Another twist in the Spot Runner saga, as the once white-hot company, already being sued by WPP for $13 million for securities fraud and breach of contract, faces more legal trouble — this time in the form of an arbitration ruling nearly two years in the making. An arbitration panel has awarded Adam Shaw $2.2 million plus interest and attorneys fees after unanimously deciding that Spot Runner failed to allow him to exercise options earned as a consultant. In making the ruling, the panel accepted Shaw as a founder, despite Spot Runner’s arguments to the contrary, and, in several instances, rejected testimony by Spot Runner CEO Nick Grouf (pictured here). The panel’s June 4 ruling and other material were included in a filing last week in Los Angeles Superior Court as part of the arbitration process. The award has to be confirmed before Shaw can try to collect.
A little background: Shaw told the panel he came up with the idea for Spot Runner while he was an executive with the NFL Network and approached family friend Grouf, a founder of PeoplePC, in 2004 with a business plan for something he called “AdVision” that would use a website to sell unused and available local cable ad time to small businesses. According to the arbitration panel, Grouf denied that and said all Shaw had done was tell him about the existence of a large amount of unsold cable ad time. But the panel said it was “undisputed” that the parties had written agreements that included acknowledging Shaw as a founder. Grouf and David Waxman are the only cofounders listed on Spot Runner’s website; the two previously cofounded PeoplePC and Firefly Network.
Shaw decided not to join Spot Runner full when the company was founded, instead signing a “founders agreement” in April 2005 to “formalize [his] status as a founder.” It included options for 5 percent of its common stock for $5,000 in exchange for assigning Spot Runner his business plan and interest in the business; Shaw acquired those with no problem. A separate two-year consulting agreement paid him $75,000 a year with the right to acquire up to 2.5 percent of the equity. Before that contract expired, Shaw said he agreed to work without compensation when Grouf told him the company could no longer afford to pay him. When he tried to exercise his options, he said he was told that they had expired because he was no longer a paid consultant.
In October 2007, Shaw filed an arbitration demand, the recourse both had agreed to when the contract was signed, claiming that Spot Runner had denied his right to the options. (He also asked to be added to Spot Runner patent applications as an inventor. Those applications were rejected during the arbitration process and the panel decided not to get involved but dismissed the claim without prejudice.) In return, Spot Runner claimed Shaw didn’t do the work required by the consulting agreement and demanded repayment of $137,500; the panel disagreed, saying there was no written evidence complaining about Shaw’s performance and that the company didn’t take advantage of opportunities to cancel the contract. Grouf said he told Shaw he was dissatisfied but the panel concluded that the company’s conduct before the dispute was proof to the contrary.
Shaw left the NFL in 2007; the need to confirm his role at Spot Runner for that announcement played a pivotal part in the panel’s decision. He is now CEO of Digital Artists Entertainment, a virtual studio associated with CAA.
Valuing Spot Runner: The award is based on a complicated series of formulas used by the panel to arrive at $2.40 a share. Convertible preferred shares sold in 2007 for $4.66 a share in March and May and for $6 per share the following January and February. The panel also considered a valuation report for the common shares done in December 2007 that was based on recent, annual and projected financial data. The company argued that the shares Shaw would have received would be worthless because they couldn’t be sold on the open market. The panel noted quietly that other sales had been made; that would include the millions in sales WPP is suing Grouf, Waxman and others over. The amount Shaw was awarded covered 925,000 shares at $2.40 a share — $2,220,000 — minus the $9,500 option price plus interest, attorneys fees and arbitration costs.
SpotRunner Settlement 1 – Get more Business Documents
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SpotRunner Settlement 2 – Get more Business Documents

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