EXHIBIT 10.31
KPMG Peat Marwick LLP
Princeton Pike Corporate Center
X.X. Xxx 0000
Xxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Confidential
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July 24, 1998
Xxxxxx X. Xxxxxxxx, Ph.D.
President & CEO
Discovery Laboratories, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
The purpose of this letter is to provide a revision ("Revision One") to the
letter agreement of April 27, 1998 ("the Agreement") between KPMG Peat Marwick
LLP ("KPMG") and Discovery Laboratories, Inc. ("Discovery Labs" or "the
Company"). In addition to the advisory services outlined in the Agreement, KPMG
will render strategic advisory services to the Company in connection with a
possible merger, acquisition or sale transaction (a "Transaction") with another
company ("Strategic Partner"). KPMG will also arrange additional contacts with
portfolio managers.
Section 1. Services to be Rendered
In addition to those services provided under the original Agreement, KPMG will
perform such of the following financial advisory services as the Company may
reasonably request:
o Assist the executive management of Discovery Labs in formulating
and prioritizing the Company's strategic objectives;
o From these objectives, work with the Company to identify the
preferred attributes of prospective Strategic Partners;
o Perform a broad search of publicly available information on public
and private companies to identify an initial list of potential
Strategic Partners;
o Advise and assist the Company in refining the list of potential
Strategic Partners and prepare a profile of Select Companies,
including financial data, product pipeline, intellectual property
position and possible strategic fit with Discovery Labs;
o If KPMG and the Company believe it to be advisable, assist the
Company in preparing a memorandum and confidentiality agreement,
for distribution to Select Companies, the memorandum will describe
the Company and its technology, business, operations, properties,
financial condition, and prospects, it being specifically agreed
that (i) such memorandum shall be based entirely upon information
supplied by the Company, which information the Company hereby
warrants shall be complete and accurate in all material respects,
and not misleading, (ii) the Company shall be solely responsible
for the accuracy and completeness of such memorandum, and (iii)
other than as contemplated by this paragraph, such memorandum
shall not be used, reproduced, disseminated, quoted, or referred
to at any time, in any manner, or for any purpose, except with
KPMG's prior written consent;
o On behalf of the Company, contact such potential Strategic
Partners as the Company may designate;
o Advise and assist the Company in considering the desirability of
effecting various types of Transaction(s), and, if the Company
believes such a transaction to be desirable, in developing a
general strategy for accomplishing a Transaction;
o Assist management of the Company in making presentations to the
Board of Directors of the Company concerning a proposed
Transaction with one or more potential Strategic Partners;
o Advise and assist the Company in the course of its negotiation of
a Transaction with a potential Strategic Partner in order to
facilitate the issuance of a letter of intent and definitive
Transaction agreement;
o Suggest various financing alternatives in financing a
Transaction(s); o Render such other financial advisory services as
may from time to time be agreed upon by KPMG and the Company; and
o Separately, KPMG will arrange additional contacts with portfolio
managers.
Section 2. Fees
The Company shall pay to KPMG for its services hereunder the following cash
fees:
o $7,500 each month, representing an increase of $2,500 from the
monthly fee under the original Agreement, as payment for KPMG's
services; and
o At the conclusion of the above contemplated engagement, the
Company will pay KPMG a fee reflective of the value of the
services provided. [***]
Section 3. Indemnity
KPMG and the Company hereby agrees as follows:
1. The Company agrees to reimburse KPMG, its affiliates and their
respective partners, principals, directors, officers, employees, agents and
controlling persons (each an "Indemnified Party") promptly upon demand for
expenses (including fees and expenses of legal counsel) as they are incurred in
connection with the investigation of, preparation for or defense of any pending
or threatened claim, or any litigation, proceeding or other action in connection
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[***] Confidential Treatment Requested. Omitted portions have been filed
separately with the Commission
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with or arising out of or relating to the engagement of KPMG under the Letter
Agreement, or any actions taken or omitted, services performed or matters
contemplated by or in connection with the Letter Agreement, whether or not such
litigation, proceeding or other action is initiated or brought by the Company.
The Company also agrees to indemnify and hold harmless each Indemnified Party
from and against any and all losses, claims, damages and liabilities ("Losses"),
joint or several, to which any Indemnified Party may become subject, including,
without limitations, any amount paid or payable in settlement of any litigation,
proceeding or other action (commenced or threatened), in connection with or
arising out of or relating to the engagement of KPMG under the Letter Agreement,
or any actions taken or omitted, services performed or matters contemplated by
or in connection with the Letter Agreement, provided, however, that the Company
shall not be liable pursuant to this paragraph to the extent such Losses have
been finally determined by a court of competent jurisdiction (not subject to
further appeal) to have resulted primarily from the willful misconduct or gross
negligence of any Indemnified Party.
2. If indemnification is to be sought hereunder by an Indemnified
Party, then such indemnified Party shall notify the Company of the commencement
or threat of any litigation, proceeding or other action in respect thereof;
provided, however, that the failure to notify the Company shall not relieve the
Company from any liability or obligation that it may have hereunder or otherwise
to such Indemnified Party unless and only to the extent that such failure to
notify results in actual prejudice to the Company. Following such notification,
the Company may elect in writing to assume the defense of such litigation,
proceeding or other action (and the costs related thereto) and, upon such
election, the Company shall not be liable for any legal costs subsequently
incurred by such Indemnified Party (other than costs of investigation or the
production of documents or witnesses) unless (i) the Company has failed to
provide legal counsel reasonably satisfactory to such Indemnified Party in a
timely manner or (ii) such Indemnified Party shall have reasonably concluded on
the advice of counsel that (a) the representation of such Indemnified Party by
legal counsel selected by the Company would be inappropriate due to actual or
potential conflicts of interest; or (b) there may be legal defenses available to
such Indemnified Party that are different from or additional to those available
to the Company such that separate representation for such Indemnified Party
would be advisable. Nothing set forth herein shall preclude an Indemnified Party
from retaining its own counsel at its own expense.
The Company agrees that, without KPMG's prior written consent (which
will not be unreasonably withheld), the Company will not settle, compromise or
consent to the entry of any judgment with respect to arny pending or threatened
claim, action or proceeding in respect of which indemnification could be sought
hereunder (whether or not KPMG or any other Indemnified Party are an actual or
potential party to such claim, action or proceeding), unless such settlement,
compromise or consent includes an unconditional release of each of the foregoing
parties from all liability arising out of such claim, action or proceeding or
unless KPMG reasonably agrees that such release is not necessary at such time
(it being understood that the Company's indemnification obligations will remain
in full force and effect). KPMG agrees that the Company shall not be liable for
the settlement, comproniise or consent of any claim, action or proceeding which
is effected without the Company's written consent (which will not be
unreasonably withheld).
3. In the event that the indemnity provided for in paragraphs 1 and 2
hereof is unavailable or insufficient to hold any Indemnified Party harmless
other than by operation of the proviso set forth in paragraph 1 above, then the
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Company shall contribute to amounts paid or payable by an Indemnified Party in
respect of such Indemnified Party's Losses as to which the indemnity provided
for in paragraphs 1 and 2 hereof is unavailable or insufficient (i) in such
proportion as approximately reflects the relative benefits received by the
Company, on the one hand, and KPMG, on the other hand, in connection with the
matters as to which such Losses relate or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
appropriately reflects not only the relative benefits referred to in clause (i)
but also the relative fault of the Company, on the one hand, and KPMG, on the
other hand, as well as any other equitable considerations. The amounts paid or
payable by an Indemnified Party in respect of Losses referred to above shall be
deemed to include any legal or other fees and expenses incurred in defending any
litigation, proceeding or other action or claim. Notwithstanding the provisions
hereof, to the extent permitted by applicable law, KPMG's share of the liability
hereunder shall not be in excess of the amount of fees actually received by KPMG
under the Letter Agreement (excluding any amounts received as reimbursement of
expenses incurred by KPMG).
4. These Indemnification Provisions shall remain in full force and
effect whether or not any of the transactions contemplated by the Letter
Agreement are consummated and shall survive the expiration or termination of the
Letter Agreement and all residual periods, and shall be in addition to any
liability that the Company might otherwise have to any Indemnified Party under
the Letter Agreement or otherwise. It is further agreed that no Indemnified
Party (including KPMG) shall be liable to the Company or any affiliate of the
Company in connection with any matter arising out of or relating to the
engagement of KPMG under the Letter Agreement, or any actions taken or omitted,
services performed or matters contemplated by or in connection with the Letter
Agreement, except to the extent of any Losses that a court of competent
jurisdiction shall have finally determined (not subject to further appeal) to
have resulted primarily from the willful misfeasance or gross negligence of any
Indemnified Party.
Section 4. Termination of Engagement
As under the original Agreement, this engagement will continue until terminated
by one of the parties; provided, however, that KPMG will have the same
entitlement to its fee under Section 2 hereof in the event that, at any time
prior to the expiration of one year after such termination, a Transaction is
consummated with a company with whom KPMG held discussions during the course of
its engagement hereunder.
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Please confirm that the foregoing is in accordance with your understandings and
agreements with KPMG Peat Marwick LLP by signing and returning to KPMG Peat
Marwick LLP the duplicate of this letter enclosed herewith.
KPMG's acceptance of this assignment is conditioned upon completion of our
standard prospective client evaluation
Very truly yours,
KPMG Peat Marwick LLP
/s/ X.X. Xxxxx
Xxxx X. Xxxxx, Ph.D.
Senior Managing Director
KPMG Corporate Finance
cc: Xxxxxxx X. Xxxx - National Director, Corporate Finance
Xxxxx Xxxxxxx - Managing Partner, Corporate Finance
ACCEPTED AND AGREED AS OF
THE DATE FIRST ABOVE WRITTEN:
/s/ Xxxxxx X. Xxxxxxxx/mtg
Xxxxxx X. Xxxxxxxx, Ph.D.
President & CEO
Discovery Laboratories, Inc.
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