SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) is November 4, 2004
YP CORP.
(Exact name of registrant as specified in its charter)
NEVADA 000-24217 85-0206668
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(State or other jurisdiction of (Commission File (IRS Employer
incorporation or jurisdiction) Number) Identification Number)
4940 E. JASMINE STREET, SUITE 105, MESA,
ARIZONA 85205
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (480) 654-9646
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On November 4, 2004, YP Corp. ("YP") entered into a Termination Agreement with
Advanced Internet Marketing, Inc. ("AIM"), an entity controlled by DeVal
Johnson, a director of YP, concerning the termination of the Executive
Consulting Agreement, dated September 20, 2002, between YP and AIM. Mr.
Johnson's resignation as an officer of YP and its subsidiary coincided with the
execution of the Termination Agreement.
The Executive Consulting Agreement with AIM had provided for the provision of
executive management services by AIM through DeVal Johnson and other AIM
employees.
The Termination Agreement provides for the payment of $367,570 to AIM, payable
over 18 months. The required remaining amount that would have been payable to
AIM under the Executive Consulting Agreement through its expiration in 2007 was
approximately $1 million.
Specifically, the amounts owed to AIM under the Termination Agreement with AIM
are payable as follows:
a. $50,000 upon execution of the Termination Agreement;
b. $14,865 payable at the beginning of each month for 18 months
commencing December 1, 2004;
c. $50,000 on January 1, 2005;
Upon a change of control or the sale of all or substantially all of the assets
of YP, all the foregoing payments to AIM will be immediately due and payable.
Additionally, pursuant to the Termination Agreement, AIM and its respective
officers, directors and affiliates have agreed not to compete with or solicit
customers or employees of YP for a period of six years. Finally, the Termination
Agreement requires Mr. Johnson and other officers and employees of AIM to make
themselves available to YP for consultation.
Mr. Johnson will remain a director of YP.
ITEM 1.02. TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT.
On November 4, 2004, YP and AIM terminated the Executive Consulting Agreement,
dated September 20, 2002, between YP and AIM.
The Executive Consulting Agreement was scheduled to expire in September 2007 and
had remaining total payments to AIM of approximately $1 million. The Agreement
provided for executive management services by AIM, primarily through DeVal
Johnson, the President of AIM and one of the founders of YP. Specifically, Mr.
Johnson provided the services of director, Corporate Secretary, and Executive
Vice President of Corporate Image. In addition to the services discussed above,
YP also outsourced the design and some of the marketing of its
website to AIM. As part of the Agreement, AIM originally received $18,000 per
month with a 10% annual increase in each succeeding year, as well as board of
director fees, an annual bonus, and fees and reimbursements for certain
ancillary items. In addition, the Agreement also awarded AIM with 1,000,000
shares of YP common stock, grossed-up for taxes, subject to achieving certain
performance goals for YP in fiscal 2003, which were achieved.
As part of the agreement, a Flex Compensation program was instituted. This
program provided AIM with the ability to be paid up to $30,000 annually
(increased by 10% on each anniversary date of the agreement) as additional
compensation, subject to sufficient cash on hand at YP. The taxes on the Flex
Compensation, bonus and stock were paid by YP. In addition, the Agreement
contained a Due on Sale clause whereby, if there were a change of control of YP,
AIM would receive the greater of 30% of the amounts due under the Agreement or
12 months' worth of fees.
The Agreement contained a termination penalty, whereby YP would be required to
pay AIM, in a single lump sum, the greater of 30% of the amounts due under the
Agreement or 12 months' worth of fees. YP negotiated a Termination Agreement
with AIM and Mr. Johnson that provides for scheduled payments over 18 months and
non-compete and consulting covenants from AIM.
Mr. Johnson will remain a director of YP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 8, 2004 YP CORP.
/s/ Peter Bergmann
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Peter Bergmann, Chairman and
Chief Executive Officer