EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into onNovember 1, 2004 by and between YP Corp., a Nevada corporation (the "Company") andPenny Spaeth ("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 Executivehereby agrees to serve, subject to the provisions of this Agreement, as an employee of theCompany in the position of Chief Operating Officer, Executive will perform all services and actsreasonably necessary to fulfill the duties and responsibilities of her position and will render such services on the terms set forth herein and will report to the Company's Chief Executive Officer (the"CEO"). Executive agrees to devote her business time, attention and energies to the extent reasonably necessary to perform the duties assigned hereunder, and to perform such dutiesdiligently, faithfully and to the best of her abilities. It is expressly understood and agreed thatExecutive shall have the right to engage in any activities that are generally engaged in byexecutives of her position and status, provided that Executive agrees to refrain from any activitythat does, will or could reasonably be deemed to conflict with the best interests of the Company.
2. Term. This Agreement is for the two-year period (the "Term") commencing on thedate hereof and terminating on the second anniversary of such date, or upon the date of terminationof employment pursuant toSection 8 of this Agreement;provided, however, that commencing onthe second anniversary of the date hereof and each anniversary thereafter the Term willautomatically be extended for one additional year unless, not later than 30 days prior to any suchanniversary, either party hereto will have notified the other party hereto that such extension will nottake 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 business,Executive will perform the majority of her duties and conduct the majority of her business onbehalf of the Company at the Company's offices in Mesa, Arizona.
4. Compensation.
(a) Salary. Executive's salary during the first year of this Agreement will be atthe annual rate of $137,500 (the "Annual Salary"), payable in accordance with the Company'sregular payroll practices. All applicable withholdings, including taxes, will be deducted from suchpayments. The Annual Salary will be increased to $151,250 during the second year of thisAgreement. Thereafter, the Annual Salary will be as determined by the Compensation Committeeof the Board, but shall in no event be less than 110% of the previous year's Annual Salary,
(b) Performance Bonuses. Upon signing this agreement Executive shall receivea cash Bonus of $1,000. Promptly following the commencement of each fiscal year Executive willreceive a bonus of 25,000 shares of the Company's common stock, $.001 par value per shareissued out of the Company's 2003 Stock Plan and pursuant to the Company's standard form ofRestricted Stock Agreement ("Restricted Stock") in the event that the Company's basic earnings per share (as reported in the Company's filings with the Securities and Exchange Commission) forthat respective fiscal year ended September 30, exceed the prior fiscal year's basic earnings pershare by a minimum of 50%. To the extent such test is met, the bonus will be paid to Executive nolater than 30 days after the Company receives from its independent public accountants the auditedfinancial 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 50%. All bonuses payable under thisSection 4 will be subject to all applicable withholdings,including taxes.
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(c)Car Allowance. Executive shall be provided with a four hundred dollar permonth allowance for automobile usage.
(d) Cell Phone. Executive shall be reimbursed for cell phone usage with aceiling of one hundred dollars per month.
(c) Office. Executive shall be provided with an executive office suitable for herposition and status.
5. Business Expenses. During the Term, the Company will reimburse Executive for allbusiness expenses incurred by her in connection with her employment, upon submission by theExecutive of receipts and other documentation in conformance with the Company's normalprocedures for executives of Executive's position and status.
6. Vacation, Holidays and Sick Leave. During the Term, Executive will be entitled topaid vacation (15 business days per calendar year), paid holidays and paid sick leave in accordancewith 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 fully in allhealth, disability and dental benefits, insurance programs, pension and retirement plans and otheremployee 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
8. Termination of Employment.
(a) Notwithstanding any provision of this Agreement to the contrary, theemployment 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 definedbelow), and the Company gives Executive notice of termination on account of Disability;
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(iii) the date on which Executive has engaged in conduct that constitutesCause (as defined below), and the Company gives Executive notice of termination for Cause;
(iv) expiration of the Term without renewal or extension;
(v) the date on which the Company gives Executive notice of terminationfor 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 terminationfor Good Reason (as defined below).
(b) For purposes of this Agreement, "Disability" will mean an illness injury orother incapacitating condition as a result of which Executive is unable to perform, with reasonableaccommodation, the services required to be performed under this Agreement for 180 consecutivedays 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 submitto 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 determinationas to the existence of a Disability will be made by a physician mutually selected by the Companyand Executive.
(c) For purposes of this Agreement, "Cause" will mean the occurrence of any ofthe following events, as reasonably determined by the Board:
(i) Executive's willful failure to substantially perform her dutieshereunder;
(ii) Executive's conviction of a felony, or her guilty plea to or entry of anolo contendere plea to a felony charge;
(iii) the willful engaging by Executive in conduct that is materiallyinjurious to the Company's business or reputation; or
(iv) Executive's breach of any material term of this Agreement or theCompany's written policies and procedures, as in effect from time to time; provided, however, thatwith respect to (i), (iii) or (iv) above, such termination for Cause will only be effective if theconduct constituting Cause is not cured by Executive within 5 days of receipt by Executive ofnotice specifying in reasonable detail the nature of the alleged breach.
(d) For purposes of this Agreement, "Good Reason" will mean the occurrence of any of the following events, as reasonably determined by Executive:
(i) the failure of the Company to pay Executive her total Annual Salaryand/or bonuses earned (not including discretionary bonuses);
(ii) 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
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(iii) a Change of Control shall have occurred. For purposes of thisAgreement, "Change of Control" shall have the meaning ascribed to it in the Company's 2003Stock Plan.
9. Compensation in Event of Termination. Upon termination of the Term, thisAgreement will terminate and the Company will have no further obligation to Executive except topay the amounts set forth in thisSection 9.
(a) In the event Executive's employment is terminated pursuant to Sections8(a)(i), (ii), (iii) or (iv) on or before the expiration of the Term, Executive or her estate, conservatoror designated beneficiary, as the case may be, will be entitled to payment of any earned but unpaidAnnual Salary for the year in which the Executive's employment is terminated through the date oftermination, as well as any accrued but unused vacation, reimbursement of expenses and vestedbenefits to which Executive is entitled in accordance with the terms of each applicable EmployeeBenefits 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 thedate of termination, as her sole and exclusive remedy, a lump sum amount equal to 2 months ofpayments that Executive would receive under the Agreement if her employment with the Companyhad not been terminated, including, but not limited to, the Annual, Salary in effect at the time oftermination and bonuses (payable at time they would be otherwise be payable), vacation, benefitsand reimbursement of expenses.
10. Confidentiality. Executive covenants and agrees that she will not at any time duringor after the end of the Term,without written consent of the Company or as may be required, by lawor valid legal process, directly or indirectly, use for her own account, or disclose to any person,firm or corporation, other than authorized officers, directors, attorneys, accountants and employeesof the Company or its subsidiaries. Confidential Information (as hereinafter defined) of theCompany. As used herein, "Confidential Information" of the Company means information aboutthe Company of any kind, nature or description, including but not limited to, any proprietaryinformation, 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 financialinformation and plans as well as all papers, resumes and records (including computer records) thatare disclosed to or otherwise known to Executive as a direct or indirect consequence of Executive'semployment with the Company, which information is not generally known to the public or in thebusinesses 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 furtherdisclosure.
11. Nonsolicitation and Noninterference.
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(a) Customers and Suppliers. While employed by the Company and for a one-year period thereafter, Executive will not, directly or indirectly, solicit or influence or attempt tosolicit 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 her or its relationship with theCompany.
(b) Employees.
(i) Executive recognizes that, asaresult of Executive's association withthe Company, she will possess confidential information about other employees or consultants of theCompany 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 she possesses or will possess about these otheremployees or consultants is not generally known, is of substantial value to the Company and itsaffiliates and subsidiaries in developing its business and in securing and retaining customers, andis, will be or may be known to Executive because of her employment with the Company.
(ii) Accordingly, Executive agrees that, while employed by the Companyand for a one-year period thereafter, Executive will not, directly or indirectly, induce, solicit orrecruit 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 suchindividual 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 otherentity 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.
(iv) The provisions of Sections 11 (a) and (b) above shall not apply in theevent that Executive terminates this Agreement for Good Reason.
12. Rights and Remedies upon Breach. In the event that Executive breaches, or threatens to breach, any of the material agreements or material covenants set forth herein, theCompany will have the right and remedy to seek to obtain injunctive relief, it being agreed that anybreach or threatened breach of any of the confidentiality, nonsolicitation or other restrictivecovenants and agreements contained herein would cause irreparable injury to the Company and thatmoney damages would not provide an adequate remedy at law to the Company.
13. Dispute Resolution. Except for an action exclusively seeking injunctive relief, anydisagreement, claim or controversy arising under or in connection with this Agreement, includingExecutive's employment or termination of employment with the Company will be resolvedexclusively by arbitration before a single arbitrator in accordance with the National Rules for theResolution 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 willbe modified by the arbitrator to the extent necessary to be consistent with applicable law. Thearbitration will take place in Phoenix, Arizona. The award of the arbitrator with respect to suchdisagreement, claim or controversy will be in writing with sufficient explanation to allow for suchmeaningful 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 inarbitration will be identical, to those allowed at law. The arbitrator will be entitled to awardreasonable attorneys' fees to the prevailing party in any arbitration or judicial action under thisAgreement, consistent with applicable law. The Company and Executive each will pay its or herown attorneys' fees and costs in any such arbitration, provided that, the Company will pay for anycosts, 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,
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14. Rinding Agreement. (a) This Agreement is a personal contract and the rights and interests of Executive hereunder may not be sold, transferred, assigned, pledged, encumbered orhypothecated by her, provided that all rights of the Executive hereunder shall inure to the benefitof, and be enforceable by Executive's personal or legal representatives, executors, heirs,administrators, successors, distributors, devisees and legatees,
(b) In addition to any obligations imposed by law upon any successor toCompany (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 toExecutive, 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 prompt and fulldisclosure to the Company of any change of facts or circumstances that may affect Executive'sobligations undertaken and acknowledged herein, and Executive agrees that the Company has theright to notify any third party of the existence and content of Executive's obligations hereunder.
16. Return of Company Property. Executive agrees that following the termination of her employment for any reason, she will promptly return all property of the Company, itssubsidiaries, affiliates and any divisions thereof she may have managed that is then in or thereaftercomes into her 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 between theparties hereto pertaining to the matters referred to herein, and supersedes all undertakings andagreements, whether oral or written, previously entered into by them with respect thereto,Executive represents that, in executing this Agreement, she does not rely, and has not relied, on anyrepresentation or statement not set forth herein made by the Company with regard to the subjectmatter, bases or effect of this Agreement or otherwise.
18. Amendment or Modification, Waiver. No provision of this Agreement may beamended or waived unless such amendment or waiver is agreed to in writing, signed by Executiveand by a duly authorized officer of the Company. The failure of either party to this Agreement toenforce any of its terms, provisions or covenants will not be construed as a waiver of the same or ofthe right of such party to enforce the same. Waiver by either party hereto of any breach or defaultby the other party of any term or provision of this Agreement will not operate as a waiver of anvother breach or default.
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19. Notices. Any notice to be given hereunder will be in writing and will be deemedgiven when) delivered personally, sent by courier or fax or registered or certified mail, postageprepaid, return receipt requested, addressed to the party concerned at the address indicated below or to such other address as such patty may subsequently give notice of hereunder in writing:
To Executive at:
Penny Spaeth.
Mesa, Az.
YP Corp.
Suite 105
4840 East Jasmine Street
Mesa, Arizona 85205-3321
Phone: (480) 860-0011
Fax: (480) 325-1257
To the Company at:
YP Corp.
Suite 105
4840 East Jasmine Street
Mesa, Arizona 85205-3321
Phone: (480) 860-0011
Fax: (480) 325-1257
Attention: Board of Directors
Any notice delivered personally or by courier under this Section will be deemed given on the datedelivered. Any notice sent by fax or registered or certified mail, postage prepaid, return receiptrequested, will be deemed given on the date faxed or mailed. Each party may change the address towhich notices are to be sent by giving notice of such change in conformity with the provisions ofthis Section.
Severability. In the event that any one or more of the provisions of this Agreement will be held tobe invalid, illegal or unenforceable, the validity, legality and enforceability of the remainder of theAgreement will not in any way be affected or impaired thereby. Moreover, if any one or more ofthe 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 beenforceable to the maximum extent allowed by applicable law.
20. Survivorship. The respective rights and obligations of the parties hereunder willsurvive any termination of this Agreement to the extent necessary for the intended preservation ofsuch rights and obligations.
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21. Each Party the Drafter. This Agreement and the provisions contained in it will notbe 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.
22. Governing Law. This Agreement will be governed by and construed in accordancewith the laws of the State of Arizona, without regard to its conflicts of laws principles.
23. Headings. All descriptive headings of sections and paragraphs in this Agreementare intended solely for convenience, and no provision of this Agreement is to be construed byreference to the heading of any section or paragraph.
24. Counterparts. This Agreement may be executed in counterparts, each of which willbe deemed an original, but all of which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the datefirst written above,
| YP CORP., a Nevada corporation | EXECUTIVE | |
| /s/ Peter J. Bergmann | /s/ Penny Spaeth | |
| Peter J. Bergmann | Penny Spaeth | |
| Chief Executive Officer |
[PENNY SPAETH EMPLOYMENT AGREEMENT]
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