SERVICES, PAYMENT & SECURITY AGREEMENT
This Services, Payment & Security Agreement (this "AGREEMENT") dated as of
August 19, 2004, is made by and among First Virtual Communications, Inc. ("FIRST
VIRTUAL"), on the one hand, and Morrison & Foerster LLP ("MORRISON & FOERSTER"),
Huron Consulting Group ("HURON") and Applied Discovery, Inc. ("ADI")
(individually each a "SERVICE PROVIDER" and together, the "SERVICE PROVIDERS"),
on the other hand, with respect to the following facts and circumstances:
A. The Service Providers have from time to time provided certain forensic
accounting, legal and other professional services to First Virtual in connection
with the current special investigation.
B. Invoices provided to First Virtual by the Service Providers for work
performed by them through July 31, 2004 list an aggregate unpaid balance of
$1,548,474.50, apportioned as follows: (i) Morrison & Foerster ($1,016,879.51)
(invoice nos. 4312502, 4321450); (ii) Huron ($317,047.20) (invoice nos. 105434,
105625, 105,788); and (iii) ADI ($214,547.79) (invoice nos. 6620, 6800).
C. As partial payment on those outstanding invoices, First Virtual paid
the Service Providers by wire transfer the aggregate sum of $450,000,
apportioned as follows: (i) Morrison & Foerster ($300,000)and Huron ($90,000) on
August 18, 2004; and (ii) ADI ($60,000) on August 19, 2004.
D. As of the date hereof, the aggregate amount outstanding based on
services provided through July 31, 2004 is $1,098,474.50, apportioned as
follows: (i) Morrison & Foerster ($716,879.51); (ii) Huron ($227,047.20); and
(iii) ADI ($154,547.79).
E. First Virtual has requested that the Service Providers continue to
furnish the required professional services to complete the investigations
currently in progress. The Service Providers have agreed to continue such
services upon the terms upon which they have heretofore been provided as set
forth in each such Service Provider's prior written agreement with First Virtual
(such agreement being for each respective Service Provider its "ENGAGEMENT
AGREEMENT"), in each case, as modified hereby.
F. Morrison & Foerster has advised and hereby advises First Virtual that
First Virtual may seek the advice of an independent lawyer of First Virtual's
choice with respect to the granting of a security interest to Morrison &
Foerster under the terms of this Agreement and shall have a reasonable time in
which to do so before entering into this Agreement as to Morrison & Foerster.
First Virtual hereby acknowledges that it has been so advised by Morrison &
Foerster in writing herein and has had a reasonable opportunity to consult with
an independent lawyer.
NOW, THEREFORE, in consideration of the foregoing recitals
, which are
incorporated into the operative provisions of this Amendment by this reference,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
1. Services. Each of the Service Providers shall furnish First Virtual
with its services with respect to those matters First Virtual has engaged them
to perform such services in accordance with its Engagement Agreement, except as
may be expressly modified herein.
2. Term. In addition to the rights it would otherwise have to terminate
its provision of services under its Engagement Agreement, each of the Service
Providers shall be entitled to terminate its provision of services if the
amounts described in paragraphs 3 and 4 below are not paid as and when provided
herein, the Service Providers shall be entitled to cease providing such
3. Compensation. For all services that the Service Providers render to
First Virtual during the term hereof, First Virtual shall pay all fees earned by
the Service Providers at those rates set forth in its respective Engagement
Agreement, and all costs incurred during such term, provided, however, that such
fees and costs shall bear interest at the rate of 1% per month from the 30th day
following the date of invoice until paid; and provided, further, that First
Virtual shall be entitled to review and object to any invoices submitted by any
Service Provider in accordance with First Virtual's rights under the respective
Engagement Agreement and otherwise applicable law.
4. Acknowledgment of Partial Payment; Payment of Arrearages, Ongoing
4.1 Each of the Service Providers acknowledges receipt of the payment
described in Recital C above.
4.2 First Virtual shall pay the Service Providers (i) the balance of
amounts due for services provided through July 31, 2004, in the aggregate amount
and at the ratable distribution as set forth in Recital D above, plus interest
from the date hereof at the rate of 1% per month until paid; and (ii) fees and
costs accruing after July 31, 2004, bearing interest as provided in paragraph 3
above, and in each case such outstanding and accruing fees and costs shall be
paid at the time First Virtual completes its current financing, which is
currently scheduled to close on or about October 28, 2004, but in no event shall
such payment be made later than December 31, 2004.
5. Security Interest. As security for the full and timely payment of the
amounts due for services provided through July 31, 2004 and fees and costs
thereafter, First Virtual hereby grants a security interest on a PARI PASSU
basis to the Service Providers in all of First Virtual's right title and
interest in and to the following, whether now owned or hereafter acquired, and
wherever located: (i) inventory; (ii) equipment; (iii) deposit accounts; (iv)
general intangibles (including without limitation, intellectual property); (v)
investment property; and (vi) any other of its personal or intangible property,
and in each case, any of the proceeds therefrom. First Virtual shall cooperate
with the Service Providers in connection with the perfection of the Service
Providers' security interest granted herein, including, without limitation,
promptly executing any documents reasonably required by the Service Providers
therefor. Until all obligations secured by the security interest granted herein
are paid in full, First Virtual shall not dispose of any property or interest
therein, except in the ordinary course of business, and excepting further, First
Virtual's sale of its interest in its live asynchronous transfer mode product,
commonly known as "ATM," without the consent of any of the Service Providers
whose obligations secured hereby have not been paid in full.
In the event of a default as to any Service Provider, such Service Provider
may declare all sums due it secured hereby due and payable, and proceed to
enforce all of its rights and remedies, including, including, without
limitation, foreclosure on the security interest granted herein, without the
consent of any other party hereto, provided, however, that the commencement of
any such foreclosure process by one Service Provider shall also constitute an
additional default by First Virtual as to all the other Service Providers, who
may individually declare First Virtual's respective obligations to them secured
hereby all due and payable and proceed to enforce each and all of their
respective rights and remedies, including, without limitation, foreclosure on
the security interest granted herein.
6. Subordination of Security Interest. The Service Providers acknowledge
that First Virtual is a borrower under a loan facility provided by Silicon
Valley Bank, which is evidence by that certain April 3, 2003 Loan and Security
Agreement, as amended. That loan facility is secured by a broad form security
interest in all of First Virtual's property, including the property referenced
in paragraph 5 above. The Service Providers agree that the security interest
granted by this Agreement shall in all respects be junior and subordinate to the
security interest of Silicon Valley Bank or its successor in interest. The
Service Providers further acknowledge that Silicon Valley Bank will request that
they execute an intercreditor/subordination agreement in light of the security
interest granted herein and each agrees to execute such an agreement in the form
and substance requested by Silicon Valley Bank in the form attached hereto as
7. Release of Security Interests. Upon payment in full of the obligations
secured hereby, the security interests granted under this Agreement shall
terminate and the Service Providers shall promptly execute and deliver to First
Virtual such documents and instruments reasonably requested by First Virtual as
shall be necessary to evidence
the termination of all security interests granted by First Virtual to the
Service Providers hereunder.
8. Governing Law. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of California except where the
location of the collateral described in paragraph 5 above requires that the
creation, validity, perfection, or enforcement of the security interests
provided for herein may be governed by the laws of the jurisdiction where such
collateral is located.
9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
10. Authority to Execute Agreement. The undersigned hereby represent and
warrant to each other party to this Agreement that he or she has been duly
authorized to execute this Agreement by the party on whose behalf the Agreement
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties have
executed this Agreement as of the date first set forth above.
FIRST VIRTUAL COMMUNICATIONS, INC. MORRISON & FOERSTER LLP
By: /s/ Truman Cole
By: /s/ Adam A. Lewis
Name: Truman Cole
Name: Adam A. Lewis
Its: Chief Financial Officer Its: Partner/Member
APPLIED DISCOVERY, INC.
HURON CONSULTING GROUP
By: /s/ James B. Leach
Name: James B. Leach
Its: Managing Director