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Exhibit 10.7
EMPLOYMENT AGREEMENT
CREATIVE PRODUCTS INTERNATIONAL, INC.
WITH
SUSAN A. SCHRETER
AGREEMENT, dated September 2, 1999, between CREATIVE
PRODUCTS
INTERNATIONAL, INC., a Delaware corporation having an address at
3317 3rd
Avenue, S, Seattle, WA 98134 (the "Company"),, and SUSAN A.
SCHRETER, an
individual residing at 5843 Woodlawn Avenue North, Seattle,
Washington 98103
(the "Executive").
WITNESSETH
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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.
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(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
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
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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").
(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
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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.
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(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.
(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).
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(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 cease to be
provided to all
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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 termination, subject to the procedures set
forth in
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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 pr
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