EXHIBIT 10.19
STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") is made effective as of this 30/th/ day of
---------
November, 1999, by and between The BigBallot, Inc., a Delaware corporation with
its principal place of business in California ("BigBallot"), and The ▇▇▇▇▇▇.▇▇▇,
---------
Inc., a Florida corporation with its principal place of business in California
("BigHub").
------
R E C I T A L S:
---------------
A. WHEREAS, BigBallot will operate an Internet website for sports and
entertainment balloting and which will contain information relating to such
industries and others (the "Website").
-------
B. WHEREAS, BigHub desires to provide to BigBallot, and BigBallot desires
to receive from BigHub, certain services related to the set-up, administration
and operation of the Website, pursuant to a Master Website Services Agreement to
be executed simultaneously herewith, a copy of which is attached hereto as
Exhibit A (the "Services Agreement").
--------- ------------------
C. WHEREAS, the Services Agreement contemplates amongst other things,
that BigBallot shall be the exclusive balloting entity for the BigHub web
portal.
D. WHEREAS, in consideration for the BigHub's undertaking to satisfy
its obligations under the Services Agreement, BigBallot is willing to issue to
BigHub, and BigHub desires to receive from BigBallot, shares of BigBallot's
common stock (the "Shares") according to the terms and conditions of this
------
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
1. Issuance of Shares/Warrants.
---------------------------
(a) Issuance of Shares. In consideration of entering into the Services
------------------
Agreement, BigBallot shall issue to BigHub, and BigHub shall accept from
BigBallot, six hundred twenty-two thousand two hundred twenty-two (622,222)
Shares upon execution of this Agreement.
(b) Issuance of Warrants. In consideration for BigBallot's receipt of
--------------------
and subject to BigHub raising on behalf of BigBallot (the "Offering") up to Four
--------
Million Dollars ($4,000,000) in equity capital for no greater than a Thirty-
Three percent (33%) equity interest, on a fully diluted basis, in BigBallot from
third party investors ("Equity Capital") on or before April 30, 2000, BigBallot
--------------
shall grant BigHub a warrant (the "Warrant") to purchase Three Hundred Seventy-
-------
Seven Thousand Seven Hundred Seventy-Eight (377,778) Shares of Common Stock of
BigBallot. A copy of the form of the Warrant is attached hereto as Exhibit
-------
1(b). Partial or proportional credit shall be given toward earning the Warrant.
----
For example, if BigHub raises One Million Dollars ($1,000,000) in Equity
Capital, the Warrant shall only be exercisable into Ninety-Four Thousand Four
Hundred Forty-Four and One-Half (94,444.5) Shares of Common
Stock of BigBallot (which is One-Fourth (1/4) of Three Hundred Seventy-Seven
Thousand Seven Hundred Seventy-Eight (377,778) shares). BigHub acknowledges and
agrees to (i) BigBallot's duties to comply with federal and state securities
laws in evaluating potential subscribers for the Equity Capital; (ii) BigBallot
is concurrently attempting to raise the first round of capital financing of
approximately Four Million Dollars ($4,000,000); and (iii) notwithstanding any
of the foregoing, that BigBallot's Board of Directors has as its sole discretion
the right to refuse to accept any subscribers for Equity Capital.
2. Right of First Refusal.
----------------------
Before any Shares registered in the name of BigHub or any transferee
thereof may be sold or transferred, such Shares shall first be offered to
BigBallot in the manner set forth below.
(a) Notice of Sale. BigHub or BigHub's transferee shall deliver a
--------------
notice (the "Notice") in writing to the Secretary of BigBallot of such person's
------
bona fide intention to sell or transfer such shares. The notice shall specify
(i) the proposed buyer or buyers, (ii) the number of the shares to be sold or
transferred, (iii) the price per share, and (iv) the terms upon which BigHub or
the transferee intends to make such sale or transfer. In the event that the
consideration to be received is other than cash, the Notice shall fully describe
such consideration and state the fair market value thereof. BigBallot, at its
option and at the expense of BigHub or the transferee of BigHub, may in good
faith require that the fair market value of such consideration be determined by
an independent appraiser selected by BigBallot. In the case of a noncash
consideration, the price per share shall be based upon the fair market value of
the consideration as stated in the Notice, unless BigBallot exercised its option
to require the aforementioned independent appraisal, in which case the price per
share shall be based upon such independently appraised fair market value.
(b) Included Transactions. A sale or transfer shall be deemed to have
---------------------
occurred for the purpose of this Section 2 whenever any interest in any of the
---------
Shares is transferred voluntarily, involuntarily or by operation of law,
irrespective of whether any change in the record ownership results therefrom and
without regard to whether or not any consideration is received for such
transfer.
(c) Exercise of Right. Within 30 days after receipt of the Notice,
-----------------
BigBallot or its assignee shall have the prior right to purchase the Shares
referred to in the Notice at the price and upon the terms and conditions stated
in the Notice. The Corporation or its assignee may elect to purchase all (but
not less than all) of the Shares referred to in the Notice at the price and upon
the terms and conditions stated therein by giving notice in writing to BigHub or
the transferee of the BigHub within such 30 day period and tendering payment to
such individual within 30 days after giving such notice against delivery of the
Shares duly endorsed for transfer. In the event an appraisal is requested under
Section 2(a) hereof, the period for payment shall be extended for so long as it
------------
necessary to obtain the appraisal report.
(d) Right to Sell or Transfer. If BigBallot or its assignee does not elect
-------------------------
to purchase the Shares as provided in Section 2(d), BigBallot and its assignee
------------
shall be deemed to have
2
waived their right to acquire the Shares, and BigHub's or BigHub's transferee
may sell or transfer the Shares within a period of 15 days after such deemed
waiver and provided further that any such sale or transfer is in accordance with
the terms and conditions specified in the Notice. Any shares so transferred
shall continue to be subject to the right of first refusal provided in this
Section 2. Any such transfer must also be in compliance with applicable
---------
securities laws and the provisions of Section 4 of this Agreement. If BigHub or
---------
BigHub's transferee does not sell or transfer all the Shares referred to in the
Notice within the aforesaid 15 day period, the Shares shall become again subject
to the restrictions imposed by this Section 2.
---------
(e) Other Transfers Void. Any sale or transfer, or purported sale or
--------------------
transfer, of the Shares shall be null and void unless made in accordance with
the terms, conditions and provisions of this Section 2. BigBallot shall not be
---------
required (i) to transfer on its share register any Shares which shall have been
purportedly sold or transferred if such transfer would be in violation of this
Agreement or (ii) to treat as owner of such Shares, to accord the right to vote
as such owner, or to pay dividends to any purported transferee to whom such
Shares shall have purportedly been so transferred.
(f) Termination of Provisions. The provisions of this Section 2 shall
------------------------- ---------
terminate and cease to have effect upon the earliest to occur of (i) the
consummation of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Act") covering the offer and sale of BigBallot's common stock, (ii) the
---
date upon which BigBallot becomes a reporting company under either Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended, or (iii) the
closing date of a sale of assets or merger of BigBallot or other acquisition
transaction pursuant to which the shareholders of BigBallot receive securities
of a buyer whose shares are publicly traded.
3. Capital Changes.
---------------
(a) Definition of a Capital Change. For purposes of this Agreement, a
------------------------------
"Capital Change" shall include:
--------------
(i) Any stock divided or liquidating dividend of cash and/or
property, stock split, or other change in the character or amount of any of the
outstanding securities of BigBallot; or
(ii) Any liquidation or consolidation or merger of BigBallot with
another corporation.
(b) Effect of Capital Changes. If a Capital Change occurs, then any and
-------------------------
all new, substitute or additional securities, or other property, other than
cash, to which BigHub is entitled by reason of BigHub's ownership of the Shares,
shall be immediately subject to this Agreement and be included in the word
"Shares" for all purposes with the same force and effect as the Shares presently
subject to the forfeiture provisions, right of first refusal, and other terms of
this Agreement.
4. Securities Law Compliance.
-------------------------
3
(a) Exemption From Registration. The Shares have not been registered
---------------------------
under the Act and are being issued to BigHub in reliance upon the exemption from
such registration provided by Section 4(2) of the Act. The Shares have not been
qualified under the California Corporate Securities Law of 1968 and are being
issued to BigHub in reliance upon the exemption from qualification provided by
Section 25102(f) of the Corporations Code.
(b) Investment Representations. As an inducement to BigBallot to issue
--------------------------
the Shares to BigHub, and in order to establish the suitability of BigHub for
such an investment, BigHub hereby represents and warrants to BigBallot as
follows:
(i) Investment Intent. BigHub is aware of and familiar with
-----------------
BigBallot's business affairs and financial condition and has acquired sufficient
information about BigBallot to reach a knowledgeable and informed decision to
acquire the Shares. BigHub is acquiring the Shares for investment for his own
account, not for resale, without any intention of or view toward or for
participating, directly or indirectly, in a distribution of the Shares or any
portion thereof.
(ii) Representatives. BigHub has consulted with such professional
---------------
advisors (the "Representatives"), if any, as BigHub has seen fit in connection
with this proposed investment.
(iii) Experience. BigHub and BigHub's Representatives, if any, have
----------
such knowledge and experience in financial and business matters that BigHub is
capable of evaluating the merits and risks of investment in the Shares.
(iv) Risks. BigHub understands that an investment in BigBallot is
-----
speculative, that any possible profits therefrom are uncertain, and that BigHub
must bear the economic risks of the investment in BigBallot for an indefinite
period of time. BigHub is able to bear these economic risks and to hold the
Shares for an indefinite period.
(v) Information. BigHub and BigHub's Representatives, if any,
-----------
understand that all documents required to be made available to BigHub under Rule
502(b)(2)(iii) of the rules promulgated under the Act, and all records and books
pertaining to this investment have been made available for inspection by him or
his advisor and that the books and records of BigBallot will be available upon
reasonable notice by investors during reasonable business hours at its principal
place of business. BigHub and BigHub's Representatives, if any, have had a
reasonable opportunity to ask questions of and receive answers from BigBallot,
or a person or persons acting on its behalf, concerning the Shares in connection
with an evaluation of the merits and risks of this investment in BigBallot, and
all such questions have been answered to the full satisfaction of BigHub and
BigHub's Representatives, if any.
(vi) Domicile. BigHub's principal place of business is in the State
--------
of California, and BigHub does not have any present intention of moving its
principal place of business from California.
4
(vii) Legends. BigHub understands and agrees that (i) the legends
-------
set forth in Section 5 will be placed on the certificate(s) evidencing the
Shares and on certificate(s) issued to transferees; (ii) the stock records of
BigBallot will be noted with respect to such restrictions; and (iii) BigBallot
will not be under any obligation to register the Shares or to comply with any
exemption available for sale of the Shares without registration.
(viii) Restrictions on Resale. BigHub understands that, under
----------------------
relevant securities law requirements, additional restrictions on the
transferability of the Shares will apply, unless BigBallot, in its discretion,
otherwise determines. BigHub understands that the Shares must be held
indefinitely unless they are subsequently registered under the Act or an
exemption from such registration is available. BigBallot is under no obligation
to so register the Shares. BigHub understands that Rule 144 of the Securities
and Exchange Commission permit limited public resale of securities acquired in a
non-public offering subject to satisfaction of certain conditions. BigHub
understands that BigBallot may not be satisfying, and is not obligated to
satisfy, any requirement of Rule 144 at such time as BigHub might wish to sell
any of the Shares, and, if so, BigHub must be precluded from selling any of the
Shares under Rule 144.
(c) Further Limitations on Disposition. Without in any way limiting the
----------------------------------
representations set forth above. BigHub further agrees that BigHub shall in no
event make any disposition of any portion of the Shares unless and until:
(i) (A) There is in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or (B)(1) BigHub shall have notified BigBallot
of the proposed disposition and shall have furnished BigBallot with a detailed
statement of the circumstances surrounding the proposed disposition, (2) BigHub
shall have furnished BigBallot with an opinion of the BigHub's counsel to the
effect that such disposition will not require registration of such shares under
the Act and (3) such opinion of the BigHub's counsel shall have been concurred
in by counsel for BigBallot and BigBallot shall have advised BigHub of such
concurrence; and
(ii) There has been compliance with the right of first refusal
provisions contained in Section 2.
---------
5. Legends on Shares.
-----------------
Each certificate representing the Shares shall have conspicuously printed
on it the following legends:
(a) "THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 'ACT'), OR THE
SECURITIES LAWS OF THE VARIOUS STATES, AND HAVE BEEN ISSUED AND SOLD PURSUANT TO
AN EXEMPTION FROM THE ACT, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
BY THE HOLDER THEREOF AT ANY TIME EXCEPT (1) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE ACT COVERING THESE SHARES, OR (2) UPON
DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL
5
SATISFACTORY TO THE CORPORATION THAT THESE SHARES MAY BE TRANSFERRED WITHOUT
REGISTRATION."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF FIRST REFUSAL AS SET FORTH IN AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER OR HIS PREDECESSOR
IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION."
(c) Any legend required to be placed thereon by the California
Commissioner of Corporation, or required by the applicable blue sky laws of any
state.
6. Other Provisions.
----------------
(a) Valuation of Shares. BigHub understands that the Shares have been
-------------------
valued by the board of directors of BigBallot for the purpose of this sale, and
that BigBallot believes this valuation represents a fair attempt at reaching an
accurate appraisal of their worth. BigHub also understands, however, that
BigBallot can give no assurances that such price is in fact the fair market
value of the Shares and that it is possible that the Internal Revenue Service
would successfully assert that the value of the Shares on the date of purchase
is substantially greater than so determined. If the Internal Revenue Service
were to succeed in a determination that the Shares had value greater than the
purchase price, the additional value would constitute income as of the date of
its receipt. The additional taxes (and interest) due would be payable by
BigHub, and there is no provision for BigBallot to reimburse BigHub for that tax
liability. BigHub assumes all responsibility for such potential tax liability.
(b) Market Lock Up.
--------------
(i) Lock Up Period. In connection with any underwritten public
--------------
offering by BigBallot of its equity securities pursuant to an effective
registration statement filed under the Act, including BigBallot's initial public
offering, BigHub shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to any of the Shares without the prior written consent of BigBallot or
its underwriters, for such period of time from and after the effective date of
such registration statement as may be requested by BigBallot or such
underwriters; provided, however, that in no event shall such period exceed one
hundred-eighty (180) days. This Section 7(b) shall only remain in effect for the
------------
two-year period immediately following the effective date of BigBallot's initial
public offering and shall thereafter terminate and cease to be in force or
effect.
(ii) Limitation. BigHub shall be subject to the market lock up
----------
provisions of this Section 6(b) provided and only if the officers and directors
------------
of BigBallot are also subject to similar arrangements.
6
(iii) Stop Transfer. In order to enforce the provisions of Section
------------- -------
6(b), BigBallot may impose stop-transfer instructions with respect to the Shares
----
until the end of the applicable lock up period.
7. Mutual Confidentiality.
----------------------
(a) Confidential Information. The term "Confidential Information" shall
------------------------ ------------------------
include all business and financial information, written or oral, including, but
not limited to, technical know-how, specifications, quality standards, formulae,
instructions, financial data, marketing information, strategies, procedures,
processes, client, customer or product lists and all other proprietary and
confidential information of any party hereto or an affiliate of such party.
Notwithstanding the foregoing, Confidential Information shall not include any
information which:
(i) is in the public domain at the time of receipt by receiving
party or which comes into the public domain without breach of any obligation
assumed hereunder; or
(ii) was already known by the receiving party at the time of receipt
from the disclosing party without reference to the current or any prior
relationship between the receiving party and the disclosing party; or
(iii) is required to be disclosed by the receiving party pursuant to
a judgment, order or other mandate of any court of competent jurisdiction or any
administrative, governmental or regulatory body, agency, or office.
(b) Disclosure and Use. The disclosure of Confidential Information by any
------------------
party to the other party or to any director, officer, employee, agent or
representative of such other party shall be received, used and retained by such
other party and its directors, officers, employees, agents and representatives
on a strictly confidential basis and, except as expressly provided for herein or
as required by applicable law, shall not be disclosed to any third party or in
any way used by such other party or any such other person. Neither party nor any
of its directors, officers, employees, agents or representations receiving any
Confidential Information shall disclose any such information to any person
outside of its organization or to any other third party without the prior
written consent of a duly authorized representative of the disclosing party.
Each party agrees to use its best efforts to limit dissemination of and access
to any Confidential Information only to the persons within such party's
immediate organization (and not to any subsidiary, parent company or affiliate
of such party) and then only to those persons who have a need for access to such
Confidential Information. All tangible reproductions, copies or embodiments, in
whole or in part, of any Confidential Information shall carry a confidential,
proprietary notice similar to that, if any, with which it was submitted to the
receiving party.
(c) Term of Confidentiality. The foregoing obligations under this
-----------------------
Section 7 shall continue in effect for a period of three (3) years following the
---------
execution of this Agreement.
8. Attorneys' Fees.
---------------
7
The prevailing party in any legal action arising out of this Agreement
shall be entitled, in addition to any other rights and remedies such party may
have, to reimbursement for its expenses, including costs and reasonable
attorneys' fees.
9. Rights as a Shareholder.
-----------------------
Subject to the provisions and limitations hereof, BigHub may, during the
term of this Agreement, exercise all rights and privileges of a shareholder of
BigBallot with respect to the Shares.
10. Miscellaneous Provisions.
------------------------
(a) Independent Contractor Status. The parties hereto are independent
-----------------------------
contractors as to each other and nothing in this Agreement shall, or shall be
construed to, constitute an agency, partnership or joint venture relationship
between the parties hereto.
(b) Additional Actions. The parties will execute such further instruments
------------------
and take such further action as may reasonably be necessary to carry out the
intent of this Agreement.
(c) Notices. All notices, requests, consents and other communications
-------
required or permitted under this Agreement shall be in writing and shall be sent
by registered or certified mail, postage prepaid, or transmitted by telegram or
facsimile if confirmed by such mailing, to BigHub and BigBallot at the
respective addresses set forth on the signature page hereto. Either party may
change its address by written notice to the other.
(d) Assignment. BigBallot may assign its rights and delegate its duties
----------
under this Agreement. This Agreement shall inure to the benefit of the
successors and assigns of BigBallot and, subject to the restrictions on transfer
herein set forth, be binding upon BigHub, BigHub's heirs, executors,
administrators, successors and assigns.
(e) No Waiver. The failure of BigBallot (or its assignees) in any
---------
instance to exercise the right of first refusal, shall not constitute a waiver
of any other rights of first refusal that may subsequently arise under the
provisions of this Agreement or any other agreement between BigBallot and
BigHub. No waiver of any breach of condition of this Agreement shall be deemed
to be a waiver of any other or subsequent breach or condition, whether of like
or different nature.
(f) Cancellation of Shares. If BigBallot (or its assignees) shall make
----------------------
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Shares to be repurchased in accordance with
the provisions of this Agreement, then from and after such time, the person from
whom such Shares are to be repurchased shall no longer have any rights as a
holder of such Shares (other than the right to receive payment of such
consideration in accordance with this Agreement), and such Shares shall be
deemed purchased in accordance with the applicable provisions hereof and
BigBallot (or its assignees) shall be deemed the owner and holder of such
shares, whether or not the certificates therefor have been delivered as required
by this Agreement.
8
(g) Entire Agreement. This Agreement and Exhibit(s) hereto represent the
----------------
entire agreement between the parties and supersedes all prior or contemporaneous
oral or written agreements of the parties. This Agreement may be modified,
amended or changed only by a written instrument signed by the parties. No course
of conduct or dealing between the parties shall act as a modification or waiver
of any provisions of this Agreement.
(h) Governing Law. This Agreement shall be governed as to validity,
-------------
enforcement, construction, effect and in all other respects, by the laws of the
State of California, and the parties hereto hereby consent to the jurisdiction
of the courts of the State of California to enforce this Agreement.
(i) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be an original but all of which, when taken
together, shall be deemed to be one and the same original instrument. The
execution of any number of counterparts shall have the same effect as if all
parties hereto had signed the same document. The facsimile execution of this
Agreement by a party hereto shall be considered to be the original execution of
the Agreement by such party.
(j) Severability. If any provision of this Agreement is held to be
------------
unenforceable or illegal, the other provisions of this Agreement shall not be
affected by any such holding and shall remain in full force and effect and shall
be construed in accordance with the purpose and terms of this Agreement. In such
event the parties shall use all reasonable efforts to replace any such
unenforceable or illegal provision with a provision reflecting as nearly as
possible the intent, purpose and economic effect of such provision.
(k) Amendments. This Agreement may not be amended, modified or
----------
supplemented except by a writing executed by both parties.
(l) Headings. The section headings contained in this Agreement are
--------
included for convenience of reference only and are not intended by the parties
to be a part of or to affect the meanings or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
BIGHUB: The ▇▇▇▇▇▇.▇▇▇, Inc.,
a Florida corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
-----------------------------------
(Print Name, Title)
Address:
9
2939 Mossrock
-------------------------------------
▇▇▇▇▇ ▇▇▇
-------------------------------------
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-------------------------------------
BIGBALLOT: The BigBallot, Inc.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇, President
Address:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
10
EXHIBIT A
SERVICES AGREEMENT
------------------
11
