EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on June 6,
2004 by and between YP Corp., a Nevada corporation (the "Company") and Xxxxx X.
Xxxxxxxx ("Executive").
In consideration of the mutual promises, covenants and agreements herein
contained, intending to be legally bound, the parties agree as follows:
1. Employment. The Company hereby agrees to employ Executive, and
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Executive hereby agrees to serve, subject to the provisions of this Agreement,
as an employee of the Company in the position of Chief Executive Officer,
President and Chairman. Executive will perform all services and acts reasonably
necessary to fulfill the duties and responsibilities of his position and will
render such services on the terms set forth herein and will report to the
Company's Board of Directors (the "Board"). In addition, Executive will have
such other executive and managerial powers and duties with respect to the
Company as may be reasonably required to perform his services and fulfill his
duties hereunder and as otherwise may reasonably be assigned to him by the
Board, to the extent consistent with his position and status as set forth above.
Executive agrees to devote his business time, attention and energies to the
extent reasonably necessary to perform the duties assigned hereunder, and to
perform such duties diligently, faithfully and to the best of his abilities. It
is expressly understood and agreed that Executive shall have the right to engage
in any activities that are generally engaged in by executives of his position
and status, provided that Executive agrees to refrain from any activity that
does, will or could reasonably be deemed to conflict with the best interests of
the Company. Notwithstanding the foregoing, Company acknowledges and agrees that
during the Term Executive shall have the right to (i) engage in activities as a
producer, director and consultant with respect to various projects in the motion
picture, television and related entertainment industries ("Outside Activities")
and (ii) render Executive's services as an employee, officer, director, agent,
consultant, independent contractor, proprietor, principal, or partner of and/or
to have a "financial interest" in any business engaging in such Outside
Activities; provided that Executive agrees that engaging in such Outside
Activities shall not substantially interfere with the performance of Executive's
duties hereunder.
2. Term. This Agreement is for the three-year period (the "Term")
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commencing on the date hereof and terminating on the third anniversary of such
date, or upon the date of termination of employment pursuant to Section 8 of
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this Agreement; provided, however, that commencing on the third anniversary of
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the date hereof and each anniversary thereafter the Term will automatically be
extended for one additional year unless, not later than 30 days prior to any
such anniversary, either party hereto will have notified the other party hereto
that such extension will not take effect, in which event the Term shall end on
the last day of the then current period.
3. Place of Performance. Except for required travel on the Company's
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business, Executive will perform the majority of his duties and conduct the
majority of his business on behalf of the Company at the Company's offices in
Mesa, Arizona and at Executive's office in Marina del Rey, California.
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4. Compensation.
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(a) Salary. Executive's salary during the first year of this
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Agreement will be at the annual rate of $200,000 (the "Annual Salary"), payable
in accordance with the Company's regular payroll practices. All applicable
withholdings, including taxes, will be deducted from such payments. The Annual
Salary will be increased to $225,000 during the second year of this Agreement
and to $275,000 during the third year of this Agreement. Thereafter, the Annual
Salary will be as determined by the Compensation Committee of the Board, but
shall in no event be less than 110% of the previous year's Annual Salary.
(b) Signing Bonus. Executive will receive $190,000 as a
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nonreturnable, nonrefundable signing bonus payable upon the execution of this
Agreement, subject to all applicable withholdings, including taxes.
(c) Performance Bonuses. Executive will receive a one-time bonus of
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$130,000 upon the resolution of existing and outstanding corporate issues
involving the Company as determined by the Board in its reasonable business
judgment, but in no event later than the date one year from the date above.
Additionally, promptly following the commencement of each fiscal year, Executive
will receive an annual bonus of $135,000 in the event that the Company's basic
earnings per share (as reported in the Company's SEC reports) for that
respective fiscal year ended September 30, exceed the prior fiscal year's basic
earnings per share by a minimum of 40%. To the extent such test is met, the
bonus will be paid to Executive no later than 30 days after the Company receives
from its independent public accountants the audited financial statements for the
relevant fiscal year indicating that the Company's basic earnings per share for
such fiscal year exceed the basic earnings per share for the prior year by a
minimum of 40%. All bonuses payable under this Section 4(c) will be subject to
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all applicable withholdings, including taxes.
(d) Discretionary Bonus. During each year of the Term, the
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Compensation Committee of the Board will review Executive's performance and may,
in its sole discretion, cause to be paid to Executive a discretionary bonus in
addition to the Annual Salary and other bonuses, subject to all applicable
withholdings, including taxes.
(e) Restricted Stock. Promptly following the date of execution of
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this Agreement, the Company will grant 1,000,000 shares of restricted common
stock of the Company, $.001 par value, to Executive ("Restricted Stock") and
pursuant to a form of Restricted Stock Agreement used by the Company which shall
be provided to Executive prior to the execution of this Agreement. The
Restricted Stock will vest in accordance with the terms of the Restricted Stock
Agreement, provided that Executive's employment is not terminated pursuant to
Section 8(iii) below. In the event that Executive's employment is terminated
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pursuant to Section 8(vi) below, such Restricted Stock shall vest immediately
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upon notice of termination. The Restricted Stock will be subject in all respects
to the terms and conditions of the Restricted Stock Agreement. The Company will
register those shares of Restricted Stock for which contractual transfer
restrictions have lapsed with the Securities and Exchange Commission within 60
days of such vesting and, in any event, will endeavor (using reasonable
commercial efforts) to obtain an effective registration statement with respect
to such shares of Restricted Stock within 90 days of vesting.
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(f) Housing Allowance. For the first 18 months of the Term of this
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Agreement, Executive will receive $2,000 per month to defray the cost of
maintaining a home in Arizona. Thereafter, the Board will review the allowance
and provide it to Executive as necessary and appropriate as reasonably
determined by the Board.
(g) Automobile. Executive will be provided with an automobile for
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Executive's use and Company shall pay all related costs and expenses, including,
but not limited to, fuel, oil, maintenance, repairs, garage and insurance.
(h) Mobile Phone Allowance. Executive will be reimbursed for two
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cellular telephones and their reasonable usage.
(i) Office. Executive shall be provided with an executive office
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suitable for his position and status. Company, at its sole cost and expense,
shall provide Executive with assistants at both his Arizona and California
offices.
5. Business Expenses. During the Term, the Company will reimburse
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Executive for all business expenses incurred by him in connection with his
employment, including first class travel and top line accommodations, upon
submission by the Executive of receipts and other documentation in conformance
with the Company's normal procedures for executives of Executive's position and
status.
6. Vacation, Holidays and Sick Leave. During the Term, Executive will be
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entitled to paid vacation (25 business days per calendar year), paid holidays
and paid sick leave in accordance with the Company's standard policies for its
officers, as may be amended from time to time.
7. Benefits. During the Term, Executive will be eligible to participate
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fully in all health, disability and dental benefits, insurance programs, pension
and retirement plans and other employee benefit and compensation arrangements
(collectively, the "Employee Benefits") available to senior officers of the
Company generally, as the same may be amended from time to time by the Board.
Without limiting the generality of the foregoing, Company shall reimburse
Executive for any and all medical and dental costs and expenses incurred by
Executive and/or his significant other to the extent that such costs and
expenses are not covered by Company's insurance policies.
8. Termination of Employment.
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(a) Notwithstanding any provision of this Agreement to the contrary,
the employment of Executive hereunder will terminate on the first to occur of
the following dates:
(i) the date of Executive's death;
(ii) the date on which Executive has experienced a Disability (as
defined below), and the Company gives Executive notice of termination on account
of Disability;
(iii) the date on which Executive has engaged in conduct that
constitutes Cause (as defined below), and the Company gives Executive notice of
termination for Cause;
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(iv) expiration of the Term without renewal or extension;
(v) the date on which the Company gives Executive notice of
termination for any reason other than the reasons set forth in (i) through (iv)
above; or
(vi) the date on which Executive gives the Company notice of
termination for Good Reason (as defined below).
(b) For purposes of this Agreement, "Disability" will mean an illness
injury or other incapacitating condition as a result of which Executive is
unable to perform, with reasonable accommodation, the services required to be
performed under this Agreement for 180 consecutive days during the Term. In any
such event, the Company, in its sole discretion, may terminate this Agreement by
giving notice to Executive of termination for Disability. Executive agrees to
submit to such medical examinations as may be necessary to determine whether a
Disability exists, pursuant to such reasonable requests made by the Company from
time to time. Any determination as to the existence of a Disability will be
made by a physician mutually selected by the Company and Executive.
(c) For purposes of this Agreement, "Cause" will mean the occurrence
of any of the following events, as reasonably determined by the Board:
(i) Executive's willful and continued failure to substantially
perform his duties hereunder;
(ii) Executive's conviction of a felony, or his guilty plea to or
entry of a nolo contendere plea to a felony charge;
(iii) the willful engaging by Executive in conduct that is
materially injurious to the Company's business or reputation; or
(iv) Executive's breach of any material term of this Agreement or
the Company's written policies and procedures, as in effect from time to time;
provided, however, that with respect to (i), (iii) or (iv) above, such
termination for Cause will only be effective if the conduct constituting Cause
is not cured by Executive within 30 days of receipt by Executive of notice
specifying in reasonable detail the nature of the alleged breach. For purposes
of this subparagraph (c), no act or omission by Executive shall be considered
"willful" unless done, or not done, by Executive in bad faith or without
reasonable belief that such act or omission was in the best interests of
Company, and any act or omission by Executive based upon or consistent with
authority given to Executive under this Agreement or by the Board or upon advise
of Company's counsel, shall be conclusively presumed to be done in good faith
and in the best interests of Company .
(d) For purposes of this Agreement, "Good Reason" will mean the
occurrence of any of the following events, as reasonably determined by
Executive:
(i) a substantial reduction in Executive's responsibilities and
duties by the Board, but excluding for reasons of Cause;
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(ii) the failure of the Company to pay Executive his total Annual
Salary and/or bonuses earned (not including discretionary bonuses);
(iii) the Company's breach of any material term of this
Agreement; provided that in all cases Executive will have provided the Company
with notice and not less than a 15 calendar day opportunity to cure the conduct
that Executive claims constitutes Good Reason; and/or
(iv) a Change of Control shall have occurred. For purposes of
this Agreement, "Change of Control" shall have the meaning ascribed to it in the
Company's 2003 Stock Plan.
9. Compensation in Event of Termination. Upon termination of the Term,
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this Agreement will terminate and the Company will have no further obligation to
Executive except to pay the amounts set forth in this Section 9.
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(a) In the event Executive's employment is terminated pursuant to
Sections 8(a)(i), (ii), (iii) or (iv) on or before the expiration of the Term,
Executive or his estate, conservator or designated beneficiary, as the case may
be, will be entitled to payment of any earned but unpaid Annual Salary for the
year in which the Executive's employment is terminated through the date of
termination, as well as any accrued but unused vacation, reimbursement of
expenses and vested benefits to which Executive is entitled in accordance with
the terms of each applicable Employee Benefits plan.
(b) In the event Executive's employment is terminated pursuant to
Section 8(a)(v) or (vi) on or before the expiration of the Term, Executive will
be entitled to receive on the date of termination, as his sole and exclusive
remedy, a lump sum amount equal to 18 months of payments that Executive would
receive under the Agreement if his employment with the Company had not been
terminated, including, but not limited to, the Annual Salary in effect at the
time of termination and bonuses (payable at time they would be otherwise be
payable), vacation, benefits and reimbursement of expenses.
(c) In the event that it shall be determined by the Company's public
accounting firm that any payment or distribution by the Company or its
affiliated companies to or for the benefit of Executive (whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any adjustment required under this
Section 9(c) (a "Payment")), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended or any amendment,
replacement or similar provision thereto, or any interest or penalties are
incurred by Executive (other than interest or penalties incurred as a result of
Executive's failure promptly to file appropriate tax returns or amended tax
returns after notification of such determination by the Company's public
accounting firm) with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive within 30 days
following such determination or such occurrence, as the case may be, an
additional payment (a "Gross Up Payment") in an amount such that after payment
by Executive of the Excise Tax imposed upon the Gross-Up Payment, Executive will
retain an amount equal to the amount he would have retained had no Exercise Tax
been imposed.
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10. Confidentiality. Executive covenants and agrees that he will not
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at any time during or after the end of the Term, without written consent of the
Company or as may be required by law or valid legal process, directly or
indirectly, use for his own account, or disclose to any person, firm or
corporation, other than authorized officers, directors, attorneys, accountants
and employees of the Company or its subsidiaries, Confidential Information (as
hereinafter defined) of the Company. As used herein, "Confidential Information"
of the Company means information about the Company of any kind, nature or
description, including but not limited to, any proprietary information, trade
secrets, data, formulae, supplier, client and customer lists or requirements,
price lists or pricing structures, marketing and sales information, business
plans or dealings and financial information and plans as well as all papers,
resumes and records (including computer records) that are disclosed to or
otherwise known to Executive as a direct or indirect consequence of Executive's
employment with the Company, which information is not generally known to the
public or in the businesses in which the Company is engaged. Confidential
Information also includes any information furnished to the Company by a third
party with restrictions on its use or further disclosure.
11. Nonsolicitation and Noninterference.
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(a) Customers and Suppliers. While employed by the Company and for a
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one-year period thereafter, Executive will not, directly or indirectly, solicit
or influence or attempt to solicit or influence any current or prospective
customer, client, vendor or supplier of the Company or any of its affiliates or
subsidiaries to divert their business to any Competitor (as defined below) of
the Company (whether or not exclusive) or otherwise terminate his or its
relationship with the Company.
(b) Employees.
(i) Executive recognizes that, as a result of Executive's
association with the Company, he will possess confidential information about
other employees or consultants of the Company and its subsidiaries and
affiliates relating to their education, experience, skills, abilities,
compensation and benefits, and their interpersonal relationships with customers.
Executive acknowledges and agrees that the information he possesses or will
possess about these other employees or consultants is not generally known, is of
substantial value to the Company and its affiliates and subsidiaries in
developing its business and in securing and retaining customers, and is, will be
or may be known to Executive because of his employment with the Company.
(ii) Accordingly, Executive agrees that, while employed by the
Company and for a one-year period thereafter, Executive will not, directly or
indirectly, induce, solicit or recruit any employee or consultant of the Company
or its subsidiaries or affiliates for the purpose of (A) being employed by
Executive or by any Competitor of the Company or (B) causing such individual to
terminate his or her employment relationship with the Company for any purpose or
no purpose.
(iii) For purposes of this Agreement, a "Competitor" will mean
any other entity or person that provides or proposes to provide services or
products similar in kind or purpose to those provided or proposed to be provided
by the Company during the Term.
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(iv) The provisions of Sections 11(a) and (b) above shall not
apply in the event that Executive terminates this Agreement for Good Reason.
12. Rights and Remedies upon Breach. In the event that Executive
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breaches, or threatens to breach, any of the material agreements or material
covenants set forth herein, the Company will have the right and remedy to seek
to obtain injunctive relief, it being agreed that any breach or threatened
breach of any of the confidentiality, nonsolicitation or other restrictive
covenants and agreements contained herein would cause irreparable injury to the
Company and that money damages would not provide an adequate remedy at law to
the Company.
13. Dispute Resolution. Except for an action exclusively seeking
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injunctive relief, any disagreement, claim or controversy arising under or in
connection with this Agreement, including Executive's employment or termination
of employment with the Company will be resolved exclusively by arbitration
before a single arbitrator in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association (the
"Rules"), provided that, the arbitrator will allow for discovery sufficient to
adequately arbitrate any statutory claims, including access to essential
documents and witnesses; provided further, that the Rules will be modified by
the arbitrator to the extent necessary to be consistent with applicable law. The
arbitration will take place in Phoenix, Arizona. The award of the arbitrator
with respect to such disagreement, claim or controversy will be in writing with
sufficient explanation to allow for such meaningful judicial review as permitted
by law, and that such decision will be enforceable in any court of competent
jurisdiction and will be binding on the parties hereto. The remedies available
in arbitration will be identical to those allowed at law. The arbitrator will be
entitled to award reasonable attorneys' fees to the prevailing party in any
arbitration or judicial action under this Agreement, consistent with applicable
law. The Company and Executive each will pay its or his own attorneys' fees and
costs in any such arbitration, provided that, the Company will pay for any
costs, including the arbitrator's fee, that Executive would not have otherwise
incurred if the dispute were adjudicated in a court of law, rather than through
arbitration.
14. Binding Agreement. This Agreement is a personal contract and the
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rights and interests of Executive hereunder may not be sold, transferred,
assigned, pledged, encumbered or hypothecated by him, provided that all rights
of the Executive hereunder shall inure to the benefit of, and be enforceable by
Executive's personal or legal representatives, executors, heirs, administrators,
successors, distributors, devisees and legatees.
(b) In addition to any obligations impose by law upon any successor
to Company (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the assets of Company, by agreement in
form and substance satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would by required to perform if no such succession had taken place.
15. Disclosure Obligations. During the Term, Executive agrees to make
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prompt and full disclosure to the Company of any change of facts or
circumstances that may affect Executive's obligations undertaken and
acknowledged herein, and Executive agrees that the Company has the right to
notify any third party of the existence and content of Executive's obligations
hereunder.
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16. Return of Company Property. Executive agrees that following the
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termination of his employment for any reason, he will promptly return all
property of the Company, its subsidiaries, affiliates and any divisions thereof
he may have managed that is then in or thereafter comes into his possession,
including, but not limited to, documents, contracts, agreements, plans,
photographs, books, notes, electronically stored data and all copies of the
foregoing, as well as any materials or equipment supplied by the Company to
Executive.
17. Entire Agreement. This Agreement contains all the understandings
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between the parties hereto pertaining to the matters referred to herein, and
supersedes all undertakings and agreements, whether oral or written, previously
entered into by them with respect thereto. Executive represents that, in
executing this Agreement, he does not rely, and has not relied, on any
representation or statement not set forth herein made by the Company with regard
to the subject matter, bases or effect of this Agreement or otherwise.
18. Amendment or Modification, Waiver. No provision of this Agreement may
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be amended or waived unless such amendment or waiver is agreed to in writing,
signed by Executive and by a duly authorized officer of the Company. The
failure of either party to this Agreement to enforce any of its terms,
provisions or covenants will not be construed as a waiver of the same or of the
right of such party to enforce the same. Waiver by either party hereto of any
breach or default by the other party of any term or provision of this Agreement
will not operate as a waiver of any other breach or default.
19. Notices. Any notice to be given hereunder will be in writing and will
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be deemed given when delivered personally, sent by courier or fax or registered
or certified mail, postage prepaid, return receipt requested, addressed to the
party concerned at the address indicated below or to such other address as such
party may subsequently give notice of hereunder in writing:
To Executive at:
Xxxxx X. Xxxxxxxx
Suite 214
000 Xxxxxxxxxx Xxxx.
Xxxxxx xxx Xxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
YP Corp.
Suite 105
4840 East Jasmine Street
Mesa, Arizona 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
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To the Company at:
YP Corp.
Suite 105
4840 East Jasmine Street
Mesa, Arizona 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Board of Directors
Any notice delivered personally or by courier under this Section will be deemed
given on the date delivered. Any notice sent by fax or registered or certified
mail, postage prepaid, return receipt requested, will be deemed given on the
date faxed or mailed. Each party may change the address to which notices are to
be sent by giving notice of such change in conformity with the provisions of
this Section. A copy of all notices sent to Executive shall be simultaneously
sent to Xxxxxxxx Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000-0000;
attention: Xxxxx X. Xxxxxxxx, Esq.
20. Severability. In the event that any one or more of the provisions
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of this Agreement will be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remainder of the Agreement will not
in any way be affected or impaired thereby. Moreover, if any one or more of the
provisions contained in this Agreement will be held to be excessively broad as
to duration, activity or subject, such provisions will be construed by limiting
and reducing them so as to be enforceable to the maximum extent allowed by
applicable law.
21. Survivorship. The respective rights and obligations of the parties
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hereunder will survive any termination of this Agreement to the extent necessary
for the intended preservation of such rights and obligations.
22. Each Party the Drafter. This Agreement and the provisions contained in
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it will not be construed or interpreted for or against any party to this
Agreement because that party drafted or caused that party's legal representative
to draft any of its provisions.
23. Governing Law. This Agreement will be governed by and construed in
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accordance with the laws of the State of Arizona, without regard to its
conflicts of laws principles.
24. Headings. All descriptive headings of sections and paragraphs in this
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Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
25. Counterparts. This Agreement may be executed in counterparts, each of
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which will be deemed an original, but all of which together will constitute one
and the same instrument.
26. Indemnification. Company shall indemnify, hold harmless and defend
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Executive for all acts or omissions taken or not taken by Executive while
performing services for Company upon the terms and conditions set forth in the
Indemnification Agreement to be entered into by the parties contemporaneously
with this Agreement. At all times during the Term Company shall maintain an
insurance policy covering all Officers and Directors of the Company against
third party
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claims and lawsuits, and Company shall insure that Executive shall be covered by
such policy upon terms and conditions no less favorable to Executive than the
terms and conditions governing the coverage accorded to such other Officers and
Directors.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
YP CORP., a Nevada corporation EXECUTIVE
/s/ XxXxx Xxxxxxx /s/ Xxxxx X. Xxxxxxxx
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XxXxx Xxxxxxx Xxxxx X. Xxxxxxxx
Executive Vice President
and Corporate Secretary
[XXXXX XXXXXXXX EMPLOYMENT AGREEMENT]
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