Restricted Stock Agreement - YP Corp. and Peter J. Bergmann
RESTRICTED STOCK AGREEMENT
This Restricted Stock Agreement (the "Agreement") is entered into between
YP Corp., a Nevada corporation (the "Company"), and Peter J. Bergmann (the
"Grantee"), as of June 6, 2004 ("Date of Grant").
Background
The Company and Grantee have entered into an Employment Agreement of even
date herewith ("Employment Agreement"). Pursuant to the Employment Agreement,
the Company is obligated to grant Grantee shares of common stock of the Company,
$.001 par value per share, subject to the restrictions set forth in this
Agreement.
Agreement
In consideration of the mutual covenants and conditions in this Agreement
and for other good and valuable consideration, the Company and the Grantee agree
as follows:
1. GRANT OF STOCK.
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Subject to the terms of this Agreement, the Company hereby grants
1,000,000 shares of the Company's common stock, $.001 par value (the "Stock") to
the Grantee. The delivery of any documents evidencing the Stock granted pursuant
to this Agreement shall be subject to the provisions of Section 5 below.
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2. RIGHTS OF GRANTEE.
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Upon the execution of this Agreement, the Grantee will become a
shareholder with respect to all of the Stock granted to him pursuant to Section
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1 and will have all of the rights of a shareholder in the Company with respect
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to all such Stock including the right to vote and receive dividends; provided,
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however, that such Stock will be subject to the restrictions set forth in this
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Agreement.
3. RESTRICTIONS ON STOCK SUBJECT TO THIS AGREEMENT.
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A. General.
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Except as set forth in this Agreement, the Grantee will transfer
those shares of Stock for which the restrictions have not lapsed under Section 4
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to the Company immediately and without any payment to the Grantee if the
Grantee's employment or status as a non-employee service provider with the
Company (or its Subsidiary) is terminated for any reason. Notwithstanding the
foregoing, in the event that Grantee's employment or status as a non-employee
service provider with the Company (or its Subsidiary) is terminated six months
or more after the Date of Grant as a result of Grantee's death or Disability (as
defined in the Employment Agreement), Grantee or Grantee's beneficiaries, as
applicable, will be permitted to retain the Stock subject to the continuing
restrictions set forth in this Agreement.
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B. Limitations on Transfer.
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Unless approved by the Committee or the Board, the Grantee agrees
not to sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of
any shares of Stock under this Agreement ("Transfer") before the date on which
the restrictions on those shares of Stock lapse in accordance with Section 4.
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Any attempted disposition of the Stock in violation of the preceding sentence
will be null and void, and the Company will not recognize or give effect to such
transfer on its books and records or recognize the person or persons to whom
such proposed transfer has been made as the legal or beneficial owner of the
shares of Stock. In the event that a Transfer is approved by the Committee or
the Board, the Grantee must, prior to consummating or effecting a Transfer,
first obtain the written agreement of the transferee to be bound by the terms of
this Agreement as if such transferee were deemed the original "Grantee."
4. LAPSE OF RESTRICTIONS.
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A. Schedule.
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Subject to the other conditions in this Section 4, the
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restrictions on the Stock set forth in Section 3 will lapse in accordance with
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the following schedule, subject to and as adjusted for, in the case of closing
prices of the Company's common stock, stock splits, reverse stock splits,
combinations, reclassifications and the like:
Date Restriction Lapses Percentage of Stock Becomes
(earlier to occur of the following) Unrestricted
Third Anniversary of Date of Grant 100%
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Change of Control (as defined in the Company's 2003 Stock Plan) 100%
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Termination of Grantee's Employment with Company by Grantee for
"Good Reason" (as defined in the Employment Agreement) 100%
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Date that Company's common stock as listed on the Over-the-Counter
Bulletin Board, Nasdaq, the American Stock Exchange, The New
York Stock Exchange, or a similar exchange or quotation system
("Exchange") reaches an average closing price of $4 for three
consecutive trading days 20%
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Date that Company's common stock as listed on an Exchange reaches
an average closing price of $5 for three consecutive trading days 40%
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Date that Company's common stock as listed on an Exchange reaches
an average closing price of $6 for three consecutive trading days 60%
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Date that Company's common stock as listed on an Exchange reaches
an average closing price of $7 for three consecutive trading days 80%
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Date that Company's common stock as listed on an Exchange reaches
an average closing price of $8 for three consecutive trading days 100%
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Notwithstanding the above, if the Grantee's employment or service
is terminated for Cause (as defined in the Employment Agreement), the Grantee
will be required to transfer all shares of Stock set forth in Section 1 (whether
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or not subject to restrictions set forth in Section 3) back to the Company for
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no consideration, excluding shares of Stock that have been transferred by
Grantee in accordance with the terms of this Agreement.
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B. Condition That Must be Satisfied Before Restrictions Lapse.
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Subject to Section 3A, the restrictions on the Stock subject to
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this Agreement will not lapse unless the Grantee is employed by, or is providing
services to, the Company (or a Subsidiary) as of the date the restrictions lapse
in accordance with the above schedule.
5. SECURITIES ACT.
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A. Registration.
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Without limiting the registration rights set forth in the
Employment Agreement, the Company agrees to register the Stock pursuant to a
Form S-8 registration statement filed within 30 days following the date hereof
and to file a reoffer prospectus with the Form S-8 to permit Executive to offer
and sell the Stock and to maintain the effectiveness of such registration
statement and prospectus for a period of at least two years after restrictions
on the Stock lapse.
B. Condition on Delivery of Stock.
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The Company will not be required to deliver any shares of Stock
if, in the opinion of counsel for the Company, the issuance would violate the
Securities Act of 1933 or any other applicable federal or state securities laws
or regulations. The Company may require the Grantee, prior to or after the
issuance of any such Stock, to sign and deliver to the Company a written
statement ("Investment Letter") in form and content acceptable to the Company in
its sole discretion. Grantee agrees (i) that the Grantee is acquiring the Stock
for investment and not with a view to the sale or distribution thereof, (ii)
that the Grantee will not sell any Stock received hereunder that remains subject
to restrictions except with the prior written approval of the Company, and (iii)
that Grantee will comply with the Securities Act of 1933 or other applicable
federal or state securities laws and regulations.
C. Legend.
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If the Stock has not been registered under the Securities Act
of 1933 or other applicable federal or state securities laws or regulations,
such shares will bear a legend restricting the transferability. The legend will
be substantially in the following form:
"The Stock represented by this certificate have not been registered or
qualified under federal or state securities laws. The Stock may not be
offered for sale, sold, pledged, or otherwise disposed of unless so
registered or qualified, unless an exemption exists or unless such
disposition is not subject to the federal or state securities laws,
and the availability of any exemption or the inapplicability of such
securities laws must be established by an opinion of counsel, which
opinion of counsel will be reasonably satisfactory to the Company."
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6. REPRESENTATIONS OF GRANTEE.
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In connection with Grantee's receipt of the Stock, Grantee hereby
represents and warrants to the Company as follows:
A. Further Limitations on Disposition.
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Grantee understands and acknowledges that he may not make any
disposition, sale, or transfer (including transfer by gift or operation of law)
of all or any portion of the Stock except as provided in this Agreement.
Moreover, Grantee agrees to make no disposition of all or any portion of the
Stock unless and until: (i) there is then in effect a registration statement
under the Securities Act of 1933 covering such proposed disposition and such
disposition is made in accordance with said Registration Statement; (ii) the
resale provisions of Rule 701 or Rule 144 are available in the opinion of
counsel to the Company; or (iii)(A) Grantee notifies the Company of the proposed
disposition and has furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, (B) Grantee furnishes the
Company with an opinion of Grantee's counsel to the effect that such disposition
will not require registration of such Stock under the Securities Act, and (C)
such opinion of Grantee's counsel shall have been concurred with by counsel for
the Company and the Company shall have advised Grantee of such concurrence.
B. Determination of Fair Market Value.
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Grantee understands Fair Market Value of the Stock shall be determined
in accordance with Section 3.1(k) of the Company's 2003 Stock Plan.
C. Section 83(b) Election.
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Grantee understands that Section 83 of the Internal Revenue Code of
1986 (the "Code") taxes as ordinary income the difference between the amount
paid for the Stock and the fair market value of the Stock as of the date any
restrictions on the Stock lapse. In this context, "restriction" means the
restrictions set forth in Section 3. The Grantee understands that he may elect
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to be taxed at the time the Stock is granted rather than when and as the Stock
vests by filing an election under Section 83(b) of the Code with the Internal
Revenue Service within 30 days from the Date of Grant. The Grantee understands
that failure to make this filing timely will result in the recognition of
ordinary income by the Grantee, as the Stock vests, on the Fair Market Value of
the Stock at the time such restrictions lapse.
THE GRANTEE ACKNOWLEDGES THAT IT IS THE GRANTEE'S SOLE RESPONSIBILITY
AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b),
EVEN IF THE GRANTEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO
MAKE THIS FILING ON THE GRANTEE'S BEHALF.
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7. NONTRANSFERABILITY OF AGREEMENT.
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Unless approved by the Committee or the Board, this Agreement will not
be transferable by the Grantee during his life other than by will or pursuant to
applicable laws of descent and distribution. Unless approved by the Committee or
the Board, any rights and privileges of the Grantee will not be transferred,
assigned, pledged, or hypothecated by the Grantee, or by any other person or
persons, in any way, whether by operation of law, or otherwise, and will not be
subject to execution, attachment, garnishment or similar process. In the event
of any such occurrence, this Agreement will automatically be terminated and will
thereafter be null and void.
8. FEDERAL AND STATE TAXES.
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The Grantee may incur certain liabilities for federal, state, or
local taxes and the Company may be required by law to withhold taxes. Upon
determination of the year in which such taxes are due and the determination by
the Company of the amount of taxes required to be withheld, the Grantee shall
pay an amount equal to the amount of federal, state, or local taxes required to
be withheld to the Company.
9. ADJUSTMENT OF SHARES.
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The number of shares of Stock granted to the Grantee pursuant to this
Agreement will be proportionately adjusted in the event of any recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event affecting the Stock all as set forth in Article 11 of the
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Company's 2003 Stock Plan.
10. AMENDMENT OF THIS AGREEMENT.
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This Agreement may only be amended with the written approval of the
Grantee and the Company.
11. GOVERNING LAW.
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This Agreement shall be governed in all respects, whether as to
validity, construction, capacity, performance, or otherwise, by the laws of the
State of Arizona.
12. SEVERABILITY.
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In the event that a court of competent jurisdiction determines that
any portion of this Agreement is in violation of any statute or public policy,
then only the portions of this Agreement which violate such statute or public
policy shall be stricken. All portions of this Agreement which do not violate
any statute or public policy shall continue in full force and effect. Further,
any court order striking any portion of this Agreement shall modify the stricken
terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized representative and Grantee has signed this Agreement as of
the day and year first written above.
YP CORP., a Nevada corporation GRANTEE
/s/ DeVal Johnson /s/ Peter J. Bergmann
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DeVal Johnson Peter J. Bergmann
Executive Vice President
and Corporate Secretary
[Signature Page to YP. Corp. Restricted Stock Agreement]