding on the parties thereto and judgment upon any such award may be
entered in any court of competent jurisdiction.
13. COMPLETE AGREEMENT.
This Agreement constitutes the entire agreement of the parties
hereto and supersedes all prior agreements and proposals, oral and written, and
all other communications between the parties relating to the subject matter
contained herein, including, without limitation, the Employment Agreement.
14. SEVERABILITY.
If any of the provisions of this Agreement are held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
15. EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS.
The rights and obligations of the Company under this Agreement
shall inure to the benefit of and shall be binding upon any successor of the
Company or to the business of the Company. Neither this Agreement or any rights
or obligations of Executive hereunder shall be transferable or assignable by
Executive; provided, however, that this Agreement shall inure to the benefit of
and be enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amounts would still be payable to Executive
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legatee or other designee or, if there be no such designee,
to Executive's estate. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by written
agreement, to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement, the term
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which executes and delivers the
agreement required by this Section 12, or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
16. MODIFICATION.
This Agreement may only be amended, varied or modified by a
written document executed by the parties hereto.
17. FURTHER INSTRUMENTS.
The parties hereto agree to execute and deliver, or cause to
be executed and delivered, such further instruments or documents and take such
other action as may be required to effectively carry out the transactions
contemplated herein.
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<PAGE> 15
18. INDEMNIFICATION AND LEGAL EXPENSES.
(a) In addition to any liability insurance to be provided Executive
under the terms contained in paragraph 2(c) and any indemnification provided
under the Company's certificate of incorporation or by-laws or applicable law,
the Company will indemnify and hold harmless Executive from and against any
claims, damages, expenses (including reasonable attorneys' fees) judgments,
fines, penalties (including any excise taxes assessed with respect to an
employee benefit plan), and amounts paid in settlement incurred by Executive in
connection with the investigation, defense, settlement or appeal of any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative, whether formal or informal and
whether brought by or in the right of the corporation, (by a class of its
security holders or otherwise) in which Executive may be involved as a party or
otherwise by reason of the fact that Executive is or was a director, officer,
stockholder, employee or agent of the Company or is or was serving at the
request of the Company as a director, officer, partner, trustee, employee or
agent of another entity or by reason of anything done or not done by Executive
in any such capacities; provided, however, that Executive shall not be entitled
to indemnification for the portion of any proceeding in which a final judgment
or other final adjudication adverse to the Executive establishes that
Executive's acts were the result of active and deliberate dishonesty and were
material to the cause of action so adjudicated or that Executive personally
gained in fact a financial profit or advantage to which the Executive was not
legally entitled.
(b) The Company shall pay the expenses (including reasonable attorneys'
fees) incurred by the Executive in advance of the final disposition of a
proceeding described in paragraph 17(a) upon receipt of an undertaking by or on
behalf of Executive to repay such amount if it shall ultimately be determined
that Executive is not entitled to indemnification under paragraph 17 (a) . Such
payments shall be made within thirty (30) days after a written, claim has been
received by the Company or, in the case of attorneys fees and expenses, shall be
paid directly by the Company.
(c) Upon the reasonable request of Executive, the Company shall provide
security satisfactory to Executive for its obligations hereunder.
(d) If it shall be necessary or desirable for Executive to retain legal
counsel and/or to incur other costs and expenses in connection with the
enforcement or validity of Executive's rights under paragraph 17(a) or 17(b) or
any other provisions of this Agreement, the Company shall pay or Executive shall
be entitled to recover from the Company, as the case may be, reasonable
attorneys' fees and costs and expenses, regardless of the final outcome. Such
payments shall be made within thirty (30) days after a written claim has been
received by the Company.
19. SURVIVAL.
All covenants, representations and warranties made in this
Agreement, and all other documents provided for herein, shall survive the
execution, delivery and performance of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CREATIVE PRODUCTS INTERNATIONAL, INC.
By:/s/ Joan Lundgren
---------------------------------------
/s/ Susan A. Schreter
---------------------------------------
Susan A. Schreter
15
<PAGE> 1
EXHIBIT 10.3
LICENSE AGREEMENT
THIS AGREEMENT, is made by and between:
Creative Products International, Inc. ("Creative), a corporation, organized and
existing under the laws of Delaware, located at P.O. Box 9288, Seattle,
Washington 98109, and Caring Products International, Inc. ("Caring"), a
corporation, organized and existing under the laws of Delaware, located at 200
First Avenue West, 2nd Floor, Seattle, Washington 98119;
WHEREAS, Creative is the owner of a certain Patent (as defined below); and
WHEREAS, Caring wishes to acquire the right to use such Patent.
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises
hereinafter set forth, the sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meaning as set
forth below:
1.01 "Patent" or "Licensed Patent" means U.S. Patent Number 5,360,522 issued on
November 1, 1994.
1.02 "Licensed Products" shall mean adult pant-sized goods within the Licensed
Field whose manufacture, use, importation, offer for sale, and/or sale is
covered by one or more of the claims of the Licensed Patent.
1.03 "Licensed Field" shall mean the adult incontinence market. For the purpose
of this Agreement, "Adult Incontinence" is defined as the temporary or permanent
loss of bladder function of men and women over the age of 21. The following
markets are specifically excluded from the Licensed Field: children's toilet
training, handicapped children including those wearing adult-sized incontinence
products of any type, child bed wetters, infant diaper use, control of excess
fluids caused by menstruation or hemorrhaging, fecal incontinence, or any other
market other than Adult Incontinence as defined above.
1.04 "Effective Date" shall mean that date of execution of the last party to
execute this Agreement, as shown on the execution page.
1.05 "Maintenance Costs" shall mean all government, maintenance, renewal, issue,
extension fees, annuities, and attorneys' fees, and all other expenses and costs
incurred in maintaining the Licensed Patents in full force and effect as set
forth in Section 8 below.
<PAGE> 2
1.06 "Confidential Information" shall mean any and all inventions, ideas,
processes, methods, prototypes, designs, drawings, specifications,
documentation, instructions, and any and all technical, trade, marketing,
manufacturing, production, customer, pricing, margin, distribution, business,
sales, and other information obtained by Caring from Creative under the terms of
this Agreement.
1.07 "Improvements" shall mean all modifications, improvements, variations,
enhancements, refinements, or developments made by Caring to the Licensed
Product.
2. GRANT OF LICENSE
Creative grants to Caring a worldwide, exclusive, nontransferable,
non-assignable royalty-free license to offer for sale, import, manufacture, have
manufactured, use, and/or sell Licensed Products in the Licensed Field
3. IMPROVEMENTS
No Improvements may be made without the express consent of Creative. Any such
Improvements made by Caring shall be the sole and exclusive property of
Creative. Creative hereby grants and agrees to grant to Caring a non-exclusive
license for any such Improvements developed by Caring.
4. OWNERSHIP OF PATENT
Caring acknowledges the ownership of the Patent by Creative, will do nothing
inconsistent with such ownership, and will assist Creative in recording this
Agreement with appropriate government authorities if so requested by Creative.
Nothing in this License shall give Caring any right, title, or interest in the
Patent other than the right to use the Patent in accordance with this License,
and Caring will not attack the title of Creative to the Patent or attack the
validity of this License.
5. FORM OF USE
Caring agrees to mark permanently and legibly all products and documentation
imported, manufactured, offered for sale, or sold by it under this Agreement
with such patent notice as may be permitted or required under Title 35 of the
United States Code.
6. INFRINGEMENT PROCEEDINGS
6.01 Caring agrees to notify Creative in writing of any unauthorized use or
other suspected infringement of the Licensed Patent by others promptly as it
comes to Caring's attention. Creative may bring, in its sole discretion,
appropriate proceedings against such infringers. Any such suit shall be
prosecuted wherever possible in the name of Creative and by its counsel, and the
expenses of any such suit shall be borne by Creative. Creative shall not be
liable in any way to Caring for taking or for not taking any action regarding
such actual or suspected infringement.
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6.02 Caring shall not be entitled to take or institute any action thereon,
either by way of informal protest or legal, equitable or criminal proceedings,
without express written approval unless, after notice by Caring, Creative fails
to take reasonable action to protect the Patent and such failure may lead to an
impairment of Caring's rights under this Agreement. In such case, the costs
shall be borne entirely by Caring. Creative shall execute all papers necessary
in connection with such suit and shall testify in any such suit whenever
required to do so by Caring all, however, at the expense of Caring with respect
to travel and similar out-of-pocket disbursements.
7. TERM
This Agreement shall begin on the Effective Date and shall expire on the expiry
date of the Licensed Patent unless sooner terminated as provided for herein.
8. PROSECUTION AND MAINTENANCE
8.01 Creative, at its sole cost and expense, shall take or cause to be taken all
actions necessary or otherwise required to maintain in full force and effect,
the Licensed Patent including the payment of all maintenance fees, and the
submission, filing, and recordation of all necessary papers, documents,
arguments, and the like, for the Licensed Patent.
8.02 Creative is under no obligation to file for patent protection outside the
United States. Should Caring wish to file for such protection, it may, after
notifying Creative in writing, do so at its own expense in the name of Creative
Products.
9. CONFIDENTIALITY AND NON-USE
9.01 Caring shall not disclose, disseminate and/or in any way make available to
any third parties or use any Confidential Information provided by Creative,
provided, however, that disclosure and use may be made of any such Confidential
Information at any time if Caring can prove: (i) that it first obtained the
prior written consent of Creative for such disclosure or use; or (ii) the
Confidential Information has become generally publicly known in the industry
through no fault of Caring; or (iii) the Confidential Information was provided
to Caring by a third-party having no duty to retain such Confidential
Information in confidence; or (iv) the Confidential Information was
independently developed by Caring without the use or benefit of any Confidential
Information disclosed to it under this Agreement.
9.02 Caring shall use reasonable and appropriate care to avoid unauthorized
disclosure, access and/or dissemination of any Confidential Information.
Prohibition of disclosure and use of Confidential Information shall not apply to
disclosure by Caring to, or use by, its employees and agents, provided that such
disclosure or use is reasonably necessary under this Agreement and provided that
Caring secures written confidentiality and non-use agreements for all such
employees and agents whereby each such person agrees to be bound by the
confidentiality and non-use terms and provisions of this Agreement.
9.03 The terms, provisions and conditions of this Section 9 shall survive the
expiration and/or termination of this Agreement.
10. TERMINATION FOR CAUSE
10.01 Except as may otherwise be expressly provided in this Agreement, in the
event either party hereto shall materially breach or default in the performance
of any of the terms, conditions or obligations to be performed by it hereunder,
and if such breach or default is not cured within thirty (30) days after the
breaching or defaulting party receives written notice from the other party of
such material breach or default, then and in any such event, the non-breaching
or defaulting party may immediately terminate this Agreement and all of the
rights and obligations hereunder (except as otherwise expressly provided by this
Agreement).
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10.02. In the event Caring sells all or substantially all of its business,
ceases doing business, and/or otherwise winds up its business this Agreement
shall terminate immediately without notice or need of any further action by any
party hereto.
10.03 Creative shall have the right to terminate this Agreement upon thirty (30)
days written notice to Caring in the event of any affirmative act of insolvency
by Caring, or upon the appointment of any receiver or trustee to take possession
of the properties of Caring or upon the winding-up, sale, consolidation, merger
or any sequestration by governmental authority of Caring, or upon breach of any
of the provisions hereof by Caring.
10.04 Creative shall have the right to terminate this Agreement upon thirty (30)
days written notice to Caring in the event that Caring fails to market any
Licensed Product within the Licensed Field within a period of two years from the
Effective Date of this Agreement.
11. EFFECT OF TERMINATION
11.01 Upon termination of this Agreement Caring agrees: (a) to immediately
discontinue all use of the Patent, (b) to cooperate with Creative or its
appointed agent to apply to the appropriate authorities to cancel any recording
of this Agreement from all government records, and (c) that all rights in the
Patent shall continue to remain the sole and exclusive property of Creative and
that Caring shall have no rights of any kind in the Patent.
11.02 In the event of any termination for cause, in addition to the other rights
and remedies granted in this Agreement, Creative may exercise all remedies
available to it at law or in equity.
12. WARRANTIES
Nothing in this Agreement shall be deemed to be a representation or warranty by
Creative (a) of the validity or scope of the Patent; (b) that anything imported,
made, used, offered for sale, sold, or otherwise disposed of is or will be free
from infringement of patents of third persons; (c) that any process performed
under any license granted in this Agreement is or will be free from infringement
of patents of third parties; (d) of the accuracy, safety, or usefulness for any
purpose, of any patent any time made available by Creative. Caring assumes the
risk of all of its activities hereunder, including use of the Patent and the
importing, manufacture, use, offering for sale, or sale of the Licensed
Products.
13. ASSIGNMENTS
This Agreement and/or the rights and licenses granted herein may not be assigned
and/or otherwise transferred by Caring without the prior written consent of
Creative.
14. RELATIONSHIP OF THE PARTIES
Nothing in this Agreement shall be construed to create a partnership, joint
venture, or agency relationship between the parties. Neither Caring nor Creative
shall have any right, power, or authority to act as a legal representative of
the other, and neither party shall have any power to obligate or bind the other,
or to make any representations, express or implied, on behalf of or in the name
of the other in any manner for any purpose whatsoever.
15. SEVERABILITY
If any part, term, or provision of this Agreement shall for any reason be found
invalid, illegal, unenforceable, or in conflict with any valid controlling law,
such term or provision shall be separated from this Agreement and such
invalidity, illegality or unenforceability shall not affect any other term or
provision hereof and this Agreement shall
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<PAGE> 5
be interrupted construed as if such term or provision, to the extent the same
shall have been held invalid, illegal, or unenforceable, had never been
contained herein.
16. WAIVER, INTEGRATION, ALTERATION
16.01 Waiver. The waiver of a breach hereunder may be effected only by a writing
signed by the waiving party and shall not constitute, or be held to be, a waiver
of any other or subsequent breach, or to affect in any way the effectiveness of
such provision. Failure by either party to object to a breach by the other party
shall not constitute or be held to be a waiver of the party's right to later
object to, or to terminate this Agreement, due to any other breach or subsequent
breach.
16.02 Integration. This Agreement contains the entire agreement between the
parties and supersedes all other agreements, representations, and warranties,
expressed or implied, between the parties concerning the Licensed Patent and
Licensed Products.
16.03 Alteration. Any modification or amendment of this Agreement shall be
effective only if made in writing and signed by both parties hereto.
17. INTERPRETATION OF AGREEMENT
Caring and Creative each understand, acknowledge and agree that this Agreement
is and shall be deemed to have been negotiated, signed and entered into in New
York, New York, United States of America. This Agreement shall be construed and
governed in accordance with the laws of the State of Washington, United States
of America, without regard to the rules of conflicts of law, except as to any
provisions hereof that are governed by the laws of the United States of America,
in which case that U.S. law shall govern. The parties agree that any lawsuit or
dispute relating to the enforcement, interpretation, or construction of this
Agreement shall be brought only in a United States District Court in Seattle,
Washington, and/or, if applicable, a State court in the County of King, State of
Washington hereby consent to exclusive personal jurisdiction by such courts, and
agree that venue is proper only in such court(s). The parties hereby waive all
objection to such jurisdiction and venue.
18. NOTICES. Any communications or notices required or permitted to be given
under this Agreement shall be in writing and will be deemed sufficiently given
if delivered personally, sent by documented overnight delivery service, mailed
by certified mail, or to the extent that receipt is confirmed, telecopy, telefax
or other electronic transmission service, addressed to the party concerned as
follows:
If to Creative:
Ms. Susan Schreter
--------------------------------
5843 Woodlawn Avenue
--------------------------------
Seattle, Washington 98103
--------------------------------
Facsimile: (206) 523-5706
-----------------------------
Telephone number: (206) 523-7065
----------------------
with a copy to:
Steven A. Saide, Esq.
--------------------------------
Bryan Cave, LLP
--------------------------------
245 Park Avenue
--------------------------------
New York, New York 10167
--------------------------------
Facsimile: (212) 692-1900
-----------------------------
Telephone number: (212) 692-1852
----------------------
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If to Caring:
200 First Avenue West
--------------------------------
Seattle, Washington 98119
--------------------------------
Facsimile: (206) 282-6337
-----------------------------
Telephone number: (206) 282-6040
----------------------
19. BINDING
This Agreement shall be binding upon the parties hereto and their respective
permitted successors and assigns.
20. HEADINGS
All Section headings are provided in this Agreement for convenience only and
shall not be deemed to substantively alter the content of such Sections.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date below their respective signatures.
CREATIVE PRODUCTS INTERNATIONAL, INC.
/s/ Susan Schreter
--------------------------------------
By: Susan Schreter
Title: Chairman of the Board
Date: June 30, 1999
-----------------------------------
CARING PRODUCTS INTERNATIONAL, INC.
/s/ Susan Schreter
--------------------------------------
By: Susan Schreter
Title: President
Date: June 30, 1999
-----------------------------------
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EXHIBIT 10.4
ESCROW AGREEMENT
ESCROW AGREEMENT ("Escrow Agreement"), dated as of the 4th day of
October, 1999, by and among CREATIVE PRODUCTS INTERNATIONAL, INC., a Delaware
corporation with an address at P. O. Box 9288, Seattle, Washington 98109 (the
"Company"), SUSAN A. SCHRETER, an individual with an address at 5843 Woodlawn
Avenue North, Seattle, Washington 98103 ("Schreter"), and BRYAN CAVE LLP, a law
firm with an address at 245 Park Avenue, New York, New York 10167-0034 (the
"Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company and Schreter have entered into an Employment
Agreement, dated September 24, 1999 (the "Employment Agreement"), a true and
correct copy of which has been delivered to the Escrow Agent, that provides,
among other things, for the sale by the Company to Schreter of an aggregate of
384,000 shares (the "Shares") of the Company's common stock, par value $.01 per
share (the "Common Stock"), at a purchase price of $.05 per share, or an
aggregate of $19,200 (the "Aggregate Purchase Price"), subject to the parties
entering into this Agreement,
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. DEFINED TERMS. All capitalized terms not defined herein shall have
the meaning ascribed thereto in the Employment Agreement.
2. DEPOSIT. (a) Simultaneously with the execution hereof, the Company,
on behalf Schreter, is delivering to the Escrow Agent a stock certificate
evidencing the Shares registered in the name of Schreter on the books and
records of the Company, duly endorsed in blank by Schreter (such stock
certificate, as so endorsed is referred to herein, as the "Certificate"). The
Company will deliver to the Escrow Agent all dividends and other distributions
paid on or made with respect to the Shares during the term of this Agreement
(all such dividends and distributions received by the Escrow Agent are
hereinafter referred to as the "Distributions").
(b) The Escrow Agent by its execution and delivery of this Agreement
acknowledges receipt of the Certificate, and agrees to hold the Certificate and
all Distributions (collectively, the "Escrow Fund") in escrow and to act with
respect thereto and otherwise as hereinafter set forth.
3. DISPOSITION OF THE ESCROW. (a) Subject to the other provisions of
this Section 3, the Escrow Agent shall release the Escrow Fund from escrow and
deliver the same to Schreter on the date of completion of the Spin-off (the
"Spin-off Date"). The Company and Schreter will deliver to the Escrow Agent on,
or as soon as practicable after the Spin-off Date, written notice, signed by
each, of the completion of the Spin-off, which notice (the "Spin-off Notice")
will specify the Spin-off Date.
(b) Schreter acknowledges that if the Spin-off is not completed and
the Escrow Agent does not receive the Spin-off Notice on or before March 31,
2000, the Company shall have the right, during the period commencing April 1,
2000 and terminating at 5:00 P.M. (New York Time) on April 30, 2000 (the
"Exercise Period"), to repurchase the Shares from Schreter.. The Company shall
exercise such right by giving written notice thereof during the Exercise Period
to the Escrow Agent and Schreter (the "Exercise Notice"), which in the case of
the Escrow Agent shall be accompanied by a bank cashier's or certified check
payable to the order of Schreter in the amount of the Aggregate Purchase Price
(the "Payment"). Upon receipt by the Escrow Agent of the Exercise Notice and the
Payment, the Escrow shall promptly release from escrow and deliver to the
Company all of the Escrow Fund. If the Escrow Agent does not receive the
Spin-off Notice on or before March 30, 2000 and the Exercise Notice and
<PAGE> 2
Payment on or before the expiration of the Exercise Period, the Escrow Agent
shall promptly release from escrow and deliver to Schreter all of the Escrow
Fund.
4. TERMINATION UPON FINAL DISPOSITION. This Agreement shall terminate
upon the final disposition of the Escrow Fund and may be terminated at any time
prior thereto by and upon receipt by the Escrow Agent of written notice of
termination signed by the Company and Schreter directing the disposition of the
Escrow Fund.
5. RIGHTS IN RESPECT OF SHARES HELD IN ESCROW. All rights in connection
with or incident to the ownership of the Shares, including without limitation,
the right to exercise any and all voting rights associated with the Shares and
the right to receive any and all dividends or other distributions in respect of
the Shares, during the period such Shares are held in escrow pursuant hereto,
shall be vested solely in Schreter, subject to such dividends or distributions
being held in escrow pursuant to this Agreement as provided herein.
6. ESCROW PROVISIONS. (a) The obligations and duties of the Escrow
Agent in connection herewith are confined to those specifically enumerated
herein and the Escrow Agent shall not be liable or responsible for any act or
failure to act on its part except for its own willful misconduct or gross
negligence.
(b) The duties of the Escrow Agent hereunder shall be limited to the
safekeeping of the Escrow Fund and the disposition of the same solely in
accordance with the terms and conditions hereof and no implied duties or
obligations shall be read herein against the Escrow Agent.
(c) The Escrow Agent may act or refrain from acting with respect to
any matter referred to herein in full reliance upon the advice of counsel of its
choice, and shall be fully protected and released as to any matter with respect
to which it shall have acted or refrained from acting upon the advice of such
counsel.
(d) The Escrow Agent may rely or act upon orders or directions,
instruments or signatures believed by it to be genuine and may assume that any
person purporting to give any written notice, advice or instruction in
connection therewith has been fully authorized to do so.
(e) The Escrow Agent shall not be bound by any modification,
amendment, termination, cancellation, rescission or supercedence of the terms
and conditions contained herein unless the same shall be in writing and signed
by the other parties hereto. However, the Escrow Agent's duties as Escrow Agent
hereunder shall not be affected, unless the Escrow Agent shall have given its
prior written consent thereto.
(f) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder, then Escrow Agent shall refrain from taking any action other
than to keep safely the Escrow Fund, until it shall be directed otherwise in
writing jointly by the Company and Schreter or by a final judgment or order of a
court of competent jurisdiction. Any such judgment shall be delivered to the
Escrow Agent with a written opinion of counsel setting forth that such judgment
is final and that such court is a court of competent jurisdiction and that
Escrow Agent shall be fully protected in relying thereon.
(g) The Escrow Agent shall not be required to institute or defend
any action or legal proceeding involving the terms and conditions contained
herein. For all payments and deliveries made by the Escrow Agent in accordance
with the provisions hereof, the Escrow Agent shall have full release, discharge
and acquittance and shall not be subject to any claim on the part of any persons
beneficially interested hereunder. The Company and Schreter hereby agree,
jointly and severally, to indemnify and hold harmless the Escrow Agent and its
successors and assigns from and against any and all claims, disputes or defenses
which may arise between the Company and Schreter.
(h) The Company shall reimburse and indemnify the Escrow Agent for,
and hold it harmless against, any and all loss, liability, costs or expenses in
connection herewith including reasonable attorneys' fees, incurred on the part
of the Escrow Agent or arising out of or in connection with its acceptance of,
or the performance of its duties and obligations under, this Agreement, as well
as the reasonable costs and expenses of defending against
2
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any claim or liability arising out of or relating to this Agreement, except for
such loss, liability, costs or expenses resulting from Escrow Agent's own gross
negligence or willful misconduct.
(i) The Escrow Agent may at any time resign hereunder by giving
written notice of resignation to the other parties hereto at least ten days
prior to the date specified for such resignation to take effect, and upon the
effective date of such resignation, the Escrow Fund then held by the Escrow
Agent hereunder shall be turned over to a new escrow agent designated in writing
by the Escrow Agent who shall be reasonably acceptable to the Company and
Schreter and who shall have accepted all of the terms hereof, whereupon all of
the Escrow Agent's obligations hereunder shall cease and terminate. If no such
person shall have been approved by the Company and Schreter by such date, the
Escrow Agent shall be entitled to deposit the Escrow Fund with a court of
competent jurisdiction whereupon all of the Escrow Agent's obligations hereunder
shall cease and terminate.
7. NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address set forth above or to such other address as any of the
parties shall give notice to the other parties hereto in the manner provided (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.
8. WAIVER. No waiver by any party of any breach of any term contained
in this Escrow Agreement, in any one or more instances, shall be deemed to be or
construed as a further continuing waiver of any such breach or a waiver of any
breach of any other term contained in this Agreement.
9. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed as original and which counterparts together shall
constitute one and the same instrument.
10. APPLICABLE LAW. This Agreement is intended to be construed solely
in accordance with and governed solely by the laws of the State of New York
pertaining to contracts made and fully performed therein (without giving effect
to choice of law principles).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
BRYAN CAVE LLP /s/ Susan A. Schreter
------------------------------
Susan A. Schreter
By: /s/ Steven Suide
----------------------------------
Name: Steven Suide
Title: Partner
CREATIVE PRODUCTS INTERNATIONAL, INC.
By: /s/ Susan A. Schreter
----------------------------------
Name: Susan A. Schreter
Title: Chairman of the Board
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the use of our auditors' report dated October 5, 1999, on
the Creative Products International, Inc. financial statements as of September
30, 1999, and for the nine-month period ended September 30, 1999, included in
the Creative Products International, Inc. Form 10-SB for the nine-month period
ended September 30, 1999.
/s/ Peterson Sullivan P.L.L.C.
October 11, 1999
Seattle, Washington
