YP Corp. 8-K 6-6-2007
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
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): June 6, 2007
YP
CORP.
(Exact
Name of Registrant as Specified in Charter)
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Nevada
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000-24217
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85-0206668
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(State
or Other Jurisdiction of Incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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4840
East Jasmine Street, Suite 105, Mesa,
Arizona
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85205
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(Address
of Principal Executive Offices)
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(Zip
code)
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(480)
654-9646
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(Registrant’s
telephone number, including area code)
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Not
Applicable
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(Former
Name or Former Address, if Changed Since Last Report)
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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):
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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Item
1.01 Entry into a Material Definitive Agreement.
On
June
6, 2007, YP Corp. (the "Company"), LD Acquisition Co. (the “Merger Sub”), a
wholly-owned subsidiary of the Company, LiveDeal, Inc. ("LiveDeal"), Rajesh
Navar and Arati Navar, as Trustees of the Rajesh & Arati Navar Living Trust
(the “Principal Shareholder”), and Rajesh Navar (the “Shareholders’
Representative”) entered into an Agreement and Plan of Merger (the "Merger
Agreement”). A copy of the press release issued by the Company announcing the
execution and consummation of the Merger Agreement is filed as Exhibit 99.1
hereto.
The
Merger Agreement
At
the
effective time (the "Effective Time"), the Merger Sub was merged with and into
LiveDeal and LiveDeal remained the surviving corporation (the "Merger"). As
a
result of the Merger, all shares of LiveDeal Common Stock, Series A Preferred
Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock, and Series B
Preferred Stock (the "LiveDeal Stock") were converted into the right to receive
14,504,808 shares of Common Stock, par value $0.001, of the Company (the
"Company Stock"). In addition, at the Effective Time, all outstanding LiveDeal
options and warrants were converted into options to purchase a total of 230,819
shares of Company Stock and warrants to acquire a total of 728 shares of Company
Stock on the same terms and conditions that are applicable to such LiveDeal
options and warrants, except that (i) each LiveDeal option and warrant will
be exercisable (or will become exercisable in accordance with its terms) for
that number of shares of Company Stock equal to the product of the number of
shares of LiveDeal Stock that were issuable upon exercise of such LiveDeal
option or warrant immediately prior to the Effective Time multiplied by .072842,
and (ii) the per share exercise price for the shares of Company Stock
issuable upon exercise of such assumed LiveDeal option and warrant will be
equal
to the quotient determined by dividing the exercise price per share of LiveDeal
Stock of such LiveDeal option and warrant by .072842; provided,
however,
that in
the case of any LiveDeal option or warrant to which Section 421 of the Internal
Revenue Code (the “Code”) applied by reason of its qualification under Section
422 of the Code, the option or warrant price, the number of shares subject
to
such option or warrant, and the terms and conditions of exercise of such option
or warrant shall be determined in a manner consistent with the requirements
of
Section 424(a) of the Code. Finally, the Company agreed to issue an additional
1,463,706 shares of Company Stock in exchange for the cancellation of $1,021,666
of LiveDeal debt. Immediately following the Merger, LiveDeal will be a
wholly-owned subsidiary of the Company.
The
Merger Agreement contains customary representations and warranties of the
parties, all of which survive for one year from the Effective Time. The
representations, warranties, covenants and other agreements are qualified by
information contained in confidential disclosure schedules that the Company
received in connection with the execution of the Merger Agreement. The
disclosure schedules contain information that modifies, qualifies and creates
exceptions to the representations, warranties, covenants and other agreements
set forth in the Merger Agreement. Although certain of the information contained
in the disclosure schedules may be non-public, the Company does not believe
that
this information is required to be publicly-disclosed under the Federal
securities laws. Moreover, certain of these representations, warranties,
covenants and other agreements may not be accurate or complete as of a specific
date because they are subject to a contractual standard of materiality that
may
be different from the standard generally applied under the Federal securities
laws or were used for the purpose of allocating risk between the Company and
LiveDeal’s shareholders rather than establishing matters as facts. Finally,
information concerning the subject matter of these representations, warranties,
covenants and other agreements may have changed since the date of the Merger
Agreement, which may or may not be fully-reflected in the Company’s public
disclosures. Accordingly, you should not rely on these representations,
warranties, covenants and other agreements as statements of fact.
The
Merger Agreement further provides that the LiveDeal shareholders will severally,
and not jointly, in accordance with their respective pro rata share of the
shares of Common Stock issued in connection with the Merger, indemnify and
hold
harmless the Company, Merger Sub, and their respective directors, officers,
employees and agents (each of the foregoing, an “Indemnified Person”) from and
against all proceedings, judgments, decrees, demands, claims, actions, losses,
damages, liabilities, costs and expenses, including, without limitation,
reasonable attorneys’ fees and costs incurred by the Company, Merger Sub or
their respective directors, officers, employees or agents resulting from (i)
a
breach by LiveDeal or the Principal Shareholder of any representation or
warranty set forth in Article
3
of the
Merger Agreement or the exhibits or schedules thereto; (ii) a breach of any
covenant or agreement of LiveDeal or Principal Shareholder contained in the
Merger Agreement; (iii) any claim or cost incurred relating to the
indemnification of current or former directors or officers of LiveDeal; or
(iv)
any claim related to dissenting shares, dissenting LiveDeal shareholders or
compliance or failure to comply with applicable California Law relating to
dissenters’ rights or appraisal rights in excess of $500,000. Except
for remedies that cannot be waived as a matter of law or statute, claims of
fraud or willful misconduct and injunctive and provisional relief,
the
remedies provided relating to indemnification in the Merger Agreement
are
the
exclusive remedies available to the Company and the other Indemnified Persons.
For matters arising under the Merger Agreement’s indemnity obligations, the
liability of a LiveDeal shareholder will be limited in the aggregate to such
LiveDeal shareholder’s pro rata portion of the 20%
of
the Company Stock issued in the Merger and held in escrow.
In
addition, for a period of two years from the Effective Time, if the Company
determines to register any of its equity securities under the Securities Act
of
1933, as amended (the
“Securities Act”),
other
than on Form S-4 or Form S-8 or their then equivalents, then the Company will
send to the LiveDeal shareholders written notice of such determination and,
if
within 20 days after receipt of such notice, a LiveDeal shareholder requests
in
writing, the Company will include in such registration statement all or any
part
of the shares of Common Stock issued in connection with the Merger or the shares
issuable in connection with the Merger’s qualification as a tax free
reorganization owned by such LiveDeal shareholder that such LiveDeal shareholder
requests to be registered. However, in the event that the managing underwriter
for said offering advises the Company that market factors require limitation
of
the number of shares to be underwritten, then the Company shall so advise all
LiveDeal shareholders requesting registration and the number of shares that
may
be included in the registration and underwriting will be allocated pro rata
among such the LiveDeal shareholders requesting registration and other parties
selling shares thereunder.
The
foregoing description of the Agreement is not complete and is qualified in
its
entirety by reference to the Merger Agreement, a copy of which is attached
hereto as Exhibit 2.1 and incorporated herein by reference.
Escrow
Agreement
To
secure
the indemnification obligations of LiveDeal’s shareholders under the terms and
conditions of the Merger Agreement, 20% of the combined total of the Company
Stock issued in the Merger will be deposited by the Company and held in escrow.
The escrowed shares will be held and released in accordance with the terms
and
conditions of the Escrow Agreement entered into at the closing between the
Company, the Shareholders’ Representative, and the Escrow Agent, Thomas Title
& Escrow, LLC.
The
foregoing description of the Escrow Agreement is not complete and is qualified
in its entirety by reference to the Escrow Agreement, a copy of which is
attached hereto as Exhibit 10.1 and incorporated herein by reference.
Item
2.01 Completion of Acquisition or Disposition of Assets.
The
applicable information contained in Item 1.01 of this Form 8−K is incorporated
by reference in response to this Item 2.01.
On
June
6, 2007, the Company completed the acquisition of LiveDeal pursuant to the
Merger Agreement described in Item 1.01 above.
Any
financial statements and pro forma financial information that may be required
to
be filed as exhibits to this Form 8−K will be filed by amendment to this Form
8−K as soon as practicable, but in any event not later than 71 calendar days
after the date that this Form 8−K must be filed with the SEC.
Item
3.02 Unregistered Sales of Equity Securities.
The
applicable information contained in Item 1.01 of this Form 8−K is incorporated
by reference in response to this Item 3.02.
The
offer
and issuance of securities in connection with the Merger were effected without
registration under the Securities Act, in reliance upon the exemption provided
by Rule 506 and/or Section 4(2) of the Securities Act. The Company believes
that
such offers and sales were exempt from registration under Section 4(2) of the
Securities Act and/or Rule 506 thereunder because the subject securities were
offered to a limited group of persons, each of whom was believed to (i) be
either an accredited investor or possessed the requisite level of sophistication
at the time of the offer, and (ii) have been purchasing the securities for
investment without a view to resale or further distribution. The LiveDeal
shareholders
acknowledged that they may not transfer the shares unless the shares are
registered under federal and applicable state securities laws or unless, in
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opinion of counsel satisfactory to the Company, an exemption from such laws
is
available. Restrictive
legends reaffirming the foregoing were placed on certificates evidencing the
securities. The Company believes that no form of general solicitation or general
advertising was made in connection with the offer or issuance of these
securities. The filing of this report shall not constitute an offer to sell,
or
a solicitation of an offer to buy, any securities of the Company.
Item
5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
(c)
Effective
June 6, 2007, the Company
appointed Rajesh Navar, 39, President of the Company. Mr. Navar brings to the
Company over 16 years of experience in building high technology and Internet
companies. As an original member of the engineering and management teams at
eBay
and other Internet companies, Mr. Navar is one of the pioneers in e-commerce.
Prior to founding LiveDeal, Mr. Navar joined eBay in 1998, a start-up at that
time, as a senior member of the engineering team. Mr. Navar founded and built
eBay’s search technology, helping build eBay into one of the world’s most
successful and profitable e-commerce companies.
In
September 2005, Mr. Navar was honored among Silicon Valley Business
Journal’s chronicle of “40 under 40” people to watch.
Mr.
Navar
holds a Master’s in Business Management (Sloan Fellow) from Stanford
University’s Graduate School of Business, a M.S. in Electrical Engineering from
Iowa State University and a Bachelor of Engineering in Electronics Engineering
from Bangalore University in Bangalore, India.
In
connection with the Merger Agreement described above in Item 1.01, the Company
entered into a three-year employment agreement with Mr.
Navar. The agreement provides for a base salary of $300,000 per year plus
participation in the Company’s health, disability and dental benefits, insurance
programs, pension and retirement plans, and all other employee benefit and
compensation arrangements available to other senior officers of the Company.
Commencing in the second year, Mr. Navar’s annual salary will be increased on an
annual basis at a rate of at least 10% of the preceding year’s annual
salary. The
Company will also reimburse Mr. Navar for all business expenses incurred by
him
in connection with his employment with the Company.
The
agreement also provides that, if Mr. Navar’s employment is terminated as a
result of his death, disability, for Cause (as defined in the agreement), the
agreement otherwise expires, or for any reason other than Good Reason (as
defined in the agreement), Mr. Navar 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 Mr. Navar’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 Mr. Navar is entitled
in
accordance with the terms of each applicable benefit plan. In the event Mr.
Navar’s employment is terminated for any other reason or if Mr. Navar terminates
his own employment for Good Reason on or before the expiration of the Agreement,
and provided that Mr. Navar executes a valid release of any and all claims
that
Mr. Navar may have relating to his employment against the Company, Mr. Navar
will be entitled to receive any earned but unpaid annual salary for the year,
any accrued but unused vacation, reimbursement of expenses and vested benefits
to which Mr. Navar is entitled in accordance with the terms of each applicable
benefit plan, plus a lump sum amount equal to three months of annual salary
that
Mr. Navar would receive under the agreement if his employment with the Company
had not been terminated.
In
addition, in the event Mr. Navar’s employment is terminated as a result of his
death, Mr. Navar’s estate, conservator or designated beneficiary, as the case
may be, will be entitled to receive, in addition to Mr. Navar’s accrued salary
and benefits through the date of death, a lump sum payment equivalent to three
months of Mr. Navar’s annual salary in effect at the time of death.
On
June
6, 2007, the Company also entered into a Noncompetition, Nondisclosure, and
Nonsolicitation Agreement with Mr. Navar, which provides that Mr. Navar will
not: (i) disclose the Company’s confidential information; (ii) compete with the
Company until the third anniversary of the agreement or for one year after
his
employment or service to the Company is terminated (unless he is terminated
for
Cause or Good Reason), whichever is longer; (iii) solicit employees of the
Company until the second anniversary of the agreement or for one year after
his
employment or service to the Company is terminated, whichever is longer; and
(iv) solicit clients of the Company until the third anniversary of the agreement
or for one year after his employment or service to the Company is terminated
(unless he is terminated for Cause or Good Reason), whichever is
longer.
The
foregoing descriptions of the employment agreement and the Noncompetition,
Nondisclosure, and Nonsolicitation Agreement
are not
complete and are qualified in their entirety by reference to the agreements,
copies of which are attached hereto as Exhibit 10.2 and 10.3, respectively,
and
are incorporated herein by reference.
(d)
On
June
6, 2007, the
Company’s Board of Directors (the “Board”) increased the size of the Board to
seven and appointed Rajesh Navar and John Clay Evans to fill the newly created
vacancies. Neither Mr. Navar nor Mr. Evans will serve on a committee of the
Board at this time.
Upon
appointment to the Board, Mr. Evans, a non-employee director, was awarded
100,000 shares of restricted common stock of the Company issued under the
Company’s 2003 Stock Plan and pursuant to the terms and conditions contained
therein and set forth under the Company’s standard form of Restricted Stock
Agreement for officers and directors. Mr. Navar, the President of the Company,
will not receive any additional compensation for his service on the Board.
Item
9.01 Financial Statements and Exhibits.
(a)
Financial statements of businesses acquired.
Any
financial statements that may be required to be filed as an exhibit to this
Form
8−K will be filed by amendment to this Form 8−K as soon as practicable, but not
later than 71 calendar days after the date that this Form 8−K must be filed with
the SEC.
(b)
Pro forma financial information.
Any
pro
forma financial information that may be required to be filed as an exhibit
to
this Form 8−K will be filed by amendment to this Form 8−K as soon as
practicable, but not later than 71 calendar days after the date that this Form
8−K must be filed with the SEC.
(d)
Exhibits.
The
following exhibits are filed herewith:
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Exhibit
No.
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Description
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2.1
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Agreement
and Plan of Merger dated June 6, 2007, by and among YP Corp., LD
Acquisition Co., LiveDeal, Inc., Rajesh Navar and Arati Navar, as
Trustees
of the Rajesh & Arati Navar Living Trust, and Rajesh
Navar.
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10.1
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Escrow
Agreement dated June 6, 2007, by and among YP Corp., the Shareholders’
Representative, and Thomas Title & Escrow, LLC.
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10.2
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Employment
Agreement dated June 6, 2007, by and between YPCorp. and Rajesh
Navar.
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10.3
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Noncompetition,
Nondisclosure, and Nonsolicitation Agreement dated June 6, 2007,
by and
between YPCorp. and Rajesh Navar.
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99.1
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Press
Release of YP Corp. issued on June 6, 2007, regarding the acquisition
of
LiveDeal, Inc.
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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.
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YP
CORP.
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Date:
June 6, 2007
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/s/
Gary L. Perschbacher
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Gary
L. Perschbacher
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Chief
Financial Officer
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Exhibit
Index
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Exhibit
No.
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Description
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Agreement
and Plan of Merger dated June 6, 2007, by and among YP Corp., LD
Acquisition Co., LiveDeal, Inc., Rajesh Navar and Arati Navar, as
Trustees
of the Rajesh & Arati Navar Living Trust, and Rajesh
Navar.
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Escrow
Agreement dated June 6, 2007, by and among YP Corp., the Shareholders’
Representative, and Thomas Title & Escrow, LLC.
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Employment
Agreement dated June 6, 2007, by and between YPCorp. and Rajesh
Navar.
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Noncompetition,
Nondisclosure, and Nonsolicitation Agreement dated June 6, 2007,
by and
between YPCorp. and Rajesh Navar.
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Press
Release of YP Corp. issued on June 6, 2007, regarding the acquisition
of
LiveDeal, Inc.
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