As filed with the Securities and Exchange Commission on September 28, 1995
Registration No. 33-59379
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
POST EFFECTIVE
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
__________________
XOMA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2756657
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2910 Seventh Street
Berkeley, California 94710
(510) 644-1170
(Address, including ZIP code, and telephone number, including
area code, of registrant's principal executive offices)
__________________________
CHRISTOPHER J. MARGOLIN, ESQ.
XOMA CORPORATION
2910 Seventh Street
Berkeley, California 94710
(510) 644-1170
(Name, address, including ZIP code, and telephone number, including
area code, of agent for service)
__________________
Copy to:
GEOFFREY E. LIEBMANN, ESQ.
CAHILL GORDON & REINDEL
80 Pine Street
New York, New York 10005
(212) 701-3000
__________________
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant_
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
<PAGE>
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the Securi-
ties Act of 1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 28, 1995
25,000 Shares
XOMA CORPORATION
COMMON STOCK
This Prospectus relates to 25,000 shares of Common
Stock, par value $.0005 per share (the "Common Stock"), of XOMA
Corporation (the "Company"), which have been registered for sale
from time to time by The Van Ness 1983 Revocable Trust (the "Sell-
ing Stockholder"). 20,000 of such shares of Common Stock will be
issued to the Selling Stockholder, and an additional 5,000 of such
shares may be issued to the Selling Stockholder, pursuant to an
agreement, effective as of May 15, 1995, among the Company, North-
west Venture Services Corporation, a Washington corporation
("Northwest"), and W. Denman Van Ness, a director of the Company
("Mr. Van Ness"), as amended by Amendment No. 1 thereto effective
July 28, 1995 (the "Van Ness Agreement"). See "Plan of Distribu-
tion." The Company will receive no proceeds from the sale by the
Selling Stockholder of the Common Stock offered hereby.
The Common Stock is traded on the NASDAQ National Market
under the symbol "XOMA." The last reported sales price of the
Common Stock as reported by the NASDAQ National Market on
August 31, 1995 was $3.50 per share.
The Common Stock offered hereby involves a high degree
of risk. See "Risk Factors."
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
____________________
The date of this Prospectus is , 1995.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities
laws of any such state.
<PAGE>
-2-
AVAILABLE INFORMATION
The Company is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and is required to file periodic reports, proxy statements
and other information with the Securities and Exchange Commission
(the "SEC") relating to its business, financial statements and
other matters. Such reports, proxy statements and other informa-
tion may be inspected and copied at the public reference facili-
ties maintained by the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the
SEC located at 500 West Madison Street, Suite 1400, Chicago, Illi-
nois 60661 and at Seven World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material can also be obtained from
the SEC at prescribed rates from the Public Reference Section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed a Registration Statement on Form
S-3 with the SEC under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the Common Stock offered hereby.
As permitted by the rules and regulations of the SEC, this Pro-
spectus omits certain information contained in the Registration
Statement. For further information, reference is made to the Reg-
istration Statement, including the financial schedules and exhib-
its incorporated therein by reference or filed as a part thereof.
Statements made in this Prospectus as to the contents of any con-
tract, agreement or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or
otherwise filed with the SEC. Each such statement shall be deemed
qualified in its entirety by such reference.
____________________
The Company will provide without charge to each person
to whom a copy of this Prospectus is delivered, upon the written
or oral request of such person, a copy of any or all of the docu-
ments incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated
by reference in such documents). Requests for such copies should
be directed to Director, Corporate Communications, XOMA Corpora-
tion, 2910 Seventh Street, Berkeley, California 94710,
(510) 644-1170.
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INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the SEC
pursuant to the Exchange Act are hereby incorporated by reference
in this Prospectus:
(1) Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (File No. 0-14710);
(2) Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1995 and June 30, 1995; and
(3) The description of XOMA's Common Stock in the Reg-
istration Statement on Form 8-A dated June 9, 1986 filed on
June 11, 1986 under Section 12 of the Exchange Act, including
any amendment or report for the purpose of updating such
description (Registration No. 33-4793).
All documents filed by the Company with the SEC pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offer-
ing of the Common Stock offered hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part
hereof from the date any such document is filed.
Any statements contained in a document incorporated by
reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus (or in any other subse-
quently filed document which also is incorporated by reference in
this Prospectus) modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed to consti-
tute a part of this Prospectus except as so modified or
superseded.
____________________
No person has been authorized in connection with the
offering made hereby to give any information or make any represen-
tation not contained in this Prospectus and, if given or made,
such information or representation must not be relied upon as hav-
ing been authorized by the Company or any other person. This Pro-
spectus does not constitute an offer to sell or solicitation of
any offer to buy any of the securities offered hereby in any
jurisdiction in which it is unlawful to make such offer or solici-
tation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication
that the information contained herein is correct as of any date
subsequent to the date hereof.
<PAGE>
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RISK FACTORS
In addition to the other information included or incor-
porated by reference in this Prospectus, the following factors
should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus.
No Assurance of Regulatory Approvals or Additional Product
Development
XOMA's products are subject to rigorous preclinical and
clinical testing requirements and to approval processes by the
U.S. Food and Drug Administration (the "FDA") and similar author-
ities in other countries. The Company's products are primarily
regulated on a product-by-product basis under the U.S. Food, Drug
and Cosmetic Act and Section 351(a) of the Public Health Service
Act. Most of the Company's human therapeutic products are or will
be classified as biologic products and would be subject to regula-
tion by the FDA Center for Biologics Evaluation and Research.
Approval of a biologic for commercialization requires licensure of
the product and the manufacturing facilities.
In December 1992, XOMA submitted an investigational new
drug application ("IND") to the FDA to begin Phase I human testing
of Neuprex(TM), a recombinantly-derived fragment of human
bactericidal/permeability increasing protein ("BPI") which may be
potentially useful in the treatment of certain bacterial infec-
tions and trauma/surgical complications. In March 1993, the Com-
pany initiated human testing under the IND. To date, three sets
of randomized, double-blind, placebo-controlled Phase I studies
have been completed. The Company has initiated efficacy trials
of its Neuprex(TM) product for treatment of meningococcemia, a severe
bacterial infection which results in massive endotoxin poisoning, for
treatment of trauma patients suffering from complications associated
with acute blood loss, known as hemorrhagic trauma and for treatment
following partial hepatectomy (liver surgery). No assurance can be
given, however, that product approval for Neuprex(TM) or any other
BPI product will be obtained.
In March 1989, XOMA filed a product license application
("PLA") for FDA licensure of E5(R), a monoclonal antibody product
for the treatment of gram-negative sepsis. XOMA has completed
several clinical trials of E5(R), including two randomized, double-
blind, placebo-controlled, multicenter Phase III studies involving
nearly 1,300 patients. In September 1991, an FDA advisory
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committee heard E5(R) data presentations but made no recommendations
regarding the safety or efficacy of the product. In June 1992,
the FDA informed XOMA that E5(R) was not approvable without further
clinical testing. In June 1993, a third Phase III clinical trial
of the E5(R) product commenced with narrower entry criteria than the
previous trials. The trial is being managed and co-funded by
Pfizer Inc. ("Pfizer"). There can be no assurance that this trial
will yield data that will result in licensure of the product in
the United States. In October 1993, Pfizer submitted an applica-
tion for approval to market E5(R) to regulatory authorities in
Japan. There can be no assurance that such application will be
approved.
During December 1991 and January 1992, the manufacturing
facilities for E5(R) were inspected for licensure by the FDA. XOMA
believes that there are no major manufacturing issues outstanding.
Such licenses are currently pending and will not be finalized
unless or until E5(R) has been approved for sale. Additionally,
FDA licensure of XOMA's manufacturing facilities for Neuprex(TM) will
be required prior to any commercial use or sale of Neuprex(TM). No
assurance can be given that approval of the manufacturing facili-
ties for E5(R) or Neuprex(TM) will be obtained.
The antibodies currently used by XOMA in its E5(R) product
are derived from ascites produced in mice by Charles River Labora-
tories ("CRL"). If the Company must obtain ascites from other
sources, including its own facilities or a different facility of
CRL, regulatory licensure of such other sources will be required.
There can be no assurance that any such licensure will be obtained
without significant delay, expense or additional clinical testing.
The FDA has substantial discretion in both the product
approval process and manufacturing facility approval process and
it is not possible to predict at what point, or whether, the FDA
will be satisfied with the Company's submissions or whether the
FDA will raise questions which may be material and delay or pre-
clude product approval or manufacturing facility approval. As
additional clinical data are accumulated, they will be submitted
to the FDA and may have a material impact on the FDA product
approval process.
The Company has accumulated inventories of raw material
and intermediates for E5(R). Because the achievement, timing and
terms of regulatory licensures and subsequent sales of pharmaceu-
tical products are uncertain, there can be no assurance that the
inventories of raw materials and intermediates will be usable. In
connection with the October 1992 restructuring, the Company
<PAGE>
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established a $6.0 million reserve for a portion of its E5(R) inven-
tory and took a $2.5 million charge to earnings for future idle
capacity. The Company increased the reserve to $6.9 million in
1993. See "-- History of Losses and Accumulated Deficit."
Other potential XOMA products will require significant
additional development, including extensive clinical testing.
There can be no assurance that any of the products under develop-
ment by the Company will be developed successfully, obtain the
requisite regulatory approval or be successfully manufactured or
marketed.
Need for Additional Funds
XOMA has expended and expects to continue to expend sub-
stantial funds in connection with research and development relat-
ing to its products and production technologies, the scale-up of
its production capabilities, extensive human clinical trials and
the protection of its intellectual property. The Company's cash
position and resulting investment income are sufficient to finance
the Company's currently anticipated needs for operating expenses,
working capital, equipment and current research projects through
approximately the third quarter of 1996. The Company continues to
evaluate strategic alliances, potential partnerships and financing
arrangements which would further strengthen its competitive posi-
tion and provide additional funding. However, no assurance can be
given that operations will generate meaningful funds, that addi-
tional agreements for product development funding or strategic
alliances can be negotiated or that adequate additional financing
will be available for the Company to finance its own development
on acceptable terms, if at all. If adequate funds are not avail-
able, the business of the Company will be materially adversely
affected.
The Company has engaged an investment banking firm to,
among other things, assist it in completing one or more strategic
alliances. The Company cannot predict whether or when any such
alliance(s) will be consummated.
History of Losses and Accumulated Deficit
XOMA has experienced significant losses and, as of
June 30, 1995, had an accumulated deficit of approximately $297.1
million.
In October 1992, the Company refocused its research and
development strategy to emphasize products based on BPI, while
<PAGE>
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continuing development of E5(R), and to develop new T lymphocyte-
targeted products for autoimmune disease therapy, while continuing
development of CD5 Plus(TM) for graft-versus-host disease ("GVHD").
Concurrently, the Company implemented an operational restructur-
ing, which resulted in a workforce reduction of approximately 25%
to 235 employees and a charge to earnings of $10.0 million relat-
ing to personnel expenses, idle production capacity costs and the
establishment of a $6.0 million reserve for a portion of E5(R)
inventory. In 1993, the Company increased the inventory reserve
to $6.9 million.
In the fourth quarter of 1994, the Company discontinued
development of its CD5 Plus(TM) product for GVHD. In addition, all
research programs having long lead times other than BPI or its
derivatives have been curtailed or eliminated.
In January 1995, in connection with an ongoing review of
the Company's financial condition and prospects, a restructuring
was completed to reduce costs and accelerate the development of
its BPI-derived products. Under this restructuring, the Company's
workforce was reduced by 37% to 145 positions. The restructuring
resulted in a charge to earnings of $2.5 million in the fourth
quarter of 1994.
For the six months ended June 30, 1995 and year ended
December 31, 1994, XOMA had a net loss of approximately $13.1 mil-
lion and $34.6 million, respectively, or $0.58 and $1.58 per
share, respectively. The Company expects to incur additional
losses in the future. Its ability to achieve a profitable level
of operations is dependent in large part on obtaining regulatory
approval for its products, entering into agreements for product
development and commercialization, and making a transition to a
manufacturing and marketing company. XOMA's ability to fund its
ongoing operations is dependent on the foregoing factors and on
its ability to secure additional funds. There can be no assurance
that the Company will ever achieve a profitable level of opera-
tions or that cash flow from future operations will be sufficient
to meet such obligations.
No Assurance of Effective Marketing
As of the date of this Prospectus, the Company has not
entered into any marketing agreements regarding its Neuprex(TM)
product.
The Company has entered into marketing agreements with
Pfizer regarding the Company's E5(R) gram-negative sepsis product.
<PAGE>
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Pfizer also has a limited first right to negotiate for future XOMA
products, other than BPI-derived products, if they will be used
for the treatment, cure or prevention of gram-negative sepsis.
However, no assurance can be given that Pfizer will be able to
market the Company's products successfully. The Company does not
currently have a marketing and sales organization for any of its
products, and no assurance can be given that XOMA will be able to
develop the marketing and sales organization necessary for the
successful commercialization of its products.
Assuming timely regulatory approval, which cannot be
assured, the successful commercialization of XOMA's products will
be dependent to a large extent upon the marketing capabilities of
its pharmaceutical partners. The Company believes that termina-
tion of its relationship with Pfizer would have a material,
adverse effect on its future revenues and prospects.
No Assurance of Scale-up of Manufacturing Processes
The Company has never commercially introduced any phar-
maceutical products. In addition, there can be no assurance that
the Company's, CRL's or Pfizer's existing manufacturing facilities
will receive regulatory approval in a timely manner. If one or
more of the Company's products and the relevant manufacturing
facilities were to receive regulatory approval, no assurance can
be given that these existing manufacturing capabilities would be
able to produce sufficient quantities of such products to meet
market demand. Additionally, no assurance can be given that if
additional manufacturing facilities are needed to meet market
demand, such manufacturing facilities will be successfully
obtained or that the requisite regulatory approval for such facil-
ities will be obtained.
No Assurance of Patent Protection/Avoidance of Patent Infringement
Because of the length of time and the expense associated
with bringing new products through development and government
approval to the marketplace, the pharmaceutical industry has tra-
ditionally placed considerable importance on obtaining and main-
taining patent and trade secret protection for significant new
technologies, products and processes. The Company and other
biotechnology firms hold and are in the process of applying for a
number of patents in the United States and abroad to protect their
products and important processes and also have obtained or have
the right to obtain exclusive licenses to certain patents and
applications filed by others. However, the patent position of
biotechnology firms generally is highly uncertain and no
<PAGE>
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consistent policy regarding the breadth of allowed claims has
emerged from the actions of the U.S. Patent and Trademark Office
(the "Patent Office") with respect to biotechnology patents.
Legal considerations surrounding the validity of biotechnology
patents continue to be in transition, and no assurance can be
given that historical legal standards surrounding questions of
validity will continue to be applied or that current defenses as
to issued biotechnology patents will in fact be considered sub-
stantial in the future. Accordingly, no assurance can be given as
to the degree and range of protection any patents will afford
against competitors with similar technologies, that patents will
issue, that others will not obtain patents claiming aspects simi-
lar to those covered by the Company's patent applications or as to
the extent to which the Company will be successful in avoiding any
patents granted to others.
In March 1993, the Patent Office issued to New York Uni-
versity U.S. Patent No. 5,198,541 (the "'541 Patent"), which con-
tains claims covering the recombinant production of BPI. The Com-
pany is the exclusive licensee of the '541 Patent for human thera-
peutic and diagnostic uses of BPI and believes it has substantial
value because it covers certain production methodologies that
allow production of commercial-scale quantities of BPI for human
use. In September 1994, U.S. Patent No. 5,348,942 was issued to
XOMA addressing the use of BPI protein products for neutralizing
anti-coagulant effects of heparin; in May 1995, U.S. Patent
No. 5,420,019 was issued to XOMA directed to, among other things,
novel recombinant amino-terminal fragments and fragment analogs of
BPI; on May 31, 1995, the European Patent Office granted a sepa-
rate patent to NYU (which patent also is licensed to XOMA under
its license agreement with NYU) directed to, among other things,
biologically active amino-terminal fragments of BPI; in August,
1995, U.S. Patent No. 5,439,807 was issued to XOMA directed to,
among other things, improved recombinant manufacturing methods for
BPI protein products; and in September, 1995, U.S. Patent
No. 5,447,913 was issued to XOMA directed to, among other things,
pharmaceutical compositions and therapeutic uses of dimeric
N-terminal BPI protein fragments. XOMA also has received notices
of allowance for four more U.S. patents, and NYU has received
notices of allowance for three additional U.S. patents, related to
BPI.
The Company is aware of an agreement between Genentech
Inc. ("Genentech") and Incyte Pharmaceuticals Inc. ("Incyte") pur-
suant to which Incyte claims to hold worldwide rights to all
Incyte and Genentech technology related to BPI and Genentech will
receive a royalty on BPI product sales. Between 1992 and 1994,
<PAGE>
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the Patent Office issued five patents related to BPI to Incyte
(the "Incyte BPI Patents"). While the Company believes, based on
the opinion of its patent counsel, that it does not infringe any
valid claims of any of the Incyte BPI Patents, no assurance can be
given that XOMA has not infringed or will not infringe any valid
claims of any of the Incyte BPI Patents.
The Company may require certain licenses from others in
order to develop and commercialize certain potential products
incorporating the Company's technology. There can be no assurance
that such licenses, if required, will be available on acceptable
terms.
While the Company pursues patent protection, due to
uncertainty as to the future utility of patent protection for
biotechnology products or processes, the Company also relies upon
trade secrets, know-how and continuing technological advancement
to develop and maintain its competitive position. All Company
employees have signed confidentiality agreements under which they
have agreed not to use or disclose any of the Company's propri-
etary information. Research and development contracts and rela-
tionships between the Company and its scientific consultants and
potential customers provide access to aspects of the Company's
know-how that are protected generally under confidentiality agree-
ments with the parties involved. There can be no assurance that
all confidentiality agreements will be honored or are enforceable.
No Assurance of Product Efficacy or the Ability To Compete
Successfully
The biotechnology and pharmaceutical industries are sub-
ject to continuous and substantial technological change. Competi-
tion in the areas of recombinant DNA-based and monoclonal
antibody-based technologies is intense and expected to increase in
the future as a number of established biotechnology firms and
large chemical and pharmaceutical companies diversify into the
field. A number of these large pharmaceutical and chemical com-
panies have enhanced their capabilities by entering into arrange-
ments with, or acquiring, biotechnology companies. Substantially
all of these companies have significantly greater financial
resources, larger research and development and marketing staffs
and larger production facilities than those of the Company. More-
over, certain of these companies have extensive experience in
undertaking preclinical testing and human clinical trials. These
factors may enable such companies to develop products and pro-
cesses competitive with or superior to those of the Company. In
addition, a significant amount of research in biotechnology is
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being carried out in universities and other non-profit research
organizations. These entities are becoming increasingly aware of
the commercial value of their work and may become more aggressive
in seeking patent protection and licensing arrangements. There
can be no assurance that developments by others will not render
the Company's products or technologies obsolete or uncompetitive.
XOMA's E5(R) product faced potential competition from
Centocor, Inc.'s HA-1A product. In January 1993, Centocor
announced suspension of all sales of its HA-1A product and in
March 1993 it announced cancellation of its Phase III trial of the
antibody due to an excess of mortality in certain HA-1A-treated
patients enrolled in the trial. There is no assurance that such
suspension of sales and cancellation of a trial of HA-1A will not
have a material adverse effect on the regulatory review of E5(R) or
that E5(R) will receive regulatory approval in the United States, or
that Pfizer will be able to market E5(R) effectively.
The Company believes that research and human testing is
being conducted with other products, some of which are designed to
treat a broader population of sepsis patients, including patients
with gram-positive as well as gram-negative sepsis. E5(R) is
intended to treat only patients with severe gram-negative sepsis.
There can be no assurance that other products will not prove to be
more effective than or receive regulatory approval prior to E5(R).
No Assurance of Supply of Monoclonal Antibodies
XOMA obtains the unpurified ascites containing the
monoclonal antibodies used in its E5(R) product from a single sup-
plier, CRL, which has multiple manufacturing sites. XOMA and CRL
entered into a supply agreement in 1989 and renewed the agreement
in 1991, committing CRL to supply and the Company to purchase
XOMA's anticipated ascites needs for five years after FDA
licensure of E5(R). Among the requirements for FDA licensure of E5(R)
is that the CRL manufacturing facilities be licensed by the FDA.
If the Company obtains ascites from other sources, including its
own facilities or a different facility of the same supplier, regu-
latory approval of such other sources will be required. Although
the Company believes that it currently has sufficient quantities
of ascites for product launch and the first few years of sales,
any significant future interruption in supply could materially and
adversely affect the Company's business.
<PAGE>
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Potential Impact of Healthcare Reform
The successful commercialization of the Company's prod-
ucts will depend upon, among other things, the Company's marketing
arrangements for its products. The Company's ability to enter
into marketing arrangements on acceptable terms and/or the terms
of its existing arrangements could be materially adversely
affected if legislation were to be enacted or regulations adopted
which mandates or otherwise results in the reduction or contain-
ment of the cost of pharmaceutical products to consumers. In
addition, if legislation were to be enacted or regulations adopted
which mandates or otherwise results in the reduction of pharmaceu-
tical product manufacturer's prices, the Company's business could
be materially adversely affected.
Uncertainties in Attracting and Retaining Qualified Personnel
The Company's success in developing marketable products
and achieving a competitive position will depend, in part, on its
ability to attract and retain qualified scientific and management
personnel. Competition for such personnel is intense, and no
assurances can be given that the Company will be able to attract
or retain such personnel. The loss of a significant group of key
personnel would adversely affect the Company's product development
efforts.
Risk of Product Liability Claims
The testing and marketing of medical and food additive
products entails an inherent risk of allegations of product lia-
bility. The Company believes it currently has adequate levels of
insurance for its clinical trials. The Company will seek to
obtain additional insurance, if needed, if and when the Company's
products are commercialized; however, there can be no assurance
that adequate insurance coverage will be available or be available
at acceptable costs or that a product liability claim would not
materially adversely affect the business or financial condition of
the Company.
Certain Provisions Relating to Changes in Control
The Stockholder Rights Agreement, dated as of
October 27, 1993 (the "Rights Agreement"), between the Company and
First Interstate Bank of California, as Rights Agent, and the Com-
pany's Amended and Restated By-Laws contain provisions that may
have the effect of making more difficult an acquisition of control
of the Company that has not been approved by the Company's Board
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of Directors. See "Description of Equity Securities -- Certain
Provisions Relating to Changes in Control of the Company."
Volatility of Stock Price
The market prices for securities of biotechnology com-
panies, including XOMA, have been highly volatile. See "Price
Range of Common Stock and Dividend Information." Announcements
regarding the results of regulatory approval filings, clinical
trials or other testing, technological innovations or new commer-
cial products by XOMA or its competitors, government regulations,
developments concerning proprietary rights or public concern as to
safety of biotechnology have historically had, and are expected to
continue to have, a significant impact on the market price of
XOMA's Common Stock.
THE COMPANY
The Company is a biopharmaceutical company engaged in
the development of products for the treatment of infectious and
immune system diseases and other serious disorders. The Company's
current development programs include:
- Neuprex(TM), a recombinantly-derived fragment of BPI for
the treatment of certain bacterial infections and
trauma/surgical complications;
- synthetic peptides derived from BPI, for treatment of
fungal and other infections, and for certain post-surgi-
cal and anti-inflammatory applications; and
- E5(R), a monoclonal antibody for the treatment of gram-
negative sepsis, a life-threatening disorder caused by
certain bacterial infections.
In the fourth quarter of 1994, the Company discontinued
development of its CD5 Plus(TM) product for GVHD. In addition, all
research programs having long lead times other than those associ-
ated with BPI or its derivatives have been curtailed or elimi-
nated. The discontinuation of CD5 Plus(TM) and other non-BPI
research programs will have no material impact on the Company's
financial condition or results of operations.
In January of 1995, in connection with an ongoing review
of the Company's financial condition and prospects, a restructur-
ing was completed to reduce costs and accelerate the development
of its BPI-derived products. Under the restructuring, the XOMA
<PAGE>
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work force was reduced by 37% to 145 positions. The Company
expects the restructuring to result in annual operating cost sav-
ings of approximately $7.5 million, and the related charge to
earnings of $2.5 million was recorded in the fourth quarter of
1994. XOMA's cash position and resulting investment income are
sufficient to finance the Company's currently anticipated needs
for operating expenses, working capital, equipment and current
research projects through approximately the third quarter of 1996.
<PAGE>
-15-
PRICE RANGE OF COMMON STOCK AND DIVIDEND INFORMATION
The Company's Common Stock trades on the NASDAQ National
Market under the symbol "XOMA." The following table sets forth
the quarterly range of high and low reported sale prices of the
Company's Common Stock on the NASDAQ National Market for the peri-
ods indicated.
High Low
1993:
First Quarter .................... $10 1/2 $7 1/2
Second Quarter ................... 7 7/8 5
Third Quarter .................... 7 1/8 5 5/8
Fourth Quarter ................... 7 1/4 5
1994:
First Quarter .................... $6 1/4 $3 3/4
Second Quarter ................... 4 1/4 2 1/2
Third Quarter .................... 3 5/8 2 1/4
Fourth Quarter ................... 4 1/8 2 3/16
1995:
First Quarter .................... $3 1/16 $1 1/8
Second Quarter ................... 2 7/8 1 9/32
Third Quarter (through
August 31, 1995)................ 4 1/4 1 11/16
On August 31, 1995 the last reported sale price of the
Common Stock as reported on the NASDAQ National Market was $3.50
per share. On August 31, 1995, there were approximately 2,800
record holders of XOMA's Common Stock.
The Company has not paid cash dividends on its Common
Stock. The Company currently intends to retain earnings for use
in the development and expansion of its business and, therefore,
does not anticipate paying cash dividends on its Common Stock in
the foreseeable future.
<PAGE>
-16-
SELLING STOCKHOLDER
The following table sets forth certain information
regarding the beneficial ownership of Common Stock by the Sell-
ing Stockholder as of August 31, 1995, and the number of shares
of Common Stock covered by this Prospectus.
Beneficial Ownership Number of Shares
Name and Address of of Common Stock prior of Common Stock
Selling Shareholder to the Offering Registered Hereby
Number of Percent
Shares of Class
The Van Ness 1983
Revocable Trust 32,481(1) Less than 1% 25,000(1)
c/o Olympic Venture Partners
2420 Carillon Point
Kirkland, Washington 98033
____________________
(1) Includes 5,000 shares of Common Stock (the "Additional Shares") which
may be issued pursuant to the Van Ness Agreement. The issuance of the
Additional Shares is conditioned upon the Board of Directors of the Com-
pany nominating Mr. Van Ness to stand for reelection as a director of
XOMA at XOMA's 1996 annual meeting of stockholders and certain other
conditions. See "Plan of Distribution." Does not include 13,450 shares
of Common Stock which may be deemed to be beneficially owned by
Mr. Van Ness, who is the trustee of The Van Ness 1983 Revocable Trust
and a Director of the Company. Mr. Van Ness disclaims beneficial owner-
ship of certain of these shares, as well as of the shares beneficially
owned by The Van Ness 1983 Revocable Trust.
<PAGE>
-17-
DESCRIPTION OF EQUITY SECURITIES
The authorized capital stock of the Company consists
of 40,000,000 shares of Common Stock, $.0005 par value, of
which 24,552,862 shares were outstanding on August 31, 1995,
and 1,000,000 shares of preferred stock, $.05 par value, of
which 650,000 have been designated Series A Cumulative Pre-
ferred Stock (the "Series A Preferred Stock"), of which none
are outstanding, 30,000 of which have been designated Senior
Convertible Preferred Stock, Series B (the "Series B Preferred
Stock"), of which 7,807 shares are outstanding and 5,000 of
which have been designated Convertible Preferred Stock,
Series C (the "Series C Preferred Stock") of which 4,799 shares
are outstanding.
Common Stock
Holders of shares of Common Stock are entitled to one
vote per share on all matters to be voted on by stockholders.
The holders of Common Stock are entitled to receive such divi-
dends, if any, as may be declared from time to time by the Com-
pany's Board of Directors out of funds legally available there-
for. Upon liquidation or dissolution of the Company, the hold-
ers of the Common Stock are entitled to share ratably in the
distribution of assets, subject to the rights of the holders of
the Series B Preferred Stock and Series C Preferred Stock or
any other series of preferred stock that may then be outstand-
ing. There are no redemption or sinking fund provisions with
respect to the Common Stock. All of the outstanding shares of
Common Stock are validly issued, fully paid and nonassessable.
Preferred Stock Purchase Rights
On October 27, 1993, the Board of Directors of the
Company declared a dividend distribution of one Preferred Stock
Purchase Right (a "Right") for each outstanding share of Common
Stock. Each Right entitles the holder to purchase from the
Company a unit consisting of one one-hundredth of a share (a
"Unit") of Series A Preferred Stock at a cash exercise price of
$30.00 per Unit, subject to adjustment.
The Rights are attached to all outstanding shares of
Common Stock, including the shares of Common Stock offered
hereby. The Rights will separate from the Common Stock and
will be distributed to holders of Common Stock upon the ear-
liest of (i) ten business days after the first public announce-
ment that a person or group of affiliated or associated persons
<PAGE>
-18-
(an "Acquiring Person") has acquired beneficial ownership of
20% or more of the Common Stock then outstanding (the date of
said announcement being referred to as the "Stock Acquisition
Date"), (ii) ten business days following the commencement of a
tender offer or exchange offer that would result in a person or
group of persons becoming an Acquiring Person or (iii) the dec-
laration by the Board of Directors of the Company that any per-
son is an "Adverse Person" (the earliest of such dates, the
"Distribution Date").
The Board of Directors of the Company may generally
declare a person to be an Adverse Person after a declaration
that such person has become the beneficial owner of 10% or more
of the outstanding shares of Common Stock and a determination
that (a) such beneficial ownership by such person is intended
to cause or is reasonably likely to cause the Company to repur-
chase the Common Stock owned by such Person or to cause the
Company to enter into other transactions not in the best
long-term interests of the Company or (b) such beneficial own-
ership is reasonably likely to cause a material adverse impact
on the business or prospects of the Company. The Rights are
not exercisable until the Distribution Date and will expire on
December 31, 2002, unless previously redeemed or exchanged by
the Company.
In the event that a person becomes an Acquiring Per-
son or the Board of Directors determines that a person is an
Adverse Person, each holder of a Right will thereafter have the
right (a "Subscription Right") to receive upon exercise that
number of Units of Series A Preferred Stock having a market
value of two times the exercise price of the Rights. In the
event that, at any time following the Stock Acquisition Date,
(i) the Company consolidates with, or merges with and into, any
person, and the Company is not the surviving corporation;
(ii) any person consolidates with the Company, or merges with
and into the Company and the Company is the continuing or sur-
viving corporation of such merger and, in connection with such
merger, all or part of the shares of Common Stock are changed
into or exchanged for other securities of any other person or
cash or any other property, or (iii) 50% or more of the Compa-
ny's assets are sold or otherwise transferred, each holder of a
Right shall thereafter have the right (a "Merger Right") to
receive, upon exercise, common stock of the acquiring company
having a market value equal to two times the exercise price of
the Rights. Rights that are beneficially owned by an Acquiring
or Adverse Person may, under certain circumstances, become null
and void.
<PAGE>
-19-
At any time after a person becomes an Acquiring Per-
son or the Board of Directors of the Company determines that a
person is an Adverse Person, the Board of Directors of the Com-
pany may exchange all or any part of the then outstanding and
exercisable Rights for shares of Common Stock or Units of
Series A Preferred Stock at an exchange ratio of one share of
Common Stock or one Unit of Series A Preferred Stock per Right.
Notwithstanding the foregoing, the Board of Directors of the
Company generally will not be empowered to effect such exchange
at any time after any person becomes the beneficial owner of
50% or more of the Common Stock then outstanding.
The Rights may be redeemed in whole, but not in part,
at a price of $.001 per Right by the Board of Directors of the
Company at any time prior to the date on which a person is
declared to be an Adverse Person, the tenth business day after
the Stock Acquisition Date, the occurrence of an event giving
rise to the Merger Right or the expiration date of the Rights
Agreement.
The Series A Preferred Stock
There are currently no shares of Series A Preferred
Stock outstanding. Pursuant to the Certificate of Designation
relating to the Series A Preferred Stock, subject to the rights
of holders of any shares of any series of preferred stock rank-
ing prior and superior (such as the Series B Preferred Stock),
the holders of Series A Preferred Stock are entitled to
receive, when, as and if declared by the Board of Directors of
the Company out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of March,
June, September and December in each year (a "Dividend Payment
Date"), commencing on the first Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share equal to the greater of
(a) $1.00 or (b) 100 times the aggregate per share amount of
all cash dividends, plus 100 times the aggregate per share
amount of all non-cash dividends or other distributions, other
than a dividend payable in shares of Common Stock, declared on
the Common Stock since the immediately preceding Dividend Pay-
ment Date, or, with respect to the first Dividend Payment Date,
since the first issuance of Series A Preferred Stock.
In addition to any other voting rights required by
law, holders of Series A Preferred Stock shall have the right
to vote on all matters submitted to a vote of stockholders of
the Company with each share of Series A Preferred Stock
<PAGE>
-20-
entitled to 100 votes. Except as otherwise provided by law,
holders of Series A Preferred Stock and holders of Common Stock
shall vote together as one class on all matters submitted to a
vote of stockholders of the Company.
Unless otherwise provided in a Certificate of Desig-
nation relating to a subsequently designated series of pre-
ferred stock of the Company, the Series A Preferred Stock shall
rank junior to any other series of preferred stock as to the
payment of dividends and distribution of assets on liquidation,
dissolution or winding-up and shall rank senior to the Common
Stock. Upon any liquidation, dissolution or winding-up of the
Company, no distributions shall be made to holders of shares of
stock ranking junior to the Series A Preferred Stock unless,
prior thereto, the holders of Series A Preferred Stock shall
have received an amount equal to accrued and unpaid dividends
and distributions, whether or not declared, to the date of such
payment, plus an amount equal to the greater of (1) $100.00 per
share or (2) an aggregate amount per share equal to 100 times
the aggregate amount to be distributed per share to holders of
Common Stock or to the holders of stock ranking on parity with
the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all other such parity stock
in proportion to the total amount to which the holders of all
such shares are entitled upon such liquidation, dissolution or
winding-up.
If the Company shall enter into any consolidation,
merger, combination or other transaction in which shares of
Common Stock are exchanged for or changed into cash, other
securities and/or any other property, then any shares of
Series A Preferred Stock outstanding shall at the same time be
similarly exchanged or changed in an amount per share equal to
100 times the aggregate amount of cash, securities and/or other
property, as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
The shares of Series A Preferred Stock shall not be
redeemable.
The Series B Preferred Stock
The 7,807 outstanding shares of Series B Preferred
Stock were issued by the Company in a private placement consum-
mated on December 21, 1993 in reliance upon the exemption con-
tained in Section 4(2) of the Securities Act (the "1993 Private
Placement"). Pursuant to the Certificate of Designation
<PAGE>
-21-
relating to the Series B Preferred Stock, the holders of
Series B Preferred Stock are entitled to receive, when, as and
if declared by the Board of Directors of the Company, out of
funds legally available therefor, dividends at an annual rate
equal to $50.00 per share, payable semi-annually in arrears,
commencing on June 30, 1994. Dividends are payable, at the
option of the Company, in cash, in Common Stock or any combina-
tion of cash and Common Stock.
The Series B Preferred Stock ranks senior in right of
payment to all classes of Common Stock and to any other class
or series of preferred stock of the Company including the
Series C Preferred Stock, whether now outstanding or issued
hereafter. Except as required by the General Corporation Law
of the State of Delaware, holders of Series B Preferred Stock
shall not be entitled to vote on any matter submitted to a vote
of stockholders of the Company. Upon any voluntary or involun-
tary liquidation, dissolution or winding-up of the Company,
holders of Series B Preferred Stock will be entitled to receive
$1,000 in cash before any distribution is made on any Common
Stock or other preferred stock of the Company.
Each holder of Series B Preferred Stock has the right
at any time, or from time to time, to convert each share of
Series B Preferred Stock into 192.7005 shares of Common Stock,
subject to adjustment.
The Series B Preferred Stock may be redeemed at the
option of the Company, in whole or, from time to time, in part
(provided that no less than 25% of the shares of Series B Pre-
ferred Stock then outstanding may be redeemed at any one time)
(i) at any time after December 31, 1996 or (ii) on or prior to
December 31, 1996 if the price per share of the Common Stock is
at least $9.08 for at least ten trading days selected by the
Company within a period of any twenty consecutive trading days.
If on the date prior to the determination of the Board of
Directors to redeem any shares of Series B Preferred Stock the
price per share of Common Stock is equal to or greater than
$5.45, then the Series B Preferred Stock to be redeemed may be
redeemed by the Company for any combination of (i) shares of
Common Stock, each share of Series B Preferred Stock to be
redeemed for 192.7005 shares of Common Stock and (ii) $1,000 in
cash per share of Series B Preferred Stock. If on the date
prior to the determination of the Board of Directors of the
Company to redeem Series B Preferred Stock the price per share
of Common Stock is less than $5.45, then the Series B Preferred
<PAGE>
-22-
Stock to be redeemed shall be redeemed by the Company for
$1,000 in cash per share.
The Series B Preferred Stock has not been registered
under the Securities Act and may not be transferred except pur-
suant to an effective registration statement under the Securi-
ties Act or pursuant to an exemption from registration thereun-
der. Additionally, the Certificate of Designation relating to
the Series B Preferred Stock contains certain restrictions on
the transfer of the Series B Preferred Stock. The Company is
not obligated and does not intend to register the Series B Pre-
ferred Stock under the Securities Act. The Common Stock into
which the outstanding shares of Series B Preferred Stock is
convertible, for which such shares are redeemable and payable
as dividends on such shares has been registered under the Secu-
rities Act for sale from time to time by the holders of the
outstanding shares of Series B Preferred Stock.
The Series C Preferred Stock
The 4,799 outstanding shares of Series C Preferred
Stock were issued by the Company in an offering made to foreign
investors in reliance on Regulation S under the Securities Act
in August 1995. The holders of Series C Preferred Stock are
not entitled to receive any dividends on shares of Series C
Preferred Stock.
The Series C Preferred Stock ranks senior with
respect to rights on liquidation, winding-up and dissolution of
the Company to all classes of Common Stock and to any other
class or series of preferred stock other then the Series B Pre-
ferred Stock. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, holders of Series C
Preferred Stock will be entitled to receive $1,000 in cash
before any distribution is made on the Common Stock or any pre-
ferred stock of the Company other than the Series B Preferred
Stock. Except as may be required by law and except with
respect to certain actions which may adversely affect the hold-
ers of Series C Preferred Stock, the holders of Series C Pre-
ferred Stock are not entitled to vote on any matter submitted
to a vote of stockholders of the Company.
The holders of Series C Preferred Stock have the
right to convert one-half of the shares of Series C Preferred
Stock originally issued to each initial holder thereof into
Common Stock at a conversion price equal to 80% of the then
current market price of the Common Stock on or after the 60th
<PAGE>
-23-
day following the date on which such shares were released for
delivery to the initial holder thereof (the "Issuance Date")
and prior to the 730th day after the Issuance Date, and the
balance of such shares are convertible by the holders thereof
into shares of Common Stock at a conversion price equal to 80%
of the then current market price of the Common Stock on or
after the 90th day after the Issuance Date and prior to the
730th day after the Issuance Date; provided that with respect
to any conversion of Series C Preferred Stock, in the event
that the conversion would result in the issuance of more than
approximately 4.5 million shares of Common Stock in the aggre-
gate with respect to all conversions of Series C Preferred
Stock, the Company will have the option to either redeem the
Series C Preferred Stock at a redemption price of $1,250 per
share or, with stockholder approval, convert such Series C Pre-
ferred Stock into shares of Common Stock. In addition, subject
to the proviso of the immediately preceding sentence, upon the
consummation of certain mergers and consolidations, the sale or
other disposition of all or substantially all of the assets of
the Company or any other corporate reorganization or business
combination in which 50% or more of the outstanding voting
stock of the Company is transferred to different holders, each
outstanding share of Series C Preferred Stock shall be con-
verted into Common Stock at a conversion price equal to 80% of
the then current market price of the Common Stock.
Each share of Series C Preferred Stock may be
redeemed at the option of the Company at any time on or after
the 730th day following the Issuance Date at a redemption price
of $1,250 per share.
The 1993 Warrants
The Company issued 1,810,980 warrants (the "1993 War-
rants") to purchase shares of Common Stock along with the
Series B Preferred Stock in the 1993 Private Placement. Each
Warrant entitles the holder thereof to purchase one share of
Common Stock, subject to anti-dilution adjustments. The 1993
Warrants are exercisable from and after December 21, 1993 and
until December 21, 1995 at the Exercise Price of $6.5215 per
share. The Company has the right to redeem all, but not less
than all, of the 1993 Warrants at a price of $.001 per Warrant
at any time if the average of the last recorded sale price per
share of the Common Stock for any ten trading days selected by
the Company within a period of twenty days is at least $11.41.
<PAGE>
-24-
The 1993 Warrants have not been registered under the
Securities Act and may not be transferred except pursuant to an
effective registration statement under the Securities Act or
pursuant to an exception from registration thereunder. Addi-
tionally, the 1993 Warrants contain certain restrictions on
their transfer. The Company is not obligated and does not
intend to register the 1993 Warrants under the Securities Act.
The Common Stock underlying the 1993 Warrants has been regis-
tered under the Securities Act for sale from time to time by
exercising holders of 1993 Warrants.
Certain Provisions Relating to Changes in Control of the
Company
Certain provisions of the Amended and Restated
By-Laws of the Company (the "By-Laws") and the Rights (summa-
rized above) may delay, defer or prevent a change in control of
the Company that a stockholder might consider to be in his or
her best interest, including those applicable to a change in
control of the Company that might result in a premium over the
market price for the shares of Common Stock held by
stockholders.
Special Meeting of Stockholders. The By-Laws provide
that meetings of stockholders of the Company may be called only
by the Chief Executive Officer or the Board of Directors of the
Company. This provision may make it more difficult for stock-
holders to take action opposed by management or the Board of
Directors of the Company.
Advance Notice Requirements for Stockholder Proposals
and Director Nominations. The By-Laws provide that stockhold-
ers seeking to bring business before an annual meeting of
stockholders or to nominate candidates for election as direc-
tors at an annual meeting of stockholders, must provide timely
notice thereof in writing. To be timely, a stockholder's
notice must be received by the Secretary of the Company not
less than sixty nor more than ninety days prior to the first
anniversary of the preceding year's annual meeting, or in the
case of an annual meeting that is called for a date that is
more than thirty days or delayed by more than sixty days from
such anniversary, notice by the stockholder to be timely must
be so received not earlier than the ninetieth day prior to such
annual meeting and not later than the close of business on the
later of (1) the sixtieth day prior to such annual meeting or
(2) the tenth day following the day on which such notice of the
date of the annual meeting was mailed or publicly disclosed.
<PAGE>
-25-
These provisions may preclude some stockholders from bringing
matters before an annual meeting of stockholders or making nom-
inations for directors at an annual meeting of stockholders.
Preferred Stock Purchase Rights. The provisions of
the Rights and the Series A Preferred Stock may make it more
difficult or more costly for a person or group of persons to
acquire control of the Company in a transaction opposed by the
Board of Directors of the Company. See "-- Preferred Stock
Purchase Rights" and "-- The Series A Preferred Stock."
Transfer Agent and Registrar
First Interstate Bank of California is the transfer
agent and registrar of the Common Stock.
PLAN OF DISTRIBUTION
Any or all of the Common Stock being registered
hereby may be sold from time to time to purchasers directly by
the Selling Stockholder. Alternatively, the Selling Stock-
holder may from time to time offer the Common Stock through
underwriters, dealers or agents who may receive compensation in
the form of underwriting discounts, concessions or commissions
from the Selling Stockholder and/or the purchasers of Common
Stock for whom they may act as agent. The Selling Stockholder,
and any such underwriters, dealers or agents that participate
in the distribution of Common Stock, may be deemed to be under-
writers, and any profit on the sale of the Common Stock by them
and any discounts, commissions or concessions received by them
may be deemed to be underwriting discounts and commissions
under the Securities Act. At the time a particular offer of
Common Stock is made, to the extent required, a supplement to
this Prospectus will be distributed which will set forth the
terms of the offering, including the name or names of any
underwriters, dealers or agents, the purchase price paid by any
underwriter for Common Stock purchased from the Selling Stock-
holder and any discounts, commissions and other items consti-
tuting compensation from the Selling Stockholder and any dis-
counts, commissions or concessions allowed or reallowed or paid
to dealers, including the proposed selling price to the public.
The Company will receive no proceeds from the sale by the Sell-
ing Stockholder of the Common Stock offered hereby.
20,000 of the shares of Common Stock to which this
Prospectus relates (the "Shares") will be issued pursuant to
the Van Ness Agreement to the Selling Stockholder and, if
<PAGE>
-26-
XOMA's Board of Directors nominates Mr. Van Ness to stand for
reelection as a director of XOMA at its 1996 annual meeting of
stockholders (the "1996 Annual Meeting"), the Company will
issue to the Selling Stockholder the 5,000 Additional Shares.
In the Van Ness Agreement, Mr. Van Ness has agreed (i) not to
resign as a director of XOMA prior to the 1996 Annual Meeting
and (ii) if nominated to stand for reelection as a director at
the 1996 Annual Meeting, to so stand for reelection and, if so
reelected, not to resign therefrom prior to XOMA's 1997 annual
meeting of stockholders (the "1997 Annual Meeting"), unless, in
any case, XOMA breaches the Van Ness Agreement or XOMA's Board
of Directors asks him to resign. If Mr. Van Ness (i) resigns
prior to the earlier of the 1996 Annual Meeting and May 31,
1996, other than for the reasons referred to above, then XOMA
will not be required to issue the Shares and, if issued, the
Selling Stockholder will be required to return the Shares (or a
like number of shares of Common Stock) to XOMA, or (ii) refuses
to stand for reelection or resigns following the earlier of the
1996 Annual Meeting and May 31, 1996 but prior to the earlier
of the 1997 Annual Meeting and May 31, 1997, other than for the
reasons referred to above, then XOMA will not be required to
issue the Additional Shares and, if issued, the Selling Stock-
holder will be required to return the Additional Shares (or a
like number of shares of Common Stock) to XOMA. Notwithstand-
ing any of the foregoing, Mr. Van Ness will be permitted to
resign without requiring the Selling Stockholder to return
shares delivered to it in the event of a business combination
between the Company and a major healthcare company.
Additionally, in the Van Ness Agreement, the Company
has agreed to file and use all reasonable commercial efforts to
keep continuously effective for a period of two years a regis-
tration statement relating to sales of the Shares and the Addi-
tional Shares by the Selling Stockholder. In connection there-
with, XOMA and the Selling Stockholder have agreed to indemnify
each other against certain liabilities, including those arising
under the Securities Act, and, under certain circumstances, to
contribute to payments required to be made by the other
thereunder.
All expenses of registration of the Common Stock to
which this Prospectus relates (other than the Selling Stock-
holder's counsel fees, if any, and any commissions and dis-
counts of any underwriters, dealers or agents), estimated to be
approximately $40,000, will be borne by the Company. As and
when the Company is required to update this Prospectus, it may
incur additional expenses in excess of this estimated amount.
<PAGE>
-27-
LEGAL OPINIONS
The validity of the shares of Common Stock to which
this Prospectus relates has been passed upon for the Company by
Cahill Gordon & Reindel, a partnership including a professional
corporation, New York, New York. Opinions regarding certain
legal matters with respect to patents and patent law have been
provided to the Company by Marshall, O'Toole, Gerstein, Murray
& Borun, Chicago, Illinois.
EXPERTS
The financial statements and schedules of XOMA incor-
porated by reference in this Prospectus and elsewhere in the
Registration Statement, to the extent and for the periods indi-
cated in their reports, have been audited by Arthur Andersen
LLP, independent public accountants, and are incorporated by
reference herein in reliance upon the authority of said firm as
experts in giving said reports.
<PAGE>
_____________________________________ ___________________________________
_____________________________________ ___________________________________
No dealer, salesman or other per-
son has been authorized to give
any information or to make representa-
tions other than those contained in
this Prospectus, and, if given or 25,000 Shares
made, such information or representa-
tions must not be relied upon as having XOMA Corporation
been authorized by the Company or the
Selling Stockholder. Neither the Common Stock
delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create an implication
that the information herein is correct
as of any time subsequent to its date. __________
This Prospectus does not constitute an
offer or solicitation by anyone in any PROSPECTUS
jurisdiction in which such offer __________
or solicitation is not authorized or in
which the person making such offer or
solicitation is not qualified to do so
or to anyone to whom it is unlawful to
make such offer or solicitation.
__________________
TABLE OF CONTENTS
Page
Available Information........... 2
Information Incorporated
by Reference.................. 3
Risk Factors.................... 4
The Company..................... 13
Price Range of Common Stock
and Dividend Information...... 15
Selling Stockholder............. 16
Description of Equity
Securities.................... 17
Plan of Distribution............ 25
Legal Opinions.................. 27
Experts......................... 27
, 1995
_____________________________________ ___________________________________
_____________________________________ ___________________________________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses in connection with this offer-
ing are as follows:
Amount
to be Paid
SEC registration fee .............................. $ 100
Legal fees and expenses (including
Blue Sky fees and expenses) ..................... 35,000
Accounting fees and expenses ...................... 3,000
Miscellaneous ..................................... ____1,900
Total ............................................. $__ 40,000
Item 15. Indemnification of Directors and Officers
The Delaware General Corporation Law provides for
indemnification of directors, officers, employees and agents,
subject to certain limitations (Del. Code, Title 8 Sec. 145).
Article VII of the Company's Bylaws provides that expenses
incurred by an officer or director of the Company in defending
a civil or criminal action, suit or proceeding shall be paid by
the Company in advance of a final disposition of the action,
suit or proceeding upon receipt by the Company of an undertak-
ing by the officer or director that he or she will repay such
expenses if it is ultimately determined that he or she is not
entitled to indemnification under the Delaware General Corpora-
tion Law.
As permitted by Section 102 of the Delaware General
Corporation Law, the Company's Certificate of Incorporation
contains provisions eliminating a director's personal liability
for monetary damages to the Company and its stockholders aris-
ing from a breach of a director's fiduciary duty except for
liability under Section 174 of the Delaware General Corporation
Law or liability for any breach of the director's duty of loy-
alty to the Company or its stockholders, for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law or for any transaction by which the
director derived an improper personal benefit. The Company has
also entered into indemnification agreements with its directors
and officers providing for indemnification and advancements of
expenses to the fullest extent permitted under Delaware law.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
Number_
4.1 Restated Certificate of Incorporation
4.2 Amended and Restated By-Laws(1)
4.3 Stockholder Rights Agreement dated October 27,
1993 by and between the Company and First
Interstate Bank of California as Rights
Agent(2)
4.4 Agreement effective as of May 15, 1995 among
the Company, Northwest and Mr. Van Ness(3)
4.5 Amendment No. 1 to the Van Ness Agreement
effective as of July 28, 1995 among the Com-
pany, Northwest, Mr. Van Ness and the Selling
Stockholder
5.1 Opinion of Cahill Gordon & Reindel(3)
24.1 Consent of Arthur Andersen LLP
24.2 Consent of Marshall, O'Toole, Gerstein, Murray
& Borun
24.3 Consent of Cahill Gordon & Reindel(3)
25.1 Power of Attorney(3)
Item 17. Undertakings
The undersigned registrant hereby undertakes:
_________________________
(1) Incorporated by reference to the Company's Registration Statement on
Form S-3 (File No. 33-74982).
(2) Incorporated by reference to the Company's Current Report on Form 8-K
dated October 27, 1993.
(3) Previously filed.
II-2
<PAGE>
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this regis-
tration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, repre-
sent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in
the registration statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii)
do not apply if the registration statement is on Form S-3 or
Form S-8, and the information required to be included in the
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any lia-
bility under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pur-
suant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Com-
mission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the regis-
trant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such direc-
tor, officer or controlling person in connection with the secu-
rities being registered, the registrant will, unless in the
opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to
deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest
annual report to security holders that is incorporated by ref-
erence in the prospectus and furnished pursuant to and meeting
the requirements of Rule 14a-3 or Rule 14c-3 under the Securi-
ties Exchange Act of 1934; and, where interim financial infor-
mation required to be presented by Article 3 of Regulation S-X
is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically incor-
porated by reference in the prospectus to provide such interim
financial information.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on
Form S-3 and has duly caused this Post-Effective Amendment No.
1 to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Ber-
keley, State of California, on September 28, 1995.
XOMA CORPORATION
By *
(John L. Castello,
Chief Executive Officer)
<PAGE>
-2-
Pursuant to the requirements of the Securities Act of
1933, this Post-Effective Amendment No. 1 to the Registration
Statement has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
* Chairman of the Board,
John L. Castello President and Chief
Executive Officer
(Principal Executive
Officer) September 28, 1995
* Chief Scientific and
Patrick J. Scannon Medical Officer and
Director September 28, 1995
* Vice President,
Peter B. Davis Finance and Chief
Financial Officer
(Principal Financial
and Accounting Officer) September 28, 1995
* Director September 28, 1995
William K. Bowes, Jr.
* Director September 28, 1995
Arthur Kornberg
* Director September 28, 1995
Steven C. Mendell
* Director September 28, 1995
W. Denman Van Ness
* Director September 28, 1995
Gary Wilcox
*By: /s/ Christopher J. Margolin September 28, 1995
Christopher J. Margolin
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
Number_
4.1 Restated Certificate of Incorporation
4.2 Amended and Restated By-Laws(1)
4.3 Stockholder Rights Agreement dated October 27,
1993 by and between the Company and First
Interstate Bank of California as Rights
Agent(2)
4.4 Agreement effective as of May 15, 1995 among
the Company, Northwest and Mr. Van Ness(3)
4.5 Amendment No. 1 to the Van Ness Agreement
effective as of July 28, 1995 among the Com-
pany, Northwest, Mr. Van Ness and the Selling
Stockholder
5.1 Opinion of Cahill Gordon & Reindel(3)
24.1 Consent of Arthur Andersen LLP
24.2 Consent of Marshall, O'Toole, Gerstein, Murray
& Borun
24.3 Consent of Cahill Gordon & Reindel(3)
25.1 Power of Attorney(3)
_________________________
(1) Incorporated by reference to the Company's Registration Statement on
Form S-3 (File No. 33-74982).
(2) Incorporated by reference to the Company's Current Report on Form 8-K
dated October 27, 1993.
(3) Previously filed.
RESTATED
CERTIFICATE OF INCORPORATION
OF XOMA CORPORATION
Xoma Corporation, a corporation organized and exist-
ing under the laws of the State of Delaware, hereby certifies
as follows:
1. The name of the Corporation is XOMA CORPORATION.
This name was adopted on May 14, 1981. Previously the Corpora-
tion had been called Zoma Corporation. The original Certifi-
cate of Incorporation of the Corporation was filed with the
Secretary of State of Delaware on February 24, 1981.
2. This Restated Certificate of Incorporation
("Certificate") was duly adopted by the Board of Directors of
the Corporation on December 18, 1986 and approved by the stock-
holders of the Corporation at the Corporation's Annual Meeting
of Stockholders on May 13, 1987 in accordance with the provi-
sions of Sections 242 and 245 of the General Corporation Law of
the State of Delaware. The text of the Certificate of Incorpo-
ration as amended and restated shall be read in full as
follows:
I.
NAME
The name of the Corporation is XOMA CORPORATION.
II.
ADDRESS
The address of its registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
<PAGE>
-2-
III.
BUSINESS
The nature of the business or purposes to be con-
ducted or promoted is to engage in any lawful act or activity
for which corporations may be organized under the General Cor-
poration Law of Delaware. The Corporation is to have perpetual
existence.
IV.
STOCK STRUCTURE
The Corporation shall be authorized to issue two
classes of stock to be designated, respectively, "preferred
stock" and "common stock"; the total number of shares of both
classes of stock authorized to be issued by the Corporation
shall be Twenty-One Million (21,000,000) shares. Such shares
shall have no preemptive or preferential rights of subscription
concerning further issuance or authorization of any of the Cor-
poration's shares.
A. Common Stock.
The total number of shares of common stock authorized
to be issued by the Corporation shall be Twenty Million
(20,000,000) shares and each such share of common stock shall
have a par value of $.0005. The common stock may be issued
from time to time in one or more series.
B. Preferred Stock.
The total number of shares of preferred stock autho-
rized to be issued by the Corporation shall be One Million
(1,000,000) shares and each such share of preferred stock shall
have a par value of $.05. The number of authorized shares of
preferred stock may be increased or decreased (but not below
the number of shares thereof then outstanding) by the affirma-
tive vote of the holders of a majority of the shares of pre-
ferred stock and common stock then outstanding, voting as a
single class.
<PAGE>
-3-
V.
RIGHTS, PREFERENCES, PRIVILEGES AND
RESTRICTIONS OF PREFERRED STOCK
The preferred stock may be issued from time to time
in one or more series consisting of such number of shares
(which number may be increased or decreased, but not below the
number of shares thereof then outstanding) and with such dis-
tinctive serial designations as shall be stated and expressed
in the resolution or resolutions creating such series adopted
by the Board of Directors; and such series (a) may have such
voting powers, full or limited, or may be without voting pow-
ers; (b) may be redeemable for cash, property or rights,
including securities of any other corporation, at the option of
either the holder or the Corporation or upon the happening of a
specified event, at such time or times, such price or prices,
or such rate or rates, and with such adjustments; (c) may be
entitled to receive dividends (which may be cumulative or non-
cumulative) at such rate or rates, on such conditions, and at
such times, and payable in preference and priority to the com-
mon stock and on a par with, or in such relation to, the divi-
dends payable on any other class or classes or series of stock
(but not in preference or priority to the preferred stock); (d)
may have such rights upon the dissolution of, or upon any dis-
tribution of the assets of, the Corporation, including the
right to receive such distribution in preference to the common
stock, and on a par with, or in such relation to, the distribu-
tion to any other class or classes or series of stock (but not
in preference or priority to the preferred stock); (e) may be
made convertible into, or exchangeable for, at the option of
either the holder or the Corporation or upon the happening of a
specified event, shares or any other class or classes or any
other series or the same or any other class or classes of stock
of the Corporation, at such price or prices or at such rate or
rates of exchange, and with such adjustments; and (f) may have
such other powers, preferences and relative, participating,
optional or special rights and qualifications, limitations or
restrictions thereof, all as shall hereafter be stated and
expressed in the resolution or resolutions providing for the
creation of each such series of preferred stock from time to
time adopted by the Board of Directors pursuant to authority so
to do which is hereby expressly vested in the Board of
Directors.
<PAGE>
-4-
VI.
LIMITATION ON DIRECTOR LIABILITY
A Director of this Corporation shall not be person-
ally liable to this Corporation or its stockholders for mone-
tary damages for breach of fiduciary duty as a Director, except
for liability (i) for any breach of the Director's duty of loy-
alty to this Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional mis-
conduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any trans-
action from which the Director derived any improper personal
benefit. If the Delaware General Corporation Law is hereafter
amended to authorize, with the approval of a corporation's
stockholders, further reductions in the liability of the corpo-
ration's directors for breach of fiduciary duty, then a Direc-
tor of this Corporation shall not be liable for any such breach
to the fullest extent permitted by the Delaware General Corpo-
ration Law as so amended. Any repeal or modification of the
foregoing provisions of this Article Sixth by the stockholders
of this Corporation shall not adversely affect any right or
protection of a Director of this Corporation existing at the
time of such repeal or modification.
VII.
BYLAWS
In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly
authorized to make, alter, or repeal the bylaws of the
Corporation.
Elections of directors need not be by written ballot
unless the bylaws of the Corporation shall so provide.
Meetings of stockholders may be held within or with-
out the State of Delaware, as the bylaws may provide. The
books of the Corporation may be kept (subject to any provision
contained in the statutes) outside the State of Delaware at
such place or places as may be designated from time to time by
the Board of Directors or in the bylaws of the Corporation.
<PAGE>
-5-
VIII.
AMENDMENT OF CERTIFICATE OF INCORPORATION
Subject to the provision of Section 242 of the Gen-
eral Corporation Law of the State of Delaware, the Corporation
reserves the right to amend, alter, change, or repeal any pro-
vision contained in this Certificate in the manner now or here-
after prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, XOMA CORPORATION has caused its
corporate seal to be hereunto affixed and this Certificate to
be signed by Steven C. Mendell, its Chairman of the Board of
Directors and Chief Executive Officer, and attested by David G.
Koncelik, its Secretary, this 7th day of April, 1988.
XOMA CORPORATION
By /s/ Steven C. Mendell
Steven C. Mendell
Chairman of the Board of
Directors and Chief
Executive Officer
(SEAL)
Attest: /s/ David G. Koncelik
David G. Koncelik
Secretary
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
INTERNATIONAL GENETIC ENGINEERING, INC.
INTO
XOMA CORPORATION
* * * *
XOMA CORPORATION, a corporation organized and exist-
ing under the laws of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on
the 24th day of February, 1981, pursuant to the General Corpo-
ration Law of the State of Delaware.
SECOND: That this corporation owns all of the out-
standing shares of the stock of International Genetic
Engineering, Inc., a corporation incorporated on the 17th day
of December, 1980, pursuant to the General Corporation Law of
the State of California.
THIRD: That this corporation, by the following
resolutions of its Board of Directors, duly adopted by the
unanimous written consent of its members, filed with the
<PAGE>
-2-
minutes of the Board of Directors, determined to and did merge
into itself said International Genetic Engineering, Inc.:
RESOLVED, that XOMA Corporation merge Inter-
national Genetic Engineering, Inc. into itself,
and assume all of its obligations; and
FURTHER RESOLVED, that the merger shall be
effective upon the date of filing with the Secre-
tary of State of Delaware; and
RESOLVED FURTHER, that the proper officers of
the corporation be and they hereby are directed to
make and execute a Certificate of Ownership and
Merger setting forth a copy of the resolutions to
merge International Genetic Engineering, Inc. and
assume its liabilities and obligations, and the
date of adoption thereof, and to cause the same to
be filed with the Secretary of State and a certi-
fied copy recorded in the office of the Recorder
of Deeds of New Castle County and to do all acts
and things whatsoever, whether within or without
the State of Delaware, which may be in any way
necessary or proper to effect said merger.
FOURTH: Anything herein or elsewhere to the con-
trary notwithstanding this merger may be amended or terminated
and abandoned by the board of directors of XOMA Corporation at
any time prior to the date of filing the merger with the Secre-
tary of State.
IN WITNESS WHEREOF, XOMA Corporation has caused this
certificate to be signed by Steven C. Mendell, its Chairman of
the Board and Chief Executive Officer, and attested by Martin
<PAGE>
-3-
H. Goldstein, its Vice President, General Counsel and Secre-
tary, this 15th day of May, 1990.
XOMA CORPORATION
By /s/ Steven C. Mendell
Steven C. Mendell
Chairman of the Board and
Chief Executive Officer
ATTEST:
By /s/ Martin H. Goldstein
Martin H. Goldstein
Vice President, General
Counsel and Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION OF
XOMA CORPORATION
XOMA Corporation, a corporation organized and exist-
ing under and by virtue of the General Corporation Law of the
State of Delaware (the "Corporation"), does hereby certify:
FIRST: That the Board of Directors of the Corpora-
tion, at a meeting duly held, adopted the following resolution:
RESOLVED: that this Board deems it advisable to
amend, and hereby does amend, Article IV of the Corporation's
Restated Certificate of Incorporation to read in its entirety
as follows:
"IV
STOCK STRUCTURE
The Corporation shall be authorized to issue two
classes of stock to be designated, respectively,
"preferred stock" and "common stock"; the total
number of shares of both classes of stock autho-
rized to be issued by the Corporation shall have
no preemptive or preferential rights of subscrip-
tion concerning further issuance or authorization
of any of the Corporation's shares.
A. Common Stock.
The total number of shares of common stock autho-
rized to be issued by the Corporation shall be
Forty Million (40,000,000) shares and each such
share of common stock shall have a par value of
<PAGE>
-2-
$.0005. The common stock may be issued from time
to time in one or more series.
B. Preferred Stock.
The total number of shares of preferred stock
authorized to be issued by the Corporation shall
be One Million (1,000,000) shares and each such
share of preferred stock shall have a par value of
$.05. The number of authorized shares of pre-
ferred stock may be increased or decreased (but
not below the number of shares thereof then out-
standing) by the affirmative vote of the holders
of a majority of the shares of preferred stock and
common stock then outstanding, voting as a class."
SECOND: That said amendment has been duly adopted by
the stockholders of this Corporation at a meeting duly held in
accordance with the applicable provisions of Sections 222 and
242 of the General Corporation Law of the State of Delaware.
THIRD: That said amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware.
<PAGE>
-3-
IN WITNESS WHEREOF, XOMA Corporation has caused this
Certificate of Amendment to be signed by Steven C. Mendell, its
Chairman of the Board and Chief Executive Officer, and
Martin H. Goldstein, its Secretary, on this 22nd day of Febru-
ary, 1991.
XOMA CORPORATION
By /s/ Steven C. Mendell
Steven C. Mendell
Chairman of the Board
Chief Executive Officer
Attest:
/s/ Martin H. Goldstein
Martin H. Goldstein, Secretary
<PAGE>
CERTIFICATE OF DESIGNATION OF
PREFERENCES AND RIGHTS OF
SERIES A CUMULATIVE PREFERRED STOCK
OF
XOMA CORPORATION
_______________
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
_______________
XOMA CORPORATION, a corporation organized and exist-
ing under the General Corporation Law of the State of Delaware
(the "Corporation"), does hereby certify that, pursuant to
authority conferred upon the Board of Directors by the Amended
and Restated Certificate of Incorporation, and pursuant to the
provisions of Section 151 of the Delaware General Corporation
Law, said Board of Directors duly adopted the following resolu-
tion on October 27, 1993, which resolution remains in full
force and effect as of the date hereof:
RESOLVED, that pursuant to authority conferred upon
the Board of Directors by the Amended and Restated Certificate
of Incorporation of the Corporation, there is hereby created a
series of preferred stock of the Corporation; which series
shall have the following powers, preferences, and relative,
participating, optional or other special rights, and the quali-
fications, limitations or restrictions thereof, in addition to
those set forth in the Amended and Restated Certificate of
Incorporation of the Corporation:
1. Designation. The series of preferred stock
established hereby shall be designated the "Series A Cumulative
Preferred Stock" (and shall be referred to herein as the "Cumu-
lative Preferred Stock") and the authorized number of shares of
Cumulative Preferred Stock shall be 650,000 shares. Such num-
ber of shares may be increased or decreased, from time to time,
by resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Cumulative Pre-
ferred Stock to a number less than the total of the number of
such shares then outstanding plus the number of such shares
<PAGE>
-2-
issuable upon the exercise of outstanding rights, options or
warrants or upon the conversion of outstanding securities
issued by the Corporation.
2. Dividends and Distributions.
(A)(i) Subject to the rights of the holders of any
shares of any series of preferred stock (or any similar stock)
ranking prior and superior to the Cumulative Preferred Stock
with respect to dividends, the holders of shares of Cumulative
Preferred Stock, in preference to the holders of shares of com-
mon stock and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out
of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of March, June, September and
December in each year (each such date being referred to herein
as a "Dividend Payment Date"), commencing on the first Dividend
Payment Date after the first issuance of a share or fraction of
a share of Cumulative Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00
or (b) subject to the provisions for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash
dividends, plus 100 times the aggregate per share amount (pay-
able in kind) of all non-cash dividends or other distributions
other than a dividend payable in shares of common stock or a
subdivision of the outstanding shares of common stock (by
reclassification or otherwise), declared on the common stock
since the immediately preceding Dividend Payment Date, or, with
respect to the first Dividend Payment Date, since the first
issuance of any share or fraction of a share of Cumulative Pre-
ferred Stock. The multiple of cash and non-cash dividends
declared on the common stock to which holders of the Cumulative
Preferred Stock are entitled, which shall be 100 initially but
which shall be adjusted from time to time as hereinafter pro-
vided, is hereinafter referred to as the "Dividend Multiple."
In the event the Corporation shall at any time after the date
hereof (i) declare or pay any dividend on common stock payable
in shares of common stock, or (ii) effect a subdivision or com-
bination or consolidation of the outstanding shares of common
stock (by reclassification or otherwise than by payment of a
dividend in shares of common stock) into a greater or lesser
number of shares of common stock, then in each such case the
Dividend Multiple thereafter applicable to the determination of
the amount of dividends which holders of shares of Cumulative
Preferred Stock shall be entitled to receive shall be the Divi-
dend Multiple applicable immediately prior to such event multi-
plied by a fraction, the numerator of which is the number of
<PAGE>
-3-
shares of common stock outstanding immediately after such event
and the denominator of which is the number of shares of common
stock that were outstanding immediately prior to such event.
(ii) Notwithstanding anything else contained in this
paragraph (A), the Corporation shall, out of funds legally
available for that purpose, declare a dividend or distribution
on the Cumulative Preferred Stock as provided in this paragraph
(A) immediately after it declares a dividend or distribution on
the common stock (other than a dividend payable in shares of
common stock); provided that, in the event no dividend or dis-
tribution shall have been declared on the common stock during
the period between any Dividend Payment Date and the next sub-
sequent Dividend Payment Date, a dividend of $1.00 per share on
the Cumulative Preferred Stock shall nevertheless be payable on
such subsequent Dividend Payment Date.
(B) Dividends shall begin to accrue and be cumula-
tive on outstanding shares of Cumulative Preferred Stock from
the Dividend Payment Date next preceding the date of issue of
such shares of Cumulative Preferred Stock, unless the date of
issue of such shares is prior to the record date for the first
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Dividend Payment Date or is a
date after the record date for the determination of holders of
shares of Cumulative Preferred Stock entitled to receive a
quarterly dividend and before such Dividend Payment Date, in
either of which events such dividends shall begin to accrue and
be cumulative from such Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on
the shares of Cumulative Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and pay-
able on such shares shall be allocated pro rata on a share-by-
share basis among all such shares at the time outstanding. The
Board of Directors may fix in accordance with applicable law a
record date for the determination of holders of shares of Cumu-
lative Preferred Stock entitled to receive payment of a divi-
dend or distribution declared thereon, which record date shall
be not more than such number of days prior to the date fixed
for the payment thereof as may be allowed by applicable law.
3. Voting Rights. In addition to any other voting
rights required by law, the holders of shares of Cumulative
Preferred Stock shall have the following voting rights:
<PAGE>
-4-
(A) Subject to the provision for adjustment herein-
after set forth, each share of Cumulative Preferred Stock shall
entitle the holder thereof to 100 votes on all matters submit-
ted to a vote of the stockholders of the Corporation. The num-
ber of votes which a holder of a share of Cumulative Preferred
Stock is entitled to cast, which shall initially be 100 but
which may be adjusted from time to time as hereinafter pro-
vided, is hereinafter referred to as the "Vote Multiple." In
the event the Corporation shall at any time after the date
hereof (i) declare or pay any dividend on common stock payable
in shares of common stock, or (ii) effect a subdivision or com-
bination or consolidation of the outstanding shares of common
stock (by reclassification or otherwise than by payment of a
dividend in shares of common stock) into a greater or lesser
number of shares of common stock, then in each such case the
Vote Multiple thereafter applicable to the determination of the
number of votes per share to which holders of shares of Cumula-
tive Preferred Stock shall be entitled shall be the Vote Mul-
tiple immediately prior to such event multiplied by a fraction,
the numerator of which is the number of shares of common stock
outstanding immediately after such event and the denominator of
which is the number of shares of common stock that were out-
standing immediately prior to such event.
(B) Except as otherwise provided herein or by law,
the holders of shares of Cumulative Preferred Stock and the
holders of shares of common stock and the holders of shares of
any other capital stock of this Corporation having general vot-
ing rights, shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) Except as otherwise required by applicable law
or as set forth herein, holders of Cumulative Preferred Stock
shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote
with holders of common stock as set forth herein) for taking
any corporate action.
4. Certain Restrictions.
(A) Whenever dividends or distributions payable on
the Cumulative Preferred Stock as provided in Paragraph 2 are
in arrears, thereafter and until all accrued and unpaid divi-
dends and distributions, whether or not declared, on shares of
Cumulative Preferred Stock outstanding shall have been paid in
full, the Corporation shall not:
<PAGE>
-5-
(i) declare or pay dividends on, make any other dis-
tributions on, or redeem or purchase or other-
wise acquire for consideration any shares of
stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to
the Cumulative Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on
a parity (either as to dividends or upon liqui-
dation, dissolution or winding up) with the
Cumulative Preferred Stock, except dividends
paid ratably on the Cumulative Preferred Stock
and all such parity stock on which dividends are
payable or in arrears in proportion to the total
amounts to which the holders of all such shares
are then entitled;
(iii) except as permitted in subparagraph 4(A)(iv)
below, redeem, purchase or otherwise acquire for
consideration shares of any stock ranking on a
parity (either as to dividends or upon liquida-
tion, dissolution or winding up) with the Cumu-
lative Preferred Stock, provided that the Corpo-
ration may at any time redeem, purchase or
otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the
Corporation ranking junior (either as to divi-
dends or upon dissolution, liquidation or wind-
ing up) to the Cumulative Preferred Stock; or
(iv) purchase or otherwise acquire for consideration
any shares of Cumulative Preferred Stock, or any
shares of any stock ranking on a parity (either
as to dividends or upon liquidation, dissolution
or winding up) with the Cumulative Preferred
Stock, except in accordance with a purchase
offer made in writing or by publication (as
determined by the Board of Directors) to all
holders of such shares upon such terms as the
Board of Directors, after consideration of the
respective annual dividend rates and other rela-
tive rights and preferences of the respective
series and classes, shall determine in good
faith will result in fair and equitable treat-
ment among the respective series or classes;
<PAGE>
-6-
provided, however, that the foregoing restrictions shall not
apply to the repurchase of shares of common stock held by
employees, officers, directors, or consultants of the Corpora-
tion (or their permitted transferees) that are subject to
restrictive stock purchase agreements under which the Corpora-
tion has the option or obligation to repurchase such shares
upon the occurrence of certain events, such as termination of
employment.
(B) The Corporation shall not permit any subsidiary
of the Corporation to purchase or otherwise acquire for consid-
eration any shares of stock of the Corporation unless the Cor-
poration could, under subparagraph (A) of this Paragraph 4,
purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Cumulative
Preferred Stock purchased or otherwise acquired by the Corpora-
tion in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall
upon their cancellation become authorized but unissued shares
of preferred stock and may be reissued as part of a new series
of preferred stock to be created by resolution or resolutions
of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. Upon
any liquidation (voluntary or otherwise), dissolution or wind-
ing up of the Corporation, no distributions shall be made (x)
to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to
the Cumulative Preferred Stock unless, prior thereto, the hold-
ers of shares of Cumulative Preferred Stock shall have received
an amount equal to accrued and unpaid dividends and distribu-
tions thereon, whether or not declared, to the date of such
payment, plus an amount equal to the greater of (1) $100.00 per
share or (2) an aggregate amount per share, subject to the pro-
vision for adjustment hereinafter set forth, equal to 100 times
the aggregate amount to be distributed per share to holders of
common stock, or (y) to the holders of stock ranking on a par-
ity (either as to dividends or upon liquidation, dissolution or
winding up) with the Cumulative Preferred Stock, except distri-
butions made ratably on the Cumulative Preferred Stock and all
other such parity stock in proportion to the total amount to
which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Cor-
poration shall at any time after the date hereof (i) declare or
<PAGE>
-7-
pay any dividend on common stock payable in shares of common
stock, or (ii) effect a subdivision or combination or consoli-
dation of the outstanding shares of common stock (by reclassi-
fication or otherwise than by payment of a dividend in shares
of common stock) into a greater or lesser number of shares of
common stock, then in each such case the aggregate amount per
share to which holders of shares of Cumulative Preferred Stock
were entitled immediately prior to such event under clause (x)
of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of
shares of common stock outstanding immediately after such event
and the denominator of which is the number of shares of common
stock that were oustanding immediately prior to such event.
7. Consolidation, Merger, etc. In case the Corpo-
ration shall enter into any consolidation, merger, combination
or other transaction in which the shares of common stock are
exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of
Cumulative Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 100
times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into
which or for which each share of common stock is changed or
exchanged. In the event the Corporation shall at any time
after the date hereof (i) declare or pay any dividend on common
stock payable in shares of common stock, or (ii) effect a sub-
division or combination or consolidation of the outstanding
shares of common stock (by reclassification or otherwise than
by payment of a dividend in shares of common stock) into a
greater or lesser number of shares of common stock, then in
each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Cumulative
Preferred Stock shall be adjusted by multiplying such amount by
a fraction, the numerator of which is the number of shares of
common stock outstanding immediately after such event and the
denominator of which is the number of shares of common stock
that were outstanding immediately prior to such event.
8. Redemption. The shares of Cumulative Preferred
Stock shall not be redeemable.
9. Ranking. Unless otherwise provided in a Cer-
tificate of Designation of Preferences and Rights of a Class of
Stock relating to a subsequently designated series of preferred
stock of the Corporation, the Cumulative Preferred Stock shall
<PAGE>
-8-
rank junior to any other series of the Corporation's preferred
stock subsequently issued, as to the payment of dividends and
the distribution of assets on liquidation, dissolution or wind-
ing up and shall rank senior to the common stock.
10. Amendment. The provisions of the Amended and
Restated Certificate of Incorporation, as amended, of the Cor-
poration shall not be amended, altered or repealed in any man-
ner which would materially alter or change the powers, prefer-
ences or special rights of Cumulative Preferred Stock so as to
effect them adversely without the affirmative vote of the hold-
ers of a majority or more of the outstanding shares of Cumula-
tive Preferred Stock, voting separately as a class.
11. Fractional Shares. Cumulative Preferred Stock
may be issued in fractions of a share (which fractions shall be
integral multiples of one one-hundreth of a share) which shall
entitle the holder, in proportion to such holder's fractional
shares, to exercise voting rights, receive dividends, partici-
pate in distributions and to have the benefit of all other
rights of holders of Cumulative Preferred Stock.
<PAGE>
-9-
IN WITNESS WHEREOF, XOMA Corporation has caused this
Certificate of Designation of Preferences and Rights of its
Series A Cumulative Preferred Stock to be signed and attested
by its duly authorized officers, this 27th day of October,
1993.
XOMA CORPORATION
By: /s/ John L. Castello____
John L. Castello
Chairman, President and
Chief Executive Officer
ATTEST:
By: /s/ Christopher J. Margolin__
Christopher J. Margolin
Secretary
<PAGE>
CERTIFICATE OF DESIGNATION OF
PREFERENCES AND RIGHTS OF
SENIOR CONVERTIBLE PREFERRED STOCK, SERIES B
OF
XOMA CORPORATION
_______________
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
_______________
XOMA CORPORATION, a corporation organized and exist-
ing under the General Corporation Law of the State of Delaware
(the "Corporation"), does hereby certify that, pursuant to
authority conferred upon the Board of Directors by the Amended
and Restated Certificate of Incorporation, and pursuant to the
provisions of Section 151 of the Delaware General Corporation
Law, said Board of Directors duly adopted a resolution on
October 27, 1993, which approved the filing of this Certificate
of Designation and which resolution remains in full force and
effect as of the date hereof.
Pursuant to such resolution and the authority con-
ferred upon the Board of Directors by the Amended and Restated
Certificate of Incorporation of the Corporation, there is
hereby created a series of preferred stock of the Corporation,
which series shall have the following powers, preferences, and
relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, in
addition to those set forth in the Amended and Restated Cer-
tificate of Incorporation of the Corporation:
1. Certain Definitions. As used herein, the fol-
lowing terms shall have the following meanings (with terms
defined in the singular having comparable meanings when used in
the plural and vice versa), unless the context otherwise
requires:
"Affiliate" of any specified Person means any other
Person which, directly or indirectly, controls, is con-
trolled by or is under direct or indirect common control
<PAGE>
-2-
with, such specified Person. For the purposes of this
definition, "control" when used with respect to any Person
means beneficial ownership of 5.0% or more of the out-
standing securities entitled to vote for the election of a
member of the board of directors of a corporation or the
power to direct the management and policies of such Per-
son, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise, and the
terms "controlling" and "controlled" have meanings correl-
ative to the foregoing.
"Board of Directors" means the Board of Directors of
the Corporation.
"Business Day" means a day that is not a Saturday, a
Sunday or a day on which banking institutions in the State
of New York or California are not required to be open.
"Cash Redemption Price" means $1,000 per share of
Series B Preferred Stock.
"Common Stock" means the Common Stock, par value
$.0005 per share, of the Corporation.
"Conversion Price" means 91.5% of the average of the
per share Quoted Prices for the Common Stock for the
twenty (20) trading days subsequent to November 19, 1993.
"Convertible Securities" has the meaning specified in
Section 6(C) hereof.
"Corporation" means XOMA Corporation, a Delaware
corporation.
"Dividend Declaration Date" means a day preceding
each Dividend Payment Date when the Board of Directors
shall either (i) declare a dividend in cash or Dividend
Shares or (ii) in the event no dividend is declared,
determine whether a dividend is to accrue in cash or Divi-
dend Shares.
"Dividend Payment Date" means December 31 and June 30
of each year beginning June 30, 1994, unless such day is
not a Business Day in which case the Dividend Payment Date
shall be the immediately succeeding Business Day.
<PAGE>
-3-
"Dividend Record Date" means a day fifteen (15) days
preceding the Dividend Payment Date.
"Dividend Shares" has the meaning specified in
Section 3(B) hereof.
"Eligible Transferee" means a Person who is not, and
who is not an Affiliate of, a Person who is (i) directly
or indirectly, in any manner whatsoever engaged in or par-
ticipating in, either alone or together with any other
Person, the manufacturing, distribution, sale, research or
development of pharmaceutical or medical products, whether
diagnostic or therapeutic, (ii) a hospital or other provi-
der of medical or healthcare services (other than a natu-
ral person who provides medical or healthcare services and
is otherwise an Eligible Transferee), (iii) an educational
or research institution (whether or not accredited and
whether or not exempt from federal income taxation pursu-
ant to section 501(c) of the Internal Revenue Code, as
amended) or (iv) directly or indirectly, in any manner
whatsoever engaged in or participating in, either alone or
together with any other Person, the manufacturing, distri-
bution, sale, research or development of products derived
from, or as a result of, biotechnology.
"GDK" means GDK, Inc., a corporation organized under
the laws of the British Virgin Islands and an original
purchaser of the Series B Preferred Stock.
"Holder" means a registered holder of shares of
Series B Preferred Stock.
"Liquidation Preference" means $1,000 per share of
Series B Preferred Stock plus accrued and unpaid divi-
dends, if any, thereon through the date such Liquidation
Preference is paid.
"Options" has the meaning specified in Section 6(C)
hereof.
"Ortelius" means Ortelius Trading L.P., a Delaware
limited partnership and an original purchaser of the
Series B Preferred Stock.
"Permitted Transfer" means the sale, assignment, con-
veyance, transfer, pledge, hypothecation or other
<PAGE>
-4-
disposition of at least 1000 shares of Series B Preferred
Stock in a single transaction to a single Eligible
Transferee.
"Person" means any natural person, corporation, part-
nership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Quoted Price" has the meaning specified in
Section 3(B) hereof.
"Redemption Date" means, with respect to any shares
of Series B Preferred Stock, the date fixed by the Corpo-
ration for redemption of such shares of Series B Preferred
Stock.
"Redemption Notice" has the meaning specified in
Section 7(B) hereof.
"Redemption Consideration" has the meaning specified
in Section 7(c) hereof.
"Registration Rights Agreement" means the Registra-
tion Rights Agreement made and entered into as of
November 18, 1993 by and among the Corporation, Ortelius
and GDK.
"Securities Act" has the meaning specified in Section
15 hereof.
"Series B Preferred Stock" has the meaning specified
in Section 2 hereof.
"Series B Preferred Stock Certificate" has the mean-
ing specified in Section 6 hereof.
2. Designation. The series of preferred stock
established hereby shall be designated the "Senior Convertible
Preferred Stock, Series B" (and shall be referred to herein as
the "Series B Preferred Stock") and the authorized number of
shares of Series B Preferred Stock shall be 30,000 shares.
3. Dividends.
(A) Holders will be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally
<PAGE>
-5-
available therefor, dividends at an annual rate equal to $50.00
per share. Dividends will be cumulative and will accrue from
the date of issuance and be payable semi-annually in arrears on
each Dividend Payment Date, commencing on June 30, 1994. Divi-
dends, whether or not declared, will cumulate until declared
and paid, when declaration and payment may be for all or part
of the then-accumulated dividends. Dividends will be computed
on the basis of a 360-day year comprised of twelve 30-day
months. Each dividend shall be payable to Holders of record as
they appear on the stock books of the Corporation on each Divi-
dend Record Date. Accrued and unpaid dividends, if any, shall
not bear interest. Dividends shall cease to accrue in respect
of shares of Series B Preferred Stock on the Redemption Date.
(B) On any Dividend Payment Date, in lieu of payment
in cash, the Corporation may, at its option, make all or any
portion of any dividend payments (including accumulated divi-
dends) by issuing to the Holders, in the aggregate, such number
of fully paid and non-assessable shares (calculated to the
nearest 1/100th of a share) of Common Stock ("Dividend Shares")
as is obtained by dividing the cash amount (or portion thereof)
that would otherwise be paid on such Dividend Payment Date by
the average of the Quoted Prices for the Common Stock for the
five (5) trading days preceding the Dividend Payment Date. The
"Quoted Price" of the Common Stock at any date is (i) if the
Common Stock is listed on a securities exchange, the last
reported sales price per share of the Common Stock on the prin-
cipal securities exchange, if any, on which the Common Stock is
listed that shall be for consolidated trading, if applicable to
such exchange, or (ii) if not so listed, the last reported
sales price per share of the Common Stock as reported by the
NASDAQ National Market System, or (iii) if neither so listed
nor reported, the last reported bid price per share of the Com-
mon Stock or (iv) in the absence of one or more of such quota-
tions, the current market price per share of the Common Stock
as determined by an independent investment banking firm chosen
by the Corporation and reasonably acceptable to the Purchasers.
(C) On each Dividend Declaration Date, the Board of
Directors shall declare whether or not a dividend is to be
paid. If a dividend is declared on such Dividend Declaration
Date, the Board of Directors shall determine whether the divi-
dend shall be paid in cash or Dividend Shares or a combination
of cash and Dividend Shares, and in the event the dividend is
to be paid in a combination of cash and Dividend Shares, the
portion of the dividend to be so paid. If no dividend is
declared on such Dividend Declaration Date, the Board of
<PAGE>
-6-
Directors shall determine whether the dividend shall accrue in
cash or Dividend Shares or in a combination of cash and Divi-
dend Shares, and if the dividend is to accrue in a combination
of cash and Dividend Shares, the cash portion and Dividend
Shares portion of such accrued dividend.
4. Ranking. The Series B Preferred Stock shall,
with respect to dividend rights and rights on liquidation,
winding-up and dissolution, rank senior to all classes of Com-
mon Stock and to any other class or series of any class of pre-
ferred stock of the Corporation, whether now outstanding or
issued hereafter.
5. Voting Rights. Except as required by the Gen-
eral Corporation Law of the State of Delaware, the Holders
shall not be entitled to vote on any matter submitted to a vote
of stockholders of the Corporation.
6. Conversion. The Holder of each share of
Series B Preferred Stock shall have the right at any time, or
from time to time (except as otherwise herein provided if such
share shall be called for redemption pursuant to Section 7), at
the option of such Holder, to convert such shares into Common
Stock, on and subject to the terms and conditions hereinafter
set forth.
(A) Subject to the provisions for adjustment herein-
after set forth, each share of Series B Preferred Stock shall
be convertible into such number of fully paid and nonassessable
shares (calculated as to each conversion to the nearest 1/100th
of a share) of Common Stock as is obtained by dividing 1,000 by
the Conversion Price as last adjusted and in effect at the date
any share or shares of Series B Preferred Stock are surrendered
for conversion.
(B) In order to exercise the conversion privilege,
the Holder of any shares of Series B Preferred Stock to be con-
verted in whole or in part shall surrender the certificate rep-
resenting such shares of Series B Preferred Stock (the
"Series B Preferred Stock Certificate") at the office or agency
then maintained by the Corporation for the transfer of the
Series B Preferred Stock, and shall give written notice of con-
version in the form provided on the Series B Preferred Stock
Certificate (or such other notice which is acceptable to the
Corporation) to the Corporation at such office or agency that
the Holder elects to convert such shares of Series B Preferred
Stock represented by the Series B Preferred Stock Certificate
<PAGE>
-7-
so surrendered or the portion thereof specified in said notice.
Such notice shall also state the name or names (with addresses)
in which the certificate or certificates for shares of Common
Stock which shall be issuable upon such conversion shall be
issued, and shall be accompanied by transfer taxes, if
required. Each Series B Preferred Stock Certificate surren-
dered for conversion shall, unless the shares issuable on con-
version are to be issued in the same name as the registration
of such Series B Preferred Stock Certificate, be duly endorsed
by, or be accompanied by instruments of transfer in form satis-
factory to the Corporation duly executed by, the Holder or his
duly authorized attorney.
As promptly as practicable after the surrender of
such Series B Preferred Stock Certificate and the receipt of
such notice and funds, if any, as aforesaid, the Corporation
shall issue and shall deliver at such office or agency to such
Holder, or on his written order, a certificate or certificates
for the number of shares of Common Stock issuable upon the con-
version of such shares of Series B Preferred Stock represented
by the Series B Preferred Stock Certificate so surrendered or
portion thereof in accordance with the provisions of this
Section 6. In case less than all of the shares of Series B
Preferred Stock represented by a Series B Preferred Stock Cer-
tificate surrendered for conversion are to be converted, the
Corporation shall deliver to or upon the written order of the
Holder of such Series B Preferred Stock Certificate a new
Series B Preferred Stock Certificate representing the shares of
Series B Preferred Stock not converted. If a Holder fails to
notify the Corporation of the number of shares of Series B Pre-
ferred Stock which such Holder wishes to convert, such Holder
shall be deemed to have elected to convert all shares repre-
sented by the certificate or certificates surrendered for
conversion.
Each conversion shall be deemed to have been effected
on the date on which such Series B Preferred Stock Certificate
shall have been surrendered and such notice shall have been
received by the Corporation, as aforesaid, and the person in
whose name any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to
have become on said date the holder of record of the shares
represented thereby; provided, however, that any such surrender
on any date when the stock books of the Corporation shall be
closed shall constitute the person in whose name the certifi-
cates are to be issued as the record holder thereof for all
purposes on the next succeeding day on which such stock books
<PAGE>
-8-
are open, but such conversion shall be at the Conversion Price
as last adjusted and in effect on the date upon which such
Series B Preferred Stock Certificate shall have been
surrendered.
The dividends due on any Series B Preferred Stock
surrendered for conversion during the period from the close of
business on a Dividend Record Date to the opening of business
on the corresponding Dividend Payment Date shall be paid to the
Holder of Series B Preferred Stock, notwithstanding such
conversion.
In the event any shares of Series B Preferred Stock
shall be called for redemption, the right to convert such
shares of Series B Preferred Stock into shares of Common Stock
shall terminate at the close of business on the Redemption
Date. Notwithstanding anything to the contrary contained in
this paragraph (B), the Corporation may, at its option, be
deemed to have purchased any shares of Series B Preferred Stock
that are called for redemption and not surrendered for conver-
sion prior to the close of business on the Redemption Date at a
purchase price equal to the price that would have been paid had
such shares been redeemed (including accrued and unpaid divi-
dends to the date fixed for such redemption) and immediately
sell such shares to any registered broker-dealer who has agreed
to purchase such shares at a price at least equal to the price
paid by the Corporation for such shares and to convert such
shares into shares of Common Stock.
(C) Except as provided in subparagraph (ix) hereof
and in paragraph (D) below, if and whenever the Corporation
shall issue or sell or is deemed, in accordance with
subparagraphs (i) through (xi) hereof, to have issued or sold
any shares of Common Stock for a consideration per share less
than the Conversion Price of the Common Stock as of the time of
issuance then, forthwith upon such issuance or sale or deemed
issuance or sale, the Conversion Price shall be reduced to the
price determined by dividing (i) an amount equal to the sum of
(a) the number of shares of Common Stock outstanding immedi-
ately prior to such issuance or sale (including as outstanding
all shares of Common Stock issuable upon conversion of all out-
standing shares of Series B Preferred stock) multiplied by the
then existing Conversion Price, and (b) the consideration, if
any, received by the Corporation upon such issuance or sale, by
(ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale (including as
<PAGE>
-9-
outstanding all shares of Common Stock issuable upon conversion
of all outstanding shares of Series B Preferred Stock).
For purposes of this paragraph (C), the following
subparagraphs (i) to (xi) inclusive shall be applicable:
(i) In case at any time the Corporation shall in
any manner grant (whether directly or by assumption in a
merger or otherwise) any rights to subscribe for or to
purchase, or any options for the purchase of, Common
Stock or any stock or securities convertible into or
exchangeable for Common Stock (such rights or options
being herein called "Options" and such convertible or
exchangeable stock or securities being herein called
"Convertible Securities") whether or not such Options,
or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange
of such Convertible Securities (determined by dividing
(x) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of
such Options, plus the minimum aggregate amount of addi-
tional consideration payable to the Corporation upon the
exercise of all such Options, plus, in the case of Con-
vertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue
or sale of such Convertible Securities and upon the con-
version or exchange thereof, by (y) the total maximum
number of shares of Common Stock issuable upon the exer-
cise of such Options or upon the conversion or exchange
of all such Convertible Securities issuable upon the
exercise of such Options) shall be less than the Conver-
sion Price as in effect immediately prior to the time of
granting of such Options, then the total maximum number
of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to
have been issued for such price per share as of the date
of granting of such Options and thereafter shall be
deemed to be outstanding. Except as otherwise provided
in subparagraph (iii), no adjustment of the Conversion
Price shall be made upon the actual issue of such Common
Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common
<PAGE>
-10-
Stock upon conversion or exchange of such Convertible
Securities.
(ii) Issuance of Convertible Securities. In case
the Corporation shall in any manner issue (whether
directly or by assumption in a merger or otherwise) or
sell any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange
(determined by dividing (x) the total amount received or
receivable by the Corporation as consideration for the
issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or
exchange thereof, by (y) the total maximum number of
shares of Common Stock issuable upon the conversion or
exchange or all such Convertible Securities) shall be
less than the Conversion Price as in effect immediately
prior to the time of such issue or sale, then the total
maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securi-
ties shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such
Convertible Securities and thereafter shall be deemed to
be outstanding, provided that (a) except as otherwise
provided in subparagraph (iii) below, no adjustment of
the Conversion Price shall be made upon the actual issue
of such Common Stock upon conversion or exchange of such
Convertible Securities and (b) if any such issue or sale
of such Convertible Securities is made upon exercise of
any Option to purchase any such Convertible Securities
for which adjustments of such Conversion Price have been
or are to be made pursuant to other provisions of this
paragraph (C), no further adjustment of such Conversion
Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate.
Upon the happening of any of the following events,
namely, if the purchase price provided for in any Option
referred to in subparagraph (i), the additional consid-
eration, if any, payable upon the conversion or exchange
of any Convertible Securities referred to in
subparagraph (i) or (ii), or the rate at which any Con-
vertible Securities referred to in subparagraph (i) or
(ii) are convertible into or exchangeable for Common
Stock shall change at any time (other than under or by
<PAGE>
-11-
reason of provisions designed to protect against dilu-
tion), the Conversion Price in effect at the time of
such event shall forthwith be readjusted to the Conver-
sion Price which would have been in effect at such time
had such Options or Convertible Securities still out-
standing provided for such changed purchase price, addi-
tional consideration or conversion rate, as the case may
be, at the time initially granted, issued or sold; and
on the expiration of any such Option or termination of
any such right to convert or exchange such Convertible
Securities, the Conversion Price then in effect hereun-
der shall forthwith be increased to the Conversion Price
that would have been in effect at the time of such expi-
ration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior
to such expiration or termination, never been issued,
and the Common Stock issuable thereunder shall no longer
be deemed to be outstanding.
(iv) Stock Dividends. In case the Corporation
shall declare a dividend or make any other distribution
upon any stock of the Corporation payable in Common
Stock, Options or Convertible Securities, any Common
Stock, Options or Convertible Securities, as the case
may be, issuable in payment of such dividend or distri-
bution shall be deemed to have been issued or sold with-
out consideration.
(v) Consideration for Stock. In case any shares
of Common Stock, Options or Convertible Securities shall
be issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by
the Corporation therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in con-
nection therewith. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of
the consideration other than cash received by the Corpo-
ration shall be deemed to be the fair value of such con-
sideration as determined in good faith by the Board of
Directors, without deduction of any expenses incurred or
any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In
case any Options shall be issued in connection with the
issue and sale of other securities of the Company,
together compromising one integral transaction in which
<PAGE>
-12-
no specific consideration is allocated to such Options
by the parties thereto, the consideration deemed to have
been received by the Corporation shall be determined by
the Board of Directors in good faith.
(vi) Record Date. In case the Corporation shall
take a record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock, Options or
Convertible Securities, or (ii) to subscribe for or pur-
chase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the
date of the granting of such right of subscription or
purchase, as the case may be.
(vii) Treasury Shares. The number of shares of Com-
mon Stock outstanding at any given time shall not
include shares owned or held by or for the account of
the Corporation, and the disposition of any such shares
shall be considered an issue or sale of Common Stock for
the purpose of this paragraph (C).
(viii) Subdivision or Combination of Common Stock.
In case the Corporation shall at any time subdivide its
outstanding shares of Common Stock into a greater number
of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares
of Common Stock of the Corporation shall be combined
into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination shall be
proportionately increased.
(ix) Certain Issues of Common Stock Excepted. Any-
thing herein to the contrary notwithstanding, the Corpo-
ration shall not be required to make any adjustment of
the Conversion Price in the case of (i) the issuance of
shares of Common Stock upon conversion or redemption of
shares of Series B Preferred Stock in accordance with
the terms thereof, (ii) the issuance of shares of Common
Stock in payment of dividends upon the Series B Pre-
ferred Stock in accordance with the terms thereof,
(iii) the issuance of up to three (3) million shares of
Common Stock (or the issuance of options therefor)
<PAGE>
-13-
reserved for issuance to employees of the Corporation
pursuant to any employee benefit or compensation plan or
arrangement which amount includes 872,075 shares of Com-
mon Stock which are currently issuable under existing
stock option plans, (iv) the issuance of shares of Com-
mon Stock upon the exercise of Warrants granted by the
Corporation to Ortelius and GDK, (v) the issuance of
shares of Common Stock upon the exercise of Warrants
pursuant to the Warrant Agreement dated as of June 3,
1993 between the Corporation and First Interstate Bank
of California, as Warrant Agent or (vi) the issuance of
shares of Common Stock in connection with preferred
stock purchase rights relating to the Corporation's
Series A Cumulative Preferred Stock, par value $.05 per
share.
(x) Reorganization or Reclassification. If any
capital reorganization or reclassification of the capi-
tal stock of the Corporation shall be effected in such a
way (including, without limitation, by way of consolida-
tion or merger or a sale of all or substantially all its
assets) that holders of Common Stock shall be entitled
to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of
such reorganization or reclassification, lawful and ade-
quate provisions (in form satisfactory to Holders of at
least a majority of the outstanding shares of Series B
Preferred Stock) shall be made whereby each Holder of a
share or shares of Series B Preferred Stock shall there-
after have the right to receive, upon the basis and upon
the terms and conditions specified herein and in lieu of
the shares of Common Stock of the Corporation immedi-
ately theretofore receivable upon the conversion of such
share or shares of Series B Preferred Stock, such shares
of stock, securities or assets as may be issued or pay-
able with respect to or in exchange for a number of out-
standing shares of such Common Stock equal to the number
of shares of such stock immediately theretofore so
receivable had such reorganization or reclassification
not taken place, and in any such case appropriate provi-
sion shall be made with respect to the rights and inter-
ests of such Holder to the end that the provisions
hereof (including without limitation provisions for
adjustment of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliv-
erable upon the exercise of such conversion rights. In
<PAGE>
-14-
the event of a merger or consolidation of the Corpora-
tion as a result of which a greater or lesser number of
shares of common stock of the surviving corporation are
issuable to holders of Common Stock of the Corporation
outstanding immediately prior to such merger or consoli-
dation, the Conversion Price in effect immediately prior
to such merger or consolidation shall be adjusted in the
same manner as though there were a subdivision or combi-
nation of the outstanding shares of Common Stock of the
Corporation.
(xi) Partial or Liquidating Distributions. In the
event that the Corporation shall make any distribution
of its assets upon or with respect to the Common Stock,
as a liquidating or partial liquidating dividend, or
other than as a dividend payable out of earnings, the
Holder of each outstanding share of Series B Preferred
Stock shall, upon the exercise of his or her right to
convert after the record date for such distribution or,
in the absence of a record date, after the date of such
distribution, receive, in addition to the number of
shares of Common Stock for which such shares of Series B
Preferred Stock are then convertible, the amount of such
assets (or, at the option of the Corporation, a sum
equal to the value thereof at the time of distribution
as determined by the Board of Directors in its sole dis-
cretion) that would have been distributed to such Holder
if he had exercised his right to convert immediately
prior to the record date for such distribution or, in
the absence of a record date, immediately prior to the
date of such distribution.
(D) Notwithstanding the foregoing provisions of this
Section 6, (i) no adjustment in the number of shares of Common
Stock into which any share of Series B Preferred Stock is con-
vertible shall be required unless such adjustment would require
an increase or decrease in such number of shares of at least 1%
and (ii) no adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or
decrease in the Conversion Price of at least $.01 per share;
provided, however, that any adjustments which by reason of this
paragraph (D) are not required to be made shall be carried for-
ward and taken into account in any subsequent adjustment. All
calculations under this Section 6 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
<PAGE>
-15-
(E) Whenever any adjustment is required in the
shares into which any share of Series B Preferred Stock is con-
vertible, the Corporation shall forthwith (i) file with each
office or agency then maintained by the Corporation for the
transfer of the Series B Preferred Stock a statement describing
in reasonable detail the adjustment and the method of calcula-
tion used and (ii) cause a notice of such adjustment, setting
forth the adjusted Conversion Price to be mailed to the Holders
of record of shares of Series B Preferred Stock at their
respective addresses as shown on the stock books of the
Corporation.
(F) All shares of Series B Preferred Stock that
shall have been surrendered for conversion as herein provided
shall no longer be deemed to be outstanding and all rights with
respect to such shares, including the rights, if any, to
receive notices and to vote, shall forthwith cease, except only
the right of the Holders thereof, subject to the provisions of
this Section 6, to receive shares of Common Stock in exchange
therefor.
(G) In the event that:
(i) the Corporation shall take action to make any
distribution (other than cash dividends payable out of
earnings) to the holders of its Common Stock;
(ii) the Corporation shall take action to offer for
subscription pro rata to the holders of its Common Stock
any securities of any kind;
(iii) the Corporation shall take action to accomplish
any capital reorganization, or reclassification of the
capital stock of the Corporation (other than a subdivi-
sion, split or combination of its Common Stock), or a con-
solidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corpora-
tion is required, or the sale or transfer of all or sub-
stantially all of the assets of the Corporation; or
(iv) the Corporation shall take action looking to a
voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;
then the Corporation shall (A) in case of any such distribution
or subscription rights, at least thirty (30) days prior to the
date or expected date on which the stock books of the
<PAGE>
-16-
Corporation shall close or a record shall be taken for the
determination of holders entitled to such distribution or sub-
scription rights, and (B) in the case of any such reorganiza-
tion, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up, at least thirty days
(30) prior to the date or expected date when the same shall
take place, cause written notice thereof to be mailed to each
Holder of shares of Series B Preferred Stock at his address as
shown on the stock books of the Corporation. Such notice in
accordance with the foregoing clause (A) shall also specify, in
the case of any such distribution or subscription rights, the
date or expected date on which the holders of Common Stock
shall be entitled thereto, and such notice in accordance with
the foregoing clause (B) shall also specify the date or
expected date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassifica-
tion, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up, as the case may be.
(H) For the purposes of this paragraph (6), the term
"Common Stock" shall mean (i) the class of stock designated as
the Common Stock of the Corporation on the date of this Cer-
tificate or (ii) any other class of stock resulting from suc-
cessive changes or reclassifications of such Common Stock con-
sisting solely of changes in par value or from no par value to
par value, or from par value to no par value. In the event
that at any time as a result of an adjustment made pursuant to
the provisions of paragraph (C) of this Section 6, the Holder
of any share of Series B Preferred Stock thereafter surrendered
for conversion shall become entitled to receive any shares of
the Corporation other than shares of Common Stock, thereafter
the number of such other shares so receivable upon conversion
of any share of Series B Preferred Stock shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the
Common Stock contained in paragraph (C) of this Section 6, and
the other provisions of this Section 6 with respect to the Com-
mon Stock shall apply on like terms to any such other shares.
(I) The Corporation shall not be required to issue
fractional shares of Common Stock upon the conversion of any
Series B Preferred Stock. If more than one share of Series B
Preferred Stock shall be surrendered for conversion at one time
by the same Holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis
of the aggregate number of shares so surrendered. If any
<PAGE>
-17-
fractional interest in a share of Common Stock would be deliv-
erable upon the conversion of any shares of Series B Preferred
Stock, the Corporation may pay, in lieu thereof, in cash the
Quoted Price thereof as of the Business Day immediately preced-
ing the date of such conversion.
(J) The Corporation shall at all times reserve and
keep available, free from preemptive rights, out of its autho-
rized but unissued stock, for the purpose of effecting the con-
version or redemption of the shares of Series B Preferred
Stock, such number of its duly authorized shares of Common
Stock (or treasury shares as provided below) as shall from time
to time be sufficient to effect the payment of dividends on the
Series B Preferred Stock in shares of Common Stock, the conver-
sion of all outstanding shares of Series B Preferred Stock into
Common Stock at any time and the redemption of all outstanding
shares of Series B Preferred Stock for shares of Common Stock;
provided, however, that nothing contained herein shall preclude
the Corporation from satisfying its obligations in respect of
the payment of dividends in shares of Common Stock or the con-
version of the Series B Preferred Stock by delivery of shares
of Common Stock that are held in the treasury of the Corpora-
tion. The Corporation shall, from time to time and in accor-
dance with the General Corporation Law of the State of Dela-
ware, cause the authorized number of shares of Common Stock to
be increased if the aggregate of the number of authorized
shares of Common Stock remaining unissued and the issued shares
of such Common Stock in its treasury (other than any shares of
such Common Stock reserved for issuance in any other connec-
tion) shall not be sufficient to permit the payment of divi-
dends in shares of Common Stock, the conversion of all out-
standing shares of Series B Preferred Stock into Common Stock
or the redemption of all outstanding shares of Series B Pre-
ferred Stock for shares of Common Stock.
7. Optional Redemption.
(A) The Corporation's Right To Redeem the Series B
Preferred Stock. The Series B Preferred Stock may be redeemed
(subject to contractual and other restrictions with respect
thereto and the legal availability of funds therefor) at the
option of the Corporation in whole or, from time to time, in
part (provided that no less than 25% of the shares of Series B
Preferred Stock then outstanding may be redeemed at any one
time) in the manner provided in Section 7(C) hereof (i) at any
time after December 31, 1996 or (ii) on or prior to
December 31, 1996 if the Quoted Price of the Common Stock is at
<PAGE>
-18-
least 175% of the Conversion Price (as last adjusted and in
effect) for at least ten (10) trading days selected by the Cor-
poration within a period of any twenty (20) consecutive trading
days.
(B) Consideration for Shares of Series B
Preferred Stock To Be Redeemed.
(i) If on the date prior to the determination of the
Board of Directors to redeem Series B Preferred Stock, the
Quoted Price of the Common Stock is equal to or greater
than 105% of the Conversion Price (as last adjusted and in
effect on such date) then the Series B Preferred Stock to
be redeemed may be redeemed, at the option of the Corpora-
tion, for any combination of (x) shares of Common Stock,
each share of Series B Preferred Stock to be redeemed for
such number of fully, paid and non-assessable shares (as
calculated to the nearest 1/100th of a share) as is
obtained by dividing 1000 by the Conversion Price (as last
adjusted and in effect on such date) and (y) the Cash
Redemption Price.
(ii) If on the date prior to the determination of the
Board of Directors to redeem Series B Preferred Stock, the
Quoted Price of the Common Stock is less than 105% of the
Conversion Price (as last adjusted and in effect on such
date) then the Series B Preferred Stock to be redeemed
shall be redeemed for the Cash Redemption Price.
(iii) In addition to (i) or (ii) above, the Corpora-
tion shall pay to each holder of shares of Series B Pre-
ferred Stock to be redeemed all accrued and unpaid divi-
dends, if any, on such shares of Series B Preferred Stock
to the Redemption Date payable in cash or shares of Common
Stock or a combination thereof as determined in accordance
with Section 3(B).
(iv) The aggregate amount of cash or shares of Common
Stock or combination of cash and shares of Common Stock to
be received by Holders of Series B Preferred Stock pursu-
ant to subparagraphs (i), (ii) and (iii) above are
referred to herein as the "Redemption Consideration".
(C) Procedure for Redemption.
(i) In the event of a redemption of less than all of
the Series B Preferred Stock, the shares so redeemed will
<PAGE>
-19-
be determined by the Corporation pro rata according to the
number of shares held by each Holder, except that the Cor-
poration may redeem all of the shares held by any Holders
of fewer than 100 shares (or all of the shares held by
Holders who would hold less than 100 shares as a result of
such redemption).
(ii) The Corporation shall send a written notice of
redemption (the "Redemption Notice") by first-class mail,
postage prepaid, not fewer than fifteen (15) days nor more
than sixty (60) days prior to the Redemption Date to each
Holder as of the record date fixed for such redemption of
Series B Preferred Stock at such Holder's address as the
same appears on the stock books of the Corporation; pro-
vided, however, that no failure to give such notice to any
Holder or Holders nor any deficiency therein shall affect
the validity of the procedure for the redemption of any
shares of Series B Preferred Stock to be redeemed except
as to the Holder or Holders to whom the Corporation has
failed to give said notice or except as to the Holder or
Holders whose notice was defective. The Redemption Notice
shall state:
(A) whether all or less than all the outstand-
ing shares of Series B Preferred Stock are to be
redeemed and the total number of shares of Series B
Preferred Stock being redeemed;
(B) the number of shares of Series B Preferred
Stock held of record by that specific Holder that the
Corporation intends to redeem;
(C) the Redemption Date;
(D) the Redemption Consideration;
(E) the manner and place or places at which
payment for the shares called for redemption will,
upon presentation and surrender to the Corporation of
the Series B Preferred Stock Certificates evidencing
the shares being redeemed, be made; and
(F) that dividends on the shares of Series B
Preferred Stock being redeemed shall cease to accrue
on the Redemption Date.
<PAGE>
-20-
(iii) On the Redemption Date, the full Redemption Con-
sideration shall become payable for the shares of Series B
Preferred Stock being redeemed on the Redemption Date. As
a condition of payment of the Redemption Consideration,
each Holder of Series B Preferred Stock must surrender
Series B Preferred Stock Certificates or Certificates rep-
resenting the shares of Series B Preferred Stock being
redeemed by the Corporation in the manner and at the place
designated in the Redemption Notice. The full Redemption
Consideration for such shares properly tendered for pay-
ment shall be paid to the person whose name appears on
such certificate or certificates as the owner thereof, on
and after the Redemption Date when and as certificates for
the shares being redeemed are properly tendered for pay-
ment. Each surrendered Series B Preferred Stock Certifi-
cate shall be cancelled and retired. In the event that
less than all of the shares represented by any such cer-
tificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(iv) On the Redemption Date, unless the Corporation
defaults in the payment of the Redemption Consideration,
dividends will cease to accrue with respect to the shares
of Series B Preferred Stock called for redemption. All
rights of Holders of such redeemed shares will terminate
except for the right to receive the Redemption
Consideration.
8. Payment on Liquidation.
(A) Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, Holders of
Series B Preferred Stock will be entitled to receive an amount
in cash equal to the Liquidation Preference, before any distri-
bution is made on any Common Stock or other preferred stock of
the Corporation. After payment of the full amount of the
Liquidation Preferences to which they are entitled, Holders of
Series B Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Corporation.
(B) For the purposes of this Section 8, neither the
voluntary sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all the property or assets of the Corporation nor
the consolidation or merger of the Corporation with one or more
corporations shall be deemed a voluntary or involuntary liqui-
dation, dissolution or winding-up of the Corporation, unless
<PAGE>
-21-
such sale, conveyance, exchange or transfer shall be in connec-
tion with a dissolution or winding-up of the business of the
Corporation.
9. Exclusion of Other Rights. Except as may other-
wise be required by the General Corporation Law of the State of
Delaware, shares of the Series B Preferred Stock shall not have
any preferences or relative, participating, optional or other
special rights, other than those specifically set forth in this
resolution and in the Certificate of Designation filed pursuant
hereto (as such Certificate may be amended from time to time)
and in the Corporation's Certificate of Incorporation, as
amended. No shares of Series B Preferred Stock shall have any
preemptive or subscription rights whatsoever as to any securi-
ties of the Corporation.
10. Reissuance of Preferred Stock. Shares of Series
B Preferred Stock that have been issued and reacquired in any
manner, including shares purchased or redeemed, shall (upon
compliance with any applicable provisions of the General Corpo-
ration Law of the State of Delaware) have the status of autho-
rized and unissued shares of preferred stock undesignated as to
series and may be redesignated and reissued as part of any
series of preferred stock.
11. Business Day. If any payment or redemption
shall be required by the terms hereof to be made on a day that
is not a Business Day, such payment, redemption or exchange
shall be made on the immediately succeeding Business Day.
12. Headings of Subdivisions. The headings of the
various subdivisions hereof are for convenience of reference
only and shall not affect the interpretation of any of the pro-
visions hereof.
13. Severability of Provisions. If any right, pref-
erence or limitation of the Series B Preferred Stock set forth
in this resolution and in the Certificate of Designation filed
pursuant hereto (as such Certificate may be amended from time
to time) is invalid, unlawful or incapable of being enforced by
reason of any rule or law or public policy, all other rights,
preferences and limitations set forth in such Certificate of
Designation (as so amended) which can be given effect without
the invalid, unlawful or unenforceable right, preference or
limitation shall, nevertheless, remain in full force and
effect, and no right, preference or limitation herein set forth
<PAGE>
-22-
shall be deemed dependent upon any other such right, preference
or limitation unless so expressed herein.
14. Notice. All notices and other communications
provided for or permitted to be given to the Corporation here-
under shall be made by hand delivery, next day air courier or
certified first-class mail to the Corporation at its principal
executive offices (currently located on the date of the adop-
tion of these resolutions at 2910 Seventh Street, Berkeley,
California 94710, Attention: General Counsel; with a copy to:
Cahill Gordon & Reindel, Attention: Roger Meltzer, Esq.
15. Transferability; Right of Transferees.
(A) From and after the date of original issuance of
the Series B Preferred Stock, the Series B Preferred Stock may
not be sold, assigned, conveyed, transferred, pledged, hypothe-
cated or otherwise disposed of, and no Holder shall agree to
sell, assign, convey, transfer, pledge, hypothecate or other-
wise dispose of, any Series B Preferred Stock except in a Per-
mitted Transfer. No Holder shall consummate or agree to con-
summate a Permitted Transfer or series of Permitted Transfers
involving, individually or in the aggregate, 5,000 or more
shares of Series B Preferred Stock to a single Eligible Trans-
feree or a number of related or affiliated Eligible Transferees
other than wholly-owned Affiliates of Ortelius and GDK, without
the prior written consent of the Corporation, which consent
shall not be unreasonably withheld.
(B) The Series B Preferred Stock Certificates repre-
senting all of the shares of Series B Preferred Stock to be
transferred pursuant to a Permitted Transfer shall be duly
endorsed by the transferring Holder or by his duly authorized
attorney or representative, or accompanied by proper evidence
of succession, assignment or authority to transfer. In all
cases of a Permitted Transfer by an attorney, the original
power of attorney, duly approved, or a copy thereof, duly cer-
tified, shall be deposited and remain with the Corporation. In
case of a Permitted Transfer by executors, administrators,
guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be
required to be deposited and to remain with the Corporation in
its discretion. Upon any registration of a Permitted Transfer,
the Corporation shall deliver new Series B Preferred Stock Cer-
tificates to the persons entitled to the shares of Series B
Preferred Stock represented thereby. The Series B Preferred
Stock Certificates may be exchanged at the option of the Holder
<PAGE>
-23-
thereof, when surrendered at the offices of the Corporation,
for other Series B Preferred Stock Certificates of different
denominations, of like tenor and representing in the aggregate
a like number of shares of Series B Preferred Stock. Any
Series B Preferred Stock Certificate so surrendered shall be
promptly cancelled by the Corporation and retired. Each Series
B Preferred Stock Certificate issued in exchange as provided
above shall be substantially in the form of the Series B Pre-
ferred Stock Certificate being exchanged and shall be subject
to all of the terms and provisions hereof.
(C) The Series B Preferred Stock Certificates shall
contain the following legend:
THE SENIOR CONVERTIBLE PREFERRED STOCK, SERIES B (THE
"SERIES B PREFERRED STOCK") EVIDENCED HEREBY IS SUBJECT TO SIG-
NIFICANT RESTRICTIONS ON TRANSFERABILITY AND HAS NOT BEEN REG-
ISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS AND THE SERIES B PREFERRED
STOCK AND THE SHARES OF COMMON STOCK OR OTHER SECURITIES ISSU-
ABLE UPON CONVERSION OR REDEMPTION OF THE SERIES B PREFERRED
STOCK MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE ACT AND APPLICABLE STATE SECURITIES LAWS AND AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR XOMA CORPORA-
TION THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS
AVAILABLE.
16. Amendments. The Corporation shall amend this
Certificate of Designation as soon as practicable upon the
determination of the Conversion Price in accordance with the
terms and conditions of a Securities Purchase Agreement of even
date herewith by and among Ortelius, GDK and the Corporation.
This Certificate of Designation may be amended without notice
to or the consent of any Holder to cure any ambiguity, defect
or inconsistency provided that such amendment does not
adversely affect the rights of any Holder. Any provisions of
this Certificate of Designation may be amended by the Corpora-
tion with the written consent of Holders representing a major-
ity of the outstanding shares of Series B Preferred Stock.
The Corporation will, so long as any shares of Series
B Preferred Stock are outstanding, maintain an office or agency
where such shares may be presented for registration or transfer
and where such shares may be presented for conversion and
redemption.
<PAGE>
-24-
IN WITNESS WHEREOF, XOMA Corporation has caused this
Certificate of Designation of Preferences and Rights of its
Series B Preferred Stock to be signed and attested by its duly
authorized officers, this 19th day of November, 1993.
XOMA CORPORATION
By: /s/ John L. Castello
John L. Castello
Chairman, President and
Chief Executive Officer
ATTEST:
By: /s/ Christopher J. Margolin
Christopher J. Margolin
Secretary
<PAGE>
CERTIFICATE OF DESIGNATION OF
PREFERENCES AND RIGHTS OF
CONVERTIBLE PREFERRED STOCK, SERIES C
OF
XOMA CORPORATION
_______________
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
_______________
XOMA CORPORATION, a corporation organized and exist-
ing under the General Corporation Law of the State of Delaware
(the "Corporation"), does hereby certify that, pursuant to
authority conferred upon the Board of Directors by the Amended
and Restated Certificate of Incorporation of the Corporation,
and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, said Board of Direc-
tors duly adopted a resolution on July 19, 1995, which approved
the filing of this Certificate of Designation and which resolu-
tion remains in full force and effect as of the date hereof.
Pursuant to such resolution and the authority con-
ferred upon the Board of Directors by the Amended and Restated
Certificate of Incorporation of the Corporation, there is
hereby created a series of preferred stock of the Corporation,
which series shall have the following powers, preferences, and
relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, in
addition to those set forth in the Amended and Restated Cer-
tificate of Incorporation of the Corporation:
1. Certain Definitions. As used herein, the fol-
lowing terms shall have the following meanings (with terms
defined in the singular having comparable meanings when used in
the plural and vice versa), unless the context otherwise
requires:
"Board of Directors" means the Board of Directors of
the Corporation.
<PAGE>
-2-
"Business Combination" means the occurrence of any of
the following: (a) a merger or consolidation in which the
Corporation is not the surviving entity, except for a
transaction the principal purpose of which is to change
the State of the Corporation's incorporation; (b) the
sale, transfer or other disposition of all or substan-
tially all of the assets of the Corporation; or (c) any
other corporate reorganization or business combination in
which 50% or more of the Corporation's outstanding voting
stock is transferred to different holders in a single
transaction or a series of related transactions.
"Business Combination Date" has the meaning specified
in Section 6(b) hereof.
"Business Day" means a day that is not a Saturday, a
Sunday or a day on which banking institutions in the State
of New York or California are not required to be open.
"Common Stock" means the Common Stock, par value
$.0005 per share, of the Corporation.
"Conversion Certificate" means a certificate substan-
tially in the form of Exhibit 1 attached hereto.
"Conversion Date" means (x) with respect to any con-
version of Series C Preferred Stock into Common Stock pur-
suant to Section 6(a) hereof, the date selected by the
Holder converting such shares of Series C Preferred Stock
as set forth below such Holder's signature on a properly
executed Conversion Certificate received by the Corpora-
tion, and (y) with respect to any conversion of Series C
Preferred Stock into Common Stock pursuant to Section 6(c)
hereof, the date selected by the Corporation for conver-
sion of such shares of Series C Preferred Stock as set
forth in the applicable Notice of Conversion.
"Corporation" means XOMA Corporation, a Delaware
corporation.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Holder" means a registered holder of shares of
Series C Preferred Stock.
<PAGE>
-3-
"Liquidation Preference" means $1,000 per share of
Series C Preferred Stock.
"Market Price" on any date means (i) if the Common
Stock is listed on a national securities exchange, the
numerical average of the last reported bid prices per
share of the Common Stock on the principal securities
exchange on which the Common Stock is listed that shall be
consolidated for consolidated trading, if applicable to
such exchange, for five trading days of such exchange
immediately preceding such date, or (ii) if the Common
Stock is not so listed, the numerical average of the last
reported bid prices per share of the Common Stock as
reported on the NASDAQ National Market for the five NASDAQ
trading days immediately preceding such date, or (iii) if
the Common Stock is neither so listed nor so reported, the
numerical average of the last reported bid price per share
of the Common Stock as quoted by a registered
broker-dealer for the last five days for which such quotes
are available immediately prior to such date; provided
that such quotes must have been available for at least
five days in the preceding thirty-day period, or (iv) if
the Common Stock is not so listed, so reported or so
quoted, the fair value of the Common Stock on such date,
as determined by the Board of Directors in good faith
after taking into account such factors as the Board of
Directors may deem appropriate, including one or more pro-
fessional valuations.
"Notice of Conversion" has the meaning specified in
Section 6(c) hereof.
"Person" or "person" means any natural person, corpo-
ration, partnership, limited liability company, joint ven-
ture, association, joint-stock company, trust,
unincorporated organization or government or any agency or
political subdivision thereof.
"Redemption Date" means, with respect to any shares
of Series C Preferred Stock, the date fixed by the Corpo-
ration for redemption of such shares of Series C Preferred
Stock.
"Redemption Notice" has the meaning specified in
Section 7(c) hereof.
<PAGE>
-4-
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated
thereunder.
"Series B Preferred Stock" means the Senior Convert-
ible Preferred Stock, Series B, par value $.05 per share,
of the Corporation.
"Series C Preferred Stock" has the meaning specified
in Section 2 hereof.
"Series C Preferred Stock Certificate" has the mean-
ing specified in Section 6(e) hereof.
"Stockholder Approval" means the approval by a major-
ity of the votes cast by the holders of shares of Common
Stock (in person or by proxy) at a meeting of the stock-
holders of the Corporation (duly convened at which a quo-
rum was present) of the issuance by the Corporation of 20%
or more of the outstanding Common Stock of the Corporation
for less than the greater of the book or market value of
such Common Stock, as and to the extent required under
Section 6(i) of Part III of Schedule D to the By-Laws of
the National Association of Securities Dealers, Inc. (or
any successor or replacement provision thereof).
2. Designation. The series of preferred stock
established hereby shall be designated the "Convertible Pre-
ferred Stock, Series C" (and shall be referred to herein as the
"Series C Preferred Stock") and the authorized number of shares
of Series C Preferred Stock shall be 5,000 shares.
3. Dividends. The Corporation shall not be
required to pay, and the Holders shall not be entitled to
receive, any dividends on shares of the Series C Preferred
Stock.
4. Ranking. The Series C Preferred Stock shall,
with respect to rights on liquidation, winding-up and dissolu-
tion, rank senior to all classes of Common Stock and to any
other class or series of any class of preferred stock of the
Corporation, whether now outstanding or issued hereafter, other
than the Series B Preferred Stock.
5. Voting Rights. (a) Except as required by the
General Corporation Law of the State of Delaware and as set
forth in Section 5(b) hereof, the Holders shall not be entitled
<PAGE>
-5-
to vote on any matter submitted to a vote of stockholders of
the Corporation.
(b) The Corporation shall not, without the consent
of Holders of a majority of the outstanding shares of Series C
Preferred Stock, (i) authorize, create or issue any shares of
capital stock of any class or series ranking senior to the
Series C Preferred Stock with respect to rights on liquidation,
winding-up or dissolution of the Corporation, (ii) except as
may be required by the General Corporation Law of the State of
Delaware, amend, alter or repeal, by any means, the Amended and
Restated Certificate of Incorporation of the Corporation in any
manner which would adversely affect the Holders with respect to
the powers, preferences, or relative, participating, optional
or other special rights, or the qualifications, limitations or
restrictions of the Series C Preferred Stock as set forth
herein, or (iii) otherwise voluntarily become subject to any
restriction which requires a vote of its stockholders and which
would adversely affect the Holders with respect to the powers,
preferences, or relative, participating, optional or other spe-
cial rights, or the qualifications, limitations or restrictions
of the Series C Preferred Stock as set forth herein, other than
restrictions arising solely under the General Corporation Law
of the State of Delaware and restrictions in the Amended and
Restated Certificate of Incorporation of the Corporation as in
effect on June 25, 1995.
6. Conversion. (a) Subject to Section 6(d)
hereof, the Holders shall have the right, at any time or from
time to time, to convert shares of Series C Preferred Stock
into shares of Common Stock on and subject to the terms and
conditions hereinafter set forth. One-half (1/2) of the shares
of Series C Preferred Stock originally issued to each initial
Holder thereof shall be convertible by the then current Holder
thereof into shares of Common Stock on and after the 60th day
following the date on which such shares of Series C Preferred
Stock are released for delivery to the initial Holder thereof
(the "Issuance Date") and prior to the 730th day after the
Issuance Date of such shares of Series C Preferred Stock, and
the balance of the shares of Series C Preferred Stock shall be
convertible by the then current Holder thereof into shares of
Common Stock on and after the 90th day following the Issuance
Date of such shares of Series C Preferred Stock and prior to
the 730th day after the Issuance Date of such shares of Series
C Preferred Stock. No share of Series C Preferred Stock shall
be convertible into shares of Common Stock at the option of the
Holder thereof on or after the 730th day following the Issuance
<PAGE>
-6-
Date of such share of Series C Preferred Stock. Each share of
Series C Preferred Stock convertible pursuant to this clause
(a) will be convertible into the number of shares of Common
Stock equal to the number obtained by dividing $1,000 by 80% of
the Market Price on the applicable Conversion Date.
(b) Subject to Section 6(d) hereof, upon the consum-
mation of a Business Combination (the date of such consummation
hereinafter referred to as the "Business Combination Date"),
each outstanding share of Series C Preferred Stock shall, with-
out the necessity of any action by or on behalf of a Holder, be
converted into the number of shares of Common Stock obtained by
dividing $1,000 by 80% of the Market Price on the Business Com-
bination Date. As promptly as practicable after the Business
Combination Date, the Corporation shall issue and deliver to
each Holder at its address as the same appears on the stock
books of the Corporation, a certificate or certificates for the
number of shares of Common Stock issuable upon conversion of
such shares of Series C Preferred Stock, together with a state-
ment of the relevant facts and circumstances surrounding the
Business Combination.
(c) Subject to Section 6(d) hereof, at any time on
or after the 730th day following the Issuance Date of a par-
ticular share of Series C Preferred Stock, the Corporation
shall have the right, at any time or from time to time, to con-
vert such share of Series C Preferred Stock into shares of Com-
mon Stock, such right of the Corporation with respect to the
Series C Preferred Stock to be exercisable by the Corporation
in whole or in part. Each share of Series C Preferred Stock
converted pursuant to this clause (c) will be convertible into
the number of shares of Common Stock equal to the number
obtained by dividing $1,000 by 80% of the Market Price on the
applicable Conversion Date. As promptly as practicable after
the applicable Conversion Date, the Corporation will send a
written notice (a "Notice of Conversion") by first-class mail,
postage prepaid, to each Holder whose shares of Series C Pre-
ferred Stock have been selected for conversion into Common
Stock pursuant to this clause (c), at its address as the same
appears on the stock books of the Corporation setting forth the
applicable Market Price, together with a certificate or certif-
icates for the number of shares of Common Stock issuable upon
conversion of such shares of Series C Preferred Stock.
(d) Notwithstanding any other provision herein to
the contrary, unless the Stockholder Approval shall have been
obtained, the Corporation shall not be required to convert any
<PAGE>
-7-
shares of Series C Preferred Stock into shares of Common Stock
to the extent that as a consequence of such conversion,
together with all prior conversions of Series C Preferred
Stock, greater than 4,511,549 shares of Common Stock shall have
been issued upon conversion of shares of Series C Preferred
Stock. The Corporation shall promptly give notice to each
Holder (by first class mail, postage prepaid, at such Holder's
address as the same appears on the stock books of the Corpora-
tion) if on any date the Corporation would not have been
required to convert shares of Series C Preferred Stock as a
consequence of the limitation set forth in this clause (d) had
all outstanding shares of Series C Preferred Stock been surren-
dered for conversion into Common Stock on such date. If at any
time any shares of Series C Preferred Stock surrendered for
conversion are not converted into Common Stock as a consequence
of the limitation set forth in this clause (d), the Corporation
shall promptly notify the Holders in writing of such occurrence
and shall thereafter determine in its sole discretion to either
(i) convene a meeting of the holders of Common Stock as
promptly as practicable and use its reasonable best efforts to
obtain the Stockholder Approval, or (ii) promptly redeem all of
the outstanding shares of Series C Preferred Stock, on and sub-
ject to the terms and conditions of Section 7 hereof. In the
event the Stockholder Approval contemplated in subclause (i)
above is not obtained at such meeting or any adjournment
thereof, the Corporation shall thereafter promptly redeem all
outstanding shares of Series C Preferred Stock, on and subject
to the terms and conditions of Section 7 hereof.
(e) In order to exercise the conversion privilege
provided in Section 6(a) hereof, the Holder of any shares of
Series C Preferred Stock to be converted in whole or in part
shall surrender the certificate representing such shares of
Series B Preferred Stock (the "Series B Preferred Stock Cer-
tificate"), together with a properly executed Conversion Cer-
tificate and any required transfer taxes, at the office or
agency then maintained by the Corporation for the transfer of
the Series C Preferred Stock. No fewer than 100 shares of
Series C Preferred Stock may be converted in any individual
conversion pursuant to Section 6(a) hereof. Each Series C Pre-
ferred Stock Certificate surrendered for conversion pursuant to
Section 6(a) hereof shall, unless the shares issuable on con-
version are to be issued in the same name as the registration
of such Series C Preferred Stock Certificate, be duly endorsed
by, or be accompanied by instruments of transfer in form satis-
factory to the Corporation duly executed by, the Holder or his
duly authorized attorney.
<PAGE>
-8-
(f) In the case of any conversion pursuant to Sec-
tion 6(a) hereof, as promptly as practicable after the surren-
der of such Series C Preferred Stock Certificate and the
receipt of such Conversion Certificate and funds, if any, as
aforesaid, the Corporation shall issue and shall deliver at
such office or agency to such Holder, or on his written order,
a certificate or certificates for the number of shares of Com-
mon Stock issuable upon the conversion of such shares of
Series C Preferred Stock represented by the Series C Preferred
Stock Certificate(s) so surrendered or portion thereof in
accordance with the provisions of this Section 6. In case less
than all of the shares of Series C Preferred Stock represented
by a Series C Preferred Stock Certificate surrendered by a
Holder for conversion pursuant to Section 6(a) hereof or con-
verted by the Corporation pursuant to Section 6(d) hereof are
to be converted, the Corporation shall deliver to or upon the
written order of the Holder of such Series C Preferred Stock
Certificate a new Series C Preferred Stock Certificate repre-
senting the shares of Series C Preferred Stock not converted.
In order for any shares of Series C Preferred Stock to be
deemed properly surrendered for conversion, a Holder must indi-
cate in the Conversion Certificate the number of shares of
Series C Preferred Stock which such Holder wishes to convert.
(g) Each conversion pursuant to Section 6(a) hereof,
shall be deemed to have been effected on the date on which such
Series C Preferred Stock Certificate shall have been surren-
dered, together with a properly executed Conversion Certificate
and funds, if any, shall have been received by the Corporation
as aforesaid, and the person in whose name any certificate or
certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become on said date the
holder of record of the shares of Common Stock represented
thereby; provided, however, that any such surrender on any date
when the stock books of the Corporation shall be closed shall
constitute the person in whose name the certificates of Common
Stock are to be issued as the record holder thereof for all
purposes on the next succeeding day on which such stock books
are open.
(h) All shares of Series C Preferred Stock that
shall have been properly surrendered by the Holders for conver-
sion pursuant to Section 6(a) hereof which are eligible for
conversion as herein provided, all shares of Series C Preferred
Stock after the Business Combination Date (to the extent con-
vertible pursuant to clause (d) of this Section 6) and all
shares of Series C Preferred Stock converted by the Corporation
<PAGE>
-9-
pursuant to Section 6(c) hereof shall no longer be deemed to be
outstanding and all rights with respect to such shares, includ-
ing the rights, if any, to receive notices and to vote, shall
forthwith cease, except only the right of the Holders thereof,
subject to the provisions of this Section 6, to receive shares
of Common Stock in exchange therefor.
(i) The Corporation shall not be required to issue
fractional shares of Common Stock upon the conversion of any
Series C Preferred Stock. If any fractional interest in a
share of Common Stock would be deliverable upon the conversion
of any shares of Series C Preferred Stock, the Corporation
shall (subject to Section 6(d) hereof) issue a number of shares
of Common Stock equal to the next closest whole number, with
half shares being rounded up.
(j) The Corporation shall use its reasonable best
efforts to all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued stock,
for the purpose of effecting the conversion of the shares of
Series C Preferred Stock, such number of its duly authorized
shares of Common Stock (or treasury shares as provided below)
as shall from time to time be sufficient to effect the conver-
sion of all outstanding shares of Series C Preferred Stock into
Common Stock at any time; provided, however, that nothing con-
tained herein shall preclude the Corporation from satisfying
its obligations in respect of the conversion of the Series C
Preferred Stock by delivery of shares of Common Stock that are
held in the treasury of the Corporation. The Corporation
shall, from time to time and in accordance with the General
Corporation Law of the State of Delaware, use its reasonable
best efforts (including, without limitation, convening meetings
of stockholders to increase the number of authorized shares of
Common Stock and recommending approval therefor) to cause the
authorized number of shares of Common Stock to be increased if
the aggregate of the number of authorized shares of Common
Stock remaining unissued and the issued shares of such Common
Stock in its treasury (other than any shares of such Common
Stock reserved for issuance in any other connection) shall not
be sufficient to permit the conversion of all outstanding
shares of Series C Preferred Stock into Common Stock.
(k) If any capital reorganization or reclassifica-
tion of the capital stock of the Corporation (other than a
Business Combination) shall be effected in such a way that
holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common
<PAGE>
-10-
Stock, then, as a condition of such capital reorganization or
reclassification, lawful and adequate provisions shall be made
whereby each Holder of a share or shares of Series C Preferred
Stock shall thereafter have the right to receive, upon conver-
sion of shares of Series C Preferred Stock on the basis and
upon the terms and conditions specified herein, in lieu of
shares of Common Stock of the Corporation, such shares of
stock, securities or assets issued or payable in such capital
reorganization or reclassification with respect to or in
exchange for that number of shares of such Common Stock equal
to the number of shares of such stock, securities or assets
that would have been receivable had such converting Holder's
shares of Series C Preferred Stock been converted into Common
Stock on the record date for such capital reorganization or
reclassification, and in any such case appropriate provisions
shall be made with respect to the rights and interests of such
Holder to the end that the provisions of this clause (k) shall
equally apply to each successive capital reorganization or
reclassification with respect to any shares of stock or securi-
ties thereafter deliverable upon conversion of the Series C
Preferred Stock.
7. Redemption. (a) Each shares of Series C Pre-
ferred Stock (i) may be redeemed (subject to contractual and
other restrictions with respect thereto and the legal avail-
ability of funds therefor) at the option of the Corporation at
any time on or after the 730th day following the Issuance Date
of such share of Series C Preferred Stock (such right of the
Corporation with respect to the Series C Preferred Stock to be
exercisable by the Corporation in whole or, from time to time,
in part in the manner provided in Section 7(b) hereof), and
(ii) shall be redeemed in the manner provided in Section 7(d)
hereof if required pursuant to Section 6(d) hereof, in each
case, at a redemption price of $1,250 per share of Series C
Preferred Stock.
(b) In the event of a redemption of less than all of
the outstanding shares of Series C Preferred Stock, the shares
so redeemed will be determined by the Corporation pro rata
according to the number of shares held by each Holder, except
that the Corporation may redeem all of the shares held by any
Holders of fewer than 100 shares (or all of the shares held by
Holders who would hold less than 100 shares as a result of such
redemption).
(c) The Corporation shall send a written notice of
redemption (a "Redemption Notice") by first-class mail, postage
<PAGE>
-11-
prepaid, not fewer than fifteen (15) days nor more than sixty
(60) days prior to the Redemption Date to each Holder as of the
record date fixed for such redemption of Series C Preferred
Stock at such Holder's address as the same appears on the stock
books of the Corporation; provided, however, that no failure to
give such notice to any Holder or Holders nor any deficiency
therein shall affect the validity of the procedure for the
redemption of any shares of Series C Preferred Stock to be
redeemed except as to the Holder or Holders to whom the Corpo-
ration has failed to give said notice or except as to the
Holder or Holders whose notice was defective. The Redemption
Notice shall state:
(i) whether all or less than all the outstanding
shares of Series C Preferred Stock are to be redeemed and
the total number of shares of Series C Preferred Stock
being redeemed;
(ii) the number of shares of Series C Preferred Stock
held of record by that specific Holder that the Corpora-
tion intends to redeem;
(iii) the Redemption Date; and
(iv) the manner and place or places at which payment
for the shares called for redemption will, upon presenta-
tion and surrender to the Corporation of the Series C Pre-
ferred Stock Certificates evidencing the shares being
redeemed, be made.
(d) On the Redemption Date, the redemption price
shall become payable for the shares of Series C Preferred Stock
being redeemed on the Redemption Date. As a condition of pay-
ment of the redemption price, each Holder of Series C Preferred
Stock must surrender Series C Preferred Stock Certificates or
Certificates representing the shares of Series C Preferred
Stock being redeemed by the Corporation in the manner and at
the place designated in the Redemption Notice. The full
redemption price for such shares properly tendered for payment
shall be paid to the person whose name appears on such certifi-
cate or certificates as the owner thereof, on and after the
Redemption Date when and as certificates for the shares being
redeemed are properly tendered for payment. Each surrendered
Series C Preferred Stock Certificate shall be cancelled and
retired. In the event that less than all of the shares repre-
sented by any such certificate are redeemed, a new Series C
<PAGE>
-12-
Stock Certificate shall be issued representing the unredeemed
shares.
(e) On the Redemption Date, unless the Corporation
defaults in the payment of the redemption price, all rights of
Holders of such redeemed shares will terminate except for the
right to receive the redemption price therefor.
(f) In the event any shares of Series C Preferred
Stock shall be called for redemption, the Holder's right to
convert such shares of Series C Preferred Stock into shares of
Common Stock shall terminate at the close of business on the
Redemption Date.
8. Payment on Liquidation. (a) Upon any voluntary
or involuntary liquidation, dissolution or winding-up of the
Corporation, Holders of Series C Preferred Stock will be enti-
tled to receive an amount in cash equal to the Liquidation
Preference, before any distribution is made on any Common Stock
or any preferred stock of the Corporation other than the Series
B Preferred Stock. After payment of the full amount of the
Liquidation Preferences to which they are entitled, Holders of
Series B Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Corporation.
(b) For the purposes of this Section 8, neither the
voluntary sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Corporation
nor the consolidation or merger of the Corporation with one or
more corporations shall be deemed a voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation,
unless such sale, conveyance, exchange or transfer or merger or
consolidation shall be in connection with a dissolution or
winding-up of the business of the Corporation.
9. Exclusion of Other Rights. Except as may other-
wise be required by the General Corporation Law of the State of
Delaware, shares of the Series C Preferred Stock shall not have
any preferences or relative, participating, optional or other
special rights, other than those specifically set forth in this
Certificate of Designation (as such Certificate of Designation
may be amended from time to time) and in the Corporation's
Amended and Restated Certificate of Incorporation, as amended.
No shares of Series C Preferred Stock shall have any preemptive
or subscription rights whatsoever as to any securities of the
Corporation.
<PAGE>
-13-
10. Reissuance of Preferred Stock. Shares of Series
C Preferred Stock that have been issued and reacquired in any
manner, including shares purchased or redeemed, shall (upon
compliance with any applicable provisions of the General Corpo-
ration Law of the State of Delaware) have the status of autho-
rized and unissued shares of preferred stock undesignated as to
series and may be redesignated and reissued as part of any
series of preferred stock.
11. Business Day. If any payment, redemption or
conversion shall be required by the terms hereof to be made on
a day that is not a Business Day, such payment, redemption or
conversion shall be made on the immediately succeeding Business
Day.
12. Headings of Subdivisions. The headings of the
various subdivisions hereof are for convenience of reference
only and shall not affect the interpretation of any of the pro-
visions hereof.
13. Severability of Provisions. If any right, pref-
erence or limitation of the Series C Preferred Stock set forth
in this resolution and in the Certificate of Designation filed
pursuant hereto (as such Certificate of Designation may be
amended from time to time) is invalid, unlawful or incapable of
being enforced by reason of any rule or law or public policy,
all other rights, preferences and limitations set forth in such
Certificate of Designation (as so amended) which can be given
effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full
force and effect, and no right, preference or limitation herein
set forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
14. Notice. All notices and other communications
provided for or permitted to be given to the Corporation here-
under shall be made by hand delivery, next day air courier or
certified first-class mail to the Corporation at its principal
executive offices (currently located on the date of the adop-
tion of these resolutions at 2910 Seventh Street, Berkeley,
California 94710, Attention: General Counsel; with a copy to:
Cahill Gordon & Reindel, 80 Pine Street, New York, New York
10005, Attention: Geoffrey E. Liebmann, Esq.
15. Transferability; Right of Transferees. (a) The
Series C Preferred Stock may be sold, assigned, conveyed,
transferred, pledged, hypothecated or otherwise disposed of
<PAGE>
-14-
only in compliance with the provisions of the Securities Act,
including Regulation S promulgated thereunder.
(b) The Series C Preferred Stock Certificates repre-
senting shares of Series C Preferred Stock to be transferred
shall be duly endorsed by the transferring Holder or by his
duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to
transfer. In all cases of a transfer by an attorney, the
original power of attorney, duly approved, or a copy thereof,
duly certified, shall be deposited and remain with the Corpora-
tion. In case of a transfer by executors, administrators,
guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be
required to be deposited and to remain with the Corporation in
its discretion. Upon any registration of a transfer, the Cor-
poration shall deliver new Series C Preferred Stock Certifi-
cates to the persons entitled to the shares of Series C Pre-
ferred Stock represented thereby. The Series C Preferred Stock
Certificates may be exchanged at the option of the Holder
thereof, when surrendered at the offices of the Corporation,
for other Series C Preferred Stock Certificates of different
denominations, of like tenor and representing in the aggregate
a like number of shares of Series C Preferred Stock. Any
Series C Preferred Stock Certificate so surrendered shall be
promptly cancelled by the Corporation and retired. Each Series
C Preferred Stock Certificate issued in exchange as provided
above shall be substantially in the form of the Series C Pre-
ferred Stock Certificate being exchanged and shall be subject
to all of the terms and provisions hereof.
(c) Each of the Series C Preferred Stock Certifi-
cates shall, until the 40th day following the Issuance Date
with respect to the shares of Series C Preferred Stock repre-
sented thereby (or such later date as may be required under the
Securities Act), contain the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE
OFFERED OR SOLD BY THE HOLDER HEREOF PRIOR
TO THE 40TH DAY FOLLOWING THE ORIGINAL
ISSUANCE THEREOF, AND THEREAFTER ONLY PUR-
SUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR
(ii) AN EXEMPTION FROM, OR IN A TRANSACTION
<PAGE>
-15-
NOT SUBJECT TO, THE REGISTRATION REQUIRE-
MENTS OF THE SECURITIES ACT AND, IN EACH
CASE, IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS."
(d) In addition, each of the Series C Preferred
Stock Certificates shall contain one of the following legends
until such time as such legend, by its terms, no longer shall
apply:
"THESE SECURITIES ARE NOT CONVERTIBLE AT
THE OPTION OF THE HOLDER HEREOF UNTIL ON OR
AFTER THE 60TH DAY FOLLOWING THE ORIGINAL
ISSUANCE THEREOF."
"THESE SECURITIES ARE NOT CONVERTIBLE AT
THE OPTION OF THE HOLDER HEREOF UNTIL ON OR
AFTER THE 90TH DAY FOLLOWING THE ORIGINAL
ISSUANCE THEREOF."
16. Amendments. The Certificate of Designation
filed pursuant hereto may be amended without notice to or the
consent of any Holder to cure any ambiguity, defect or incon-
sistency provided that such amendment does not adversely affect
the rights of any Holder. Any provisions of the Certificate of
Designation filed pursuant hereto may be amended by the Corpo-
ration with the written consent of Holders representing a
majority of the outstanding shares of Series C Preferred Stock.
The Corporation will, so long as any shares of Series
C Preferred Stock are outstanding, maintain an office or agency
where such shares may be presented for registration or transfer
and where such shares may be presented for conversion and
redemption.
<PAGE>
-16-
IN WITNESS WHEREOF, XOMA Corporation has caused this
Certificate of Designation of Preferences and Rights of its
Series C Preferred Stock to be signed and attested by its duly
authorized officers, this 7th day of August, 1995.
XOMA CORPORATION
By: /s/ John L. Castello
Name: John L. Castello
Title: Chairman of the Board,
President and Chief
Executive Offiver
ATTEST:
By: /s/ Christopher J. Margolin
Christopher J. Margolin
Secretary
Exhibit 4.5
Amendment number one, effective as of July 28, 1995,
to that certain Agreement among XOMA Corporation ("XOMA"),
Northwest Venture Services Corporation ("Northwest"), and W.
Denman Van Ness ("Mr. Van Ness") effective as of May 15, 1995,
("Agreement").
Because of the change in relationship between Mr. Van
Ness and the entities affiliated with Northwest and with
Northwest, the Agreement is amended to replace, wherever
appearing, Northwest with The Van Ness 1983 Revocable Trust.
Henceforth, Northwest shall no longer be a party to the
Agreement, and agrees that it has received no XOMA stock and is
entitled to no XOMA stock, the certificates for which will be
issued by XOMA to The Van Ness 1983 Revocable Trust.
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Amendment and it shall be effective as of
the date first written above.
XOMA CORPORATION NORTHWEST VENTURE SERVICES
CORPORATION
/s/ John L. Castello______ /s/ Bill Funcannon______
John L. Castello Bill Funcannon
Chairman of the Board, President
President and Chief
Executive Officer
The Van Ness 1983 Revocable
Trust
/s/ W. Denman Van Ness /s/ W. Denman Van Ness
W. Denman Van Ness W. Denman Van Ness
Trustee
Exhibit 24.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent
to the incorporation by reference in this Registration State-
ment of our reports dated February 3, 1995 included in XOMA
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994 and to all references to our Firm included in
this Registration Statement.
ARTHUR ANDERSEN LLP
San Francisco, California,
September 26, 1995
[MARSHALL, O'TOOLE, GERSTEIN,
MURRAY & BORUN LETTERHEAD]
September 28, 1995
Board of Directors
XOMA Corporation
2910 Seventh Street
Berkeley, CA 94710
Re: Registration Statement on Form S-3
Gentlemen:
Marshall, O'Toole, Gerstein, Murray & Borun hereby consents
to the disclosure of our relationship as patent counsel to XOMA Corpo-
ration (the "Company") in the Company's Post-Effective Amendment No. 1
to the Registration Statement on Form S-3 (Amendment No. 1), and in
particular the references to us under the headings "Risk Factors - No
Assurance of Patent Protection/Avoidance of Patent Infringement," and
to the filing of this consent as an exhibit to Amendment No. 1.
Very truly yours,
/s/ Jeffrey S. Sharp________
Marshall, O'Toole, Gerstein,
Murray & Borun
