EX-10 5 ex10-31.txt EX-10.31 PETER READ CONSULT EXHIBIT 10.31 CONTRACTOR, CONFIDENTIAL INFORMATION AND NON-SOLICITATION AGREEMENT This Contractor, Confidential Information and Non-Solicitation Agreement (the "Agreement") is made and entered into as of this 1st day of February, 2002 (the "Effective Date"), by and between Brilliant Digital Entertainment, Inc., a Delaware corporation ("BDE" or the "Company"), located at 6355 Topanga Canyon Boulevard, Woodland Hills, CA 91367 and VoxPop LLC, a Delaware LLC ("Contractor"), located at 608 Radcliffe Avenue, Pacific Palisades, CA 90272. RECITALS A. The Company is engaged in the business of, among other things, developing, producing, marketing and distributing: (1) 3D authoring tools (software); (2) digital animated entertainment; (3) interactive, 3D animated with audio, rich media banner advertisements for the internet ("Brilliant Banners); (4) ad serving software necessary for Brilliant Banners to be displayed on web pages; and (5) enterprise solutions for distributed network services, processing and storage through its majority ownership in the newly-formed entity sometimes referred to as the "alternate network", which is a private, peer-to-peer network ("Altnet"). B. Contractor is engaged by the Company to perform the duties described in Exhibit C and, in connection with his engagement, has been and/or will be exposed to Confidential Information (as defined below) and may participate in the development and/or sales and marketing activities of the Company referred to in Recital "A" above, in addition to many other confidential aspects of the Company's business. It is understood that for the period of Contractor's engagement hereunder, Contractor's services may be non-exclusive to Company. However, Contractor agrees that, for the term hereof, Contractor shall not perform any services for any person or firm that is in a business that is competitive with the Company or with any subsidiary of the Company. C. Contractor has received and will, in the course of Contractor's engagement with the Company, continue to receive training with respect to and acquire personal knowledge of the Company's products, plans and business relationships with customers and potential customers. AGREEMENT NOW, THEREFORE, in consideration of the foregoing facts and the covenants hereinafter set forth, and in consideration of the Contractor's engagement, the Company and Contractor agree as follows: page 1 of 13 1. DEFINITIONS. For the purposes of this Agreement, the following terms have the following definitions: (a) "Confidential Information" means all information of any kind, type or nature (written, stored on magnetic or other media or oral) which at any time during the engagement of Contractor by the Company is or has been compiled, prepared, devised, developed, designed, discovered or otherwise learned of by Contractor to the extent that such information relates to the Company or any of its affiliated entities including, without limitation, all of the Company's price lists, pricing information, customer lists, customer information, financial information, trade secrets, formulas, patterns, compilations, devices, methods, techniques, processes, confidential trade knowledge and computer programs and information; provided, however, that any such information which is generally known to the public or which may be obtained by a reasonably diligent businessman without material cost or effort from trade publications or other readily available and public sources of information shall not be deemed to be Confidential Information, unless such information was first published in breach or violation of this Agreement or any similar confidentiality agreement. (b) "Person" means any individual, corporation, partnership, limited liability company, trust, government or regulatory authority, or other entity. (c) "Brilliant Banner Campaign" means the serving of advertisements on the web, utilizing Brilliant Banner ads. (d) "ASO"s means advertising sales organizations, and includes third party web site advertising sales forces. 2. TERM OF THE ENGAGEMENT; AT WILL NATURE OF ENGAGEMENT; COMPENSATION. (a) TERM. The initial term of this Agreement shall be for a period of two (2) years, commencing on the Effective Date (the "Initial Term"). Nothing in this Agreement shall be construed as obligating the Company to continue to engage Contractor beyond such Initial Term, however Contractor's duties pursuant to this Agreement may be extended by mutual agreement between the Company and Contractor. (b) ISSUANCE OF BDE WARRANTS. The Company recognizes the value of Contractor's past business experiences and relationships, Contractor's recent efforts on behalf of the Company, particularly related to capital raising efforts and strategic consulting, and the potential value of his services to be performed for the Company. Therefore, as incentive for Contractor to enter into this Agreement, and as partial consideration for Contractor performing the duties pursuant to Exhibit C attached hereto, upon the execution of this Agreement by authorized signatories, the Company shall issue a warrant to purchase up to Two Hundred Thousand (200,000) shares of the Company's common stock (the "BDE Warrants"). All BDE Warrants will be issued page 2 of 13 in the form of Exhibit "D" attached hereto and incorporated herein by reference (the "Form of Warrant"). The BDE Warrants will be priced at Fifteen Cents ($0.15) per share and must be exercised no later than forty-eight (48) months from the Effective Date. Contractor acknowledges that the BDE Warrants shall not be registered, but upon exercise shall be entitled to "piggy back" registration rights pursuant to Exhibit "C" in the Form of Warrant. Contractor represents and warrants that he is an "accredited investor" as defined in Regulation D under the Securities Act of 1933, as amended (the "Securities Act"), and that the exercise of the BDE Warrants would be done so for investment purposes and not with a view to further distribution. Contractor agrees that the BDE Warrants will contain customary legends and will not be transferred other than in compliance with the Securities Act in transactions not required to be registered with the Securities and Exchange Commission. (c) ALTNET CONSULTING COMPENSATION. Commencing with the Effective Date of this Agreement, and continuing for the duration of the Initial Term, Contractor shall provide services to Altnet, as described in further detail in Exhibit C hereof. Within Forty-Five (45) days of the Effective Date: (i) Altnet shall issue to Contractor Sixty-Eight Thousand Five Hundred Twenty Eight (68,528) shares of Altnet common stock, which represents one and one half percent (1.5%) of Altnet's common stock outstanding as of the Effective Date (the "Altnet Shares") as additional compensation for such services. The Altnet Shares shall vest on a percentage basis; the numerator of which shall be the cumulative net revenue amount recognized by Altnet and/or the Company according to generally accepted accounting principals for revenue which accrues to either Altnet or the Company based on the direct efforts of Contractor in performing his duties as described in Exhibit C attached hereto, and the denominator which shall be One Million Dollars ($1,000,000). In the event that Contractor is not able or does not complete his services for the entire period of the Initial Term, or this Agreement is terminated prior to the expiration of the Initial Term (not including a Change of Control as defined in this paragraph 2(c)), The Company shall, in its complete and sole discretion, have the option to repurchase from Contractor all unvested Altnet Shares at a price per share equal to one tenth of one penny ($0.001); and (ii) The Company shall issue a warrant to Contractor to purchase up to One Hundred Seventy-Five Thousand (175,000) shares of the Company's common stock (the "Consulting Warrants"). The Consulting Warrants will be priced at Fifteen Cents ($0.15) per share and shall vest on a percentage basis; the numerator of which shall be the cumulative net revenue amount recognized by Altnet and/or the Company according to generally accepted accounting principals for revenue which accrues to either Altnet or the Company based on the direct efforts of Contractor in performing his duties as described in Exhibit C attached hereto, and the denominator which shall be One Million Dollars ($1,000,000). Except for the vesting schedule, the Consulting Warrants shall be in the Form of Warrant as described in paragraph 2(b) above. Furthermore, in the event that during the Initial Term, Altnet and/or the Company is acquired, merged into or consolidated with another company such that Altnet and/or the Company does not survive, or as a result of which there is more than a fifty percent (50%) change in the ownership of Altnet and/or the Company (collectively referred to as a "Change of Control"), then all unvested Altnet Shares and Consulting Warrants will fully accelerate in vesting so that all unvested shares and/or warrants will become vested shares and/or warrants. page 3 of 13 (d) INVESTMENT COMPENSATION. To the extent that, through the direct efforts of Contractor (including but not limited to the introductions to individuals, venture capitalists and/or companies), a capital investment is made in either the Company or any of its subsidiaries (including Altnet), Contractor shall receive, upon the funding of such investment, the following cash compensation calculated as a percentage of the amounts invested: (i) up to the 1st $1.0 million: 6%; (ii) between $1.001 million and $2.0 million: 5%; (iii) between $2.001 million and $3.0 million: 4%; and (iv) all amounts above $3.0 million: 3%. By way of example, if the direct efforts of Contractor lead to a $2.5 million investment, the cash compensation would be: $130,000 ($60,000 on the 1st million (6%); $50,000 on the 2nd million (5%); and $20,000 (4%) on the remaining $500,000). (e) Company shall also reimburse Contractor for all pre-approved travel expenses, said expenses to be invoiced to the Company. Contractor agrees to provide the Company with receipts for all pre-approved travel expenses. Within fifteen (15) days of receipt of the above, Company shall reimburse Contractor for his documented, pre-approved travel expenses. (f) Both parties acknowledge that Contractor is not an employee for state or federal tax purposes. Therefore, Contractor is solely responsible for any and all federal, state and local taxes, and insurance applicable to the business of Contractor and shall indemnify the Company and any of its subsidiaries, and hold the Company and any of its subsidiaries, harmless for any such failure to pay any and all applicable taxes or obtain and maintain requisite insurance, including, but not limited to, comprehensive and business liability and worker's compensation coverage for Contractor and any assistants and employees of Contractor. 3. INDEPENDENT CONTRACTOR STATUS; WORK FOR HIRE. (a) Contractor and Company agree and recognize that Contractor is not, and shall not be deemed an employee, agent, or joint venture partner of Company, but is an Independent Contractor. Nothing in this agreement shall be interpreted or construed as creating or establishing the relationship of employer and employee between the Company and Contractor. Contractor shall not be entitled to participate in any employee benefit plans provided by the Company, including without limitation, vacation and sick pay. (b) Without limiting the generality of any other provision of this Agreement, Contractor specifically acknowledges and agrees that all work product resulting from Contractor's engagement pursuant to this Agreement are for the benefit of and are the sole and exclusive property of the Company, it successors and assigns and constitute "work for hire" under Section 201 of Title 17 of the United States Code. If such work product(s) are not legally capable of being considered as "work for hire", then, in such event, Contractor hereby irrevocably grants, transfers page 4 of 13 and assigns to the Company in perpetuity all right, title and interest, including without limitation, copyright, and all extensions and renewals thereof, Contractor may have in or to such work product. 4. CONFIDENTIALITY. (a) Contractor shall not, at any time from and after the date hereof and throughout perpetuity, directly or indirectly, disclose, reveal or permit access to all or any portion of the Confidential Information, or any tangible expressions or embodiments thereof (including any facilities, apparatus or equipment which embody or employ all or any portion of the Confidential Information), to any Person without the written consent of the Company, except to Persons designated or employed by the Company. (b) Without the prior written consent of the Company, Contractor shall not, directly or indirectly, use or exploit the Confidential Information at any time from and after the date hereof and throughout perpetuity for any purpose other than in connection with his engagement duties and obligations to the Company, and any gain or profit of any kind or nature obtained or derived by Contractor or to which Contractor may become entitled, directly or indirectly, at any time as a result of the disclosure of use of all or any part of the Confidential Information in violation of the provisions of this Agreement, shall be held in trust by Contractor for the express benefit of the Company and shall be remitted thereby to the Company on demand. (c) Contractor acknowledges and agrees that the uses of Confidential Information specifically prohibited hereunder include, without limitation, the following: (i) Using any Confidential Information to induce or attempt to induce any Person, who is either a customer of the Company or who was being actively solicited by the Company at any time during which Contractor is or was engaged by the Company, to cease doing business or not to commence doing business in whole or in part with the Company; or (ii) Using any Confidential Information to solicit or assist in the solicitation of the business of any customer for any products or services competing with those products and services offered and sold by the Company at any time during which Contractor is engaged by the Company. 5. DISCLOSURES AND ASSIGNMENT OF RIGHTS. (a) Contractor shall disclose in writing to the Company full and complete details respecting any Confidential Information devised, developed, designed or discovered by Contractor while engaged by the Company. Such disclosure shall be made promptly upon such development, design or discovery, and shall be disclosed in writing pursuant to the form attached as Exhibit "A" to this Agreement, or such other form as the Company may from time to time provide. (b) Contractor agrees to assign and does hereby irrevocably assign to the Company all of his right, title and interest in and to any Confidential Information devised, page 5 of 13 developed, designed or discovered by him or in which he may otherwise obtain, or has otherwise obtained, any rights, while engaged by the Company and while performing work on behalf of the Company. Contractor agrees to take any actions, including the execution of documents or instruments, which the Company may reasonably require to effect the Contractor's assignment of rights pursuant to this Paragraph 5(b), and Contractor hereby constitutes and appoints, with full power of substitution and resubstitution, the President of the Company as his attorney-in-fact to execute and deliver any documents or instruments which Contractor is obligated to execute and deliver pursuant to this Paragraph 5(b). (c) Contractor shall promptly notify the Company of any patent relating to any portion of the Confidential Information which is applied for by, or issued to, Contractor ("Patent"). Such notice shall be in writing on the form attached as Exhibit "B" to this Agreement, or on such other form as the Company may from time to time provide. Upon the written request of the Company, Contractor shall sell to the Company, and the Company shall purchase from Contractor, all right, title and interest of Contractor in and to any Patent, whether or not Contractor is engaged by the Company at the time the Patent is issued. The purchase price for any Patent shall be one dollar ($1.00), and shall be paid by the Company at the time it makes the written request to purchase the Patent. Contractor agrees to execute any and all documents and instruments necessary to evidence and affect the transfer to the Company of all right, title and interest of Contractor in and to the Patent. (d) At the request of the Company, Contractor shall assist the Company in applying for and obtaining both domestic and foreign patents, or copyrights, as the case may be, on all Confidential Information that the Company deems to be patentable or copyrightable devised, developed, designed or discovered by Contractor or in which he may otherwise obtain, or has otherwise obtained, any rights, while engaged by the Company, and Contractor shall execute at any time or times any and all documents and perform all acts reasonably requested by the Company which the Company deems to be necessary or desirable in order to obtain such patents or copyrights or otherwise to vest in the Company full and exclusive title and interest in and to all such Confidential Information, to protect the same against infringement by others and otherwise to aid the Company in connection with any continuations, renewals or reissues of any patents or copyrights, or in the conduct of any proceedings or litigation in regard thereto. All expenses of procuring any patent or copyright shall be born by the Company. 6. CERTAIN INVENTIONS OF CONTRACTOR. Notwithstanding anything to the contrary herein, pursuant to Section 2870 of the California Labor Code, this Agreement does not apply to any invention for which no equipment, supplies, facilities or trade secret information of the Company was used and which was developed entirely on Contractor's own time, and (i) which does not relate at the time of conception or reduction to practice of the invention either to the business of the Company or to the Company's actual or demonstrably anticipated research or development, or (ii) which does not result from any work performed by Contractor for the Company. page 6 of 13 7. COVENANT NOT TO SOLICIT. Contractor covenants and agrees that for so long as he is engaged by the Company and for one year thereafter, Contractor shall not hire, solicit or cause to be solicited for engagement by Contractor or by any third party, any person who is as of the date of such solicitation or who was within the 12-month period prior to the date of such solicitation an employee of the Company or any subsidiary or affiliate of the Company. 8. BUSINESS OPPORTUNITIES. Contractor covenants and agrees that for so long as he is engaged by the Company, he will not, without the prior written consent of the Company (which consent may be withheld by the Company in the exercise of its absolute discretion), engage, directly or indirectly, in any business, venture or activity that Contractor is aware or reasonably should be aware that the Company or any affiliate of the Company is engaged in, intends at any time to become engaged in, or might become engaged in if offered the opportunity, or in any other business, venture or activity if the Company reasonably determines that such activity would adversely affect the business of the Company or any affiliate thereof or the performance by Contractor of any of Contractor's duties or obligations to the Company. Contractor further covenants and agrees that if he ever engages in any such business, venture or activity in contravention of this paragraph 8, all gross profits, compensation, rents and other income or gain (computed without reduction for the value of the services performed by the Company, if any) derived by Contractor in connection therewith shall be held by Contractor for the benefit of the Company and the affiliates thereof, and shall be remitted to the Company upon demand. Contractor and Company mutually agree that as of this Effective Date, the clients listed on Contractor's website, WWW.VOXPOPVENTURES.COM, are not competitive to the Company and Contractor may continue to provide services to such clients provided such services in the future do not violate the terms of this paragraph 8. 9. NOTICES. Any notice to the Company required or permitted hereunder shall be given in writing to the Company, either by personal service, or by registered or certified mail, postage prepaid, duly addressed to the President of the Company at its then principal place of business. Any such notice to the Contractor shall be given in a like manner, at the following address: Mr. Peter Read C/o VoxPop LLC 608 Radcliffe Avenue Pacific Palisades, CA 90272 For the purpose of determining compliance with any time limit herein, a notice, if sent by mail, shall be deemed given on the date it is so deposited in the United States mail. page 7 of 13 10. MISCELLANEOUS PROVISIONS. (a) CONTRACTOR'S REMEDIES FOR BREACH. Contractor expressly understands and agrees that in the event it is ultimately determined by a court of law that Company has committed a material breach of this agreement, the damage, if any, caused thereby would not be irreparable or otherwise sufficient to entitle Contractor to injunctive or other equitable relief. Contractor hereby acknowledges that Contractor's rights and remedies in any such event shall be strictly limited to the right, if any, to recover money damages in an action at law, and Contractor shall not have the right to rescind this Agreement or any of Company's rights hereunder. (b) INDEMNIFICATION. The parties indemnify each other as follows: (i) Contractor agrees to indemnify, defend, and hold Company and any of its subsidiaries or affiliates, and their respective officers, directors, stockholders, agents, employees, representative, heirs, independent contractors, successors and assigns harmless from any and all claims, losses, liabilities, causes of action and costs (including reasonable attorney's fees) arising from, or on account of any breach by Contractor of his duties hereunder; or as a result of any misrepresentation made by Contractor about Company. (ii) Excepting any matters which are subject to indemnification by Contractor as set forth above, or arising out of Contractor's grossly negligent acts or omissions, Company agrees to indemnify, defend, and hold Contractor harmless from any claims, losses, liabilities, causes of action and costs (including reasonable attorney's fees) arising from, or on account of any representation made by the Company to Contractor regarding the Company's products, services, or business practices, upon which Contractor relies and, in the performance of his duties hereunder, represents to others; provided, however, that the Contractor shall promptly notify Company of any such claim and shall provide Company the opportunity to control the defense and negotiations for the settlement and/or compromise of such claim at Company's exclusive cost. (c) REPRESENTATIONS AND WARRANTIES. Contractor warrants and represents that Contractor is free and available to enter this Agreement and perform the services herein and that permission of no other party is required to perform such services. (d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding on the parties hereto and their respective successors and assigns. Contractor's duties, obligations, rights and privileges hereunder may not be delegated or assigned by him in any manner. The benefits hereunder with respect to the rights of the Company may be assigned by the Company to any other corporation or other business entity which succeeds to all or substantially all of the business of the Company through merger, consolidation, corporate reorganization or by acquisition of all or substantially all of the assets of the Company. (e) SEVERABILITY. If any provision of this Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction such provision shall be deemed amended to page 8 of 13 conform to the applicable laws of such jurisdiction so as to be valid and enforceable or, if it cannot be so amended without materially altering the intention of the parties, it will be stricken, but the validity, legality and enforceability of such provision shall not in any way be affected or impaired thereby in any other jurisdiction and the remainder of this Agreement shall remain in full force and effect. (f) CONTROLLING LAW. All of the provisions of this Agreement shall be construed in accordance with the laws of the State of California as applied to residents of that State entering into contracts to be performed solely within such state. Contractor consents to the exclusive jurisdiction of any state or federal court empowered to enforce this Agreement located in Los Angeles County, California, and waives any objection thereto on the basis of personal jurisdiction or venue. (g) WAIVER. Waiver by either of the parties of any breach of any provision of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach of the same or any other provision hereof. (h) SURVIVAL OF CONTRACTOR'S OBLIGATIONS. The obligations of Contractor hereunder shall survive the termination of Contractor's engagement with the Company and the termination of this Agreement regardless of the reason or cause for such termination. (i) ATTORNEYS' FEES. The prevailing party in any litigation instituted under this Agreement shall, in addition to other remedies, be entitled to be reimbursed by the other party for all expenses of such litigation, including without limitation, reasonable attorneys' fees and all other costs incurred in commencing or defending such suit. (j) ENTIRE AGREEMENT. This instrument contains the entire agreement of the parties with respect to the subject matter hereto and into which all prior agreements and negotiations, whether written or oral, are merged. page 9 of 13 IN WITNESS WHEREOF, the parties hereto have entered into and executed this Agreement as of the date first above written. "COMPANY" Brilliant Digital Entertainment, Inc. By: /S/ KEVIN BERMEISTER -------------------- Kevin Bermeister Its: CEO -------------------- "CONTRACTOR" /S/ PETER READ ------------------------- Peter Read VoxPop LLC page 10 of 13 EXHIBIT A NOTICE OF DISCOVERY Pursuant to Paragraph 5(a) of that certain Contractor, Confidential Information and Non-Solicitation Agreement (the "Agreement") between Brilliant Digital Entertainment, Inc. (the "Company") and myself, I hereby disclose full and complete details of the following Confidential Information (as defined in Paragraph 1(a) of the Agreement) (I have attached additional sheets if the space provided herein is insufficient): I agree to provide such further information regarding such Confidential Information as may be requested by the Company. Name: Peter Read, VoxPop LLC Date: _____________________________ page 11 of 13 EXHIBIT B NOTICE OF PATENT Pursuant to Paragraph 5(c) of that certain Contractor, Confidential Information and Non-Solicitation Agreement (the "Agreement") between Brilliant Digital Entertainment, Inc. (the "Company") and myself, I hereby notify the Company that I have applied for or obtained the following described Patent (as defined in Paragraph 5(c) of the Agreement): (i) Patent No.: (ii) Date of Issuance: (iii) General Description of Subject Matter of Patent: I agree to provide such further information regarding such Patent as may be requested by the Company. Name: Peter Read, VoxPop LLC Date: __________________________ page 12 of 13 EXHIBIT C CONTRACTOR'S DUTIES In executing Contractor's responsibilities hereunder, Contractor will consult with and report to the Company's Designated Representative ("CDR") identified pro tem as Kevin Bermeister. Contractor shall submit periodic reports, containing a summary of Contractor's activities, analyses, and recommendations (including, in the case of recommendations, cost estimates for implementing such recommendations). THE SCOPE OF CONTRACTOR'S DUTIES: Contractor shall be engaged as an advisor to the Company. In his capacity as an advisor, Contractor shall advise the sales force and business development team, provide strategic financial, marketing and managerial advise, introduce corporate alliance partners, and interface with multiple external sales forces with the main intent of promoting, marketing, and exploiting the Company's private peer-to-peer network currently known as "Altnet". Secondarily, Contractor shall provide services necessary to exploit the Company's (1) Brilliant Banner ad strategy, and (2) b3d software authoring tools known as b3d Studio and Studio Pro. Specifically, Contractor shall: i. develop business relationships and achieve strategic sales relationships for Altnet services primarily focused on leveraging Altnet's technologies to generate money saving enterprise and entertainment based retail solutions for distributed network, processing and storage services; ii. work directly with senior management of the Company. Such work shall include the development of the necessary business plans, strategic directions, documentation, promotional and support materials for presentations and follow-up communications related to the commercial applications of Altnet's technologies; iii. develop relationships with ASOs to promote the acceptance of Brilliant Banner ad serving technology and achieve sales of Brilliant Banner Campaigns. By way of example only, and not of limitation, some of the ASOs currently identified by the Company include: DoubleClick; Advertising.com; 24/7 Real Media; Interep Interactive; 411 Web; and Premium Networks; and iv. identify third party developers which are potential licensees of b3d Studio and b3d Studio Pro and actively market and close licensing transactions of these software tools to such potential licensees. page 13 of 13