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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995 COMMISSION FILE NO.
0-14710
XOMA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS
CHARTER)
DELAWARE 94-2756657
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
2910 SEVENTH STREET,
BERKELEY, CALIFORNIA 94710
(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA
CODE:
(510) 644-1170
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE
ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE
ACT:
COMMON STOCK, $.0005 PAR VALUE
PREFERRED STOCK PURCHASE RIGHTS
Indicate by check mark whether the registrant (1) has
filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the
registrant was required to file such reports), and (2) has been
subject to such
filing requirements for the past 90 days. Yes X No
-- --
Indicate by check mark if disclosure of delinquent filers
pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained,
to the best of registrant's knowledge, in definitive proxy or
information
statements incorporated by reference in Part III of this Form 10-K
or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by
nonaffiliates of the
registrant, as of February 29, 1996: $114,627,723.
Number of shares of Common Stock outstanding as of
February 29, 1996:
28,312,868.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Company's Proxy Statement for the
Company's 1996 Annual
Meeting of Stockholders are incorporated by reference into Part III
of this
Report.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
XOMA Corporation ("XOMA" or the "Company") is a
biopharmaceutical company
developing products for the treatment of infectious
diseases and major
complications due to infections, traumatic injury and surgery.
The Company's
current product development programs include:
o Neuprex(TM), a recombinantly-derived fragment of
human
bactericidal/permeability-increasing protein ("BPI")
and XOMA's
lead BPI product, which is currently in efficacy
clinical trials
for four different indications.
o I-PREX(TM), a proprietary topical formulation of BPI
for the
treatment of ophthalmic disorders, which is
undergoing preclinical
testing as a treatment for corneal ulcerations and
transplants.
o Mycoprex(TM), a potent fungicidal peptide compound
derived from
BPI that is currently in preclinical product
development.
o E5(R), XOMA's monoclonal antibody product, which is
in a Phase III
trial in the United States as a treatment for
gram-negative sepsis
and has been submitted for approval in Japan as a
treatment for
endotoxemia.
PRODUCT AREAS
The following describes XOMA's significant therapeutic
product
development and clinical activities:
The BPI Product Platform
The Company's current programs are primarily focused on
the development
of therapeutic products derived from BPI. BPI is a
naturally-occurring human
host- defense protein found in white blood cells (neutrophils). BPI
kills
bacteria, apparently by permeating bacterial cell walls. It also
neutralizes
poisonous endotoxins produced on the surface of gram-negative
bacteria, which
can trigger severe complications in infected patients. Furthermore,
BPI inhibits
angiogenesis (growth of new blood vessels) by binding to heparin,
a natural
protein involved in blood vessel formation.
XOMA scientists developed a modified recombinant fragment
of the BPI
molecule, called rBPI21, which is potent and stable and can be
manufactured in
commercially viable quantities. This fragment is the basis for the
Company's
Neuprex(TM) product.
In December 1992, XOMA submitted an investigational new
drug
application ("IND") to the U.S. Food and Drug Administration
("FDA") to begin
Phase I human testing of Neuprex(TM). In March 1993, the Company
initiated human
safety and pharmocokinetic testing under the IND. In mid-1995, the
Company
initiated three clinical efficacy trials testing the Neuprex(TM)
product as a
treatment for bacterial endotoxin-related conditions. A fourth
trial started in
the first quarter of 1996.
XOMA has an agreement with New York University ("NYU")
relating to its
rBPI products. See "Research and License Agreements." In March
1993, the U.S.
Patent and Trademark Office ("Patent Office") issued a patent
related to BPI to
NYU, and the Company is the exclusive licensee of this patent. The
Company is
aware of an agreement between Genentech Inc. ("Genentech") and
Incyte
Pharmaceuticals Inc. ("Incyte") pursuant to which Incyte claims to
hold
worldwide rights to all Incyte and Genentech technology related to
BPI and
through which Genentech will receive a royalty on Incyte's BPI
product sales.
Between 1992 and 1994, the Patent
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Office issued five patents related to BPI to Incyte. Based
on the opinion
of its patent counsel, Marshall, O'Toole, Gerstein, Murray &
Borun, the Company
believes that it does not infringe any valid claims of any
of the Incyte
patents. See "Patents and Trade Secrets."
Neuprex(TM)
In the second quarter of 1995, XOMA started three clinical
trials
evaluating Neuprex(TM) as a treatment for bacterial
endotoxin-related
conditions.
The indications are:
o Meningococcemia: a potentially deadly bacterial
infection that
usually afflicts children, characterized by extremely
high
endotoxin levels.
o Hemorrhagic trauma: accidents or injuries that cause
acute blood
loss may trigger serious complications, possibly from
translocation of endotoxin or endotoxin-carrying
bacteria from the
gastrointestinal tract into the bloodstream.
o Partial hepatectomy: surgical removal of part of the
liver,
usually to remove an isolated tumor. Since the liver
clears
endotoxin, the resulting temporarily impaired liver
function can
lead to endotoxin- related complications.
In the first quarter of 1996, the Company started a fourth
clinical
trial for Neuprex(TM) to be used with conventional antibiotics in
the treatment
of severe intra-abdominal infections, including those caused by
antibiotic-resistant organisms.
I-PREX(TM)
XOMA has developed a proprietary topical formulation of
rBPI21 for the
treatment of ophthalmic infections. Although standard antibiotics
fight
bacterial infections, they do not inhibit the growth of new blood
vessels in the
cornea associated with eye infections. This neovascularization can
lead to
scarring and permanently impaired vision. In preclinical testing,
the I-PREX(TM)
product has shown anti-infective and anti-angiogenic (inhibition of
blood vessel
growth) properties in the treatment of corneal injury and
associated infection.
The use of I-PREX(TM) to treat corneal ulcers and other corneal
diseases could
eliminate the need for therapies, such as those with
corticosteroids, which have
undesirable side effects.
Mycoprex(TM)
XOMA scientists discovered that certain peptide sequences
derived from
BPI displayed potent fungicidal activity. Further research
demonstrated that
many of these compounds not only killed strains of Candida, the
most common
fungi to cause systemic illness, but also showed activity against
other strains
of fungi including fungi resistant to the currently available
drugs.
Based on these findings, the Company has initiated a
program to screen
for compounds with a broad spectrum of potent fungicidal activity
and a better
safety profile than currently-available fungicidals. The Company
has selected a
lead antifungal compound and several alternates and has moved them
from the
research phase into product development.
E5(R) Monoclonal Antibody Product
The term sepsis is commonly used to describe a severe
systemic
inflammatory response by the body's immune system to invasion by
bacteria.
Sepsis can be a complication of many different underlying causes,
including
infections, cancer, trauma, massive blood loss and surgery.
Gram-negative sepsis refers to sepsis caused by infection
by
gram-negative bacteria. Gram-negative bacteria are distinctive
because their
cell walls contain endotoxin (lipopolysaccharide or LPS), a
chemical that can
trigger the
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inflammatory cascade that leads to sepsis. Thus, sepsis could be
thought of as late-stage endotoxin poisoning.
XOMA's product for the treatment of gram-negative sepsis,
E5(R), is a
murine monoclonal antibody that neutralizes the effects of
endotoxin. XOMA has
completed several clinical trials of E5(R), including two
randomized,
double-blind, placebo-controlled, multi-center Phase III studies
involving
nearly 1300 patients. In March 1989, XOMA filed a Product License
Application
("PLA") for FDA licensure of E5(R). In September 1991, an FDA
advisory committee
heard E5(R) data presentations but made no recommendations
regarding the safety
or efficacy of the product. In June 1992, 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 began with narrower entry
criteria than the
previous trials. The trial is being managed and co-funded by Pfizer
Inc.
("Pfizer"). In December 1995, an independent Data Safety Monitoring
Board
("DSMB") completed the first of two planned interim analyses for
this trial.
The data were not disclosed to XOMA or to Pfizer. The DSMB found no
evidence
suggesting safety concerns and concluded that the results met
predetermined
criteria for continuing the trial. There can be no assurance that
the
continuing trial will yield data that will result in licensure of
E5(R) in the
U.S. See "Development and Marketing Arrangements."
In October 1993, Pfizer submitted an application for
approval to market
E5(R) for endotoxin reduction to regulatory authorities in Japan.
There can be
no assurance that such application will be approved. See
"Development and
Marketing Arrangements".
Genimune(TM)
XOMA believes there is potential for the use of a T
lymphocyte-targeted
product in autoimmune disease therapy. For several years, the
Company developed
and evaluated several proprietary variants of
genetically-engineered proteins
and targeted immunofusions ("TIF"). In mid-1993 the Company
selected a lead
immunofusion compound and named it Genimune(TM). In December 1993,
XOMA entered
into cross-license agreements with Research Development Foundation
concerning
recombinant DNA-derived gelonin ("r-gelonin"), a plant-derived
enzyme that is a
component of the Company's TIF program. In the fourth quarter of
1994, XOMA
terminated further internal development of Genimune(TM) and is
attempting to
outlicense the product. See "Research and License Agreements."
Additional Product Areas
XOMA continues to review alternatives to realize value
from products
and technologies outside the scope of its core research efforts,
including
immunoconjugates, immunofusions, bacterial and mammalian expression
technology,
osteoinductive proteins for bone repair, and non-cariogenic
proteins for low-
calorie flavor enhancement. Several licenses and sublicenses have
been entered
into in these areas, and discussions are ongoing with various other
entities
that have expressed interest in these products and technologies. No
assurance
can be given that any agreement or agreements will be reached as a
result of the
ongoing discussions.
MANUFACTURING
XOMA is currently producing its Neuprex(TM) product for
clinical and
toxicological testing needs at its Berkeley and Santa Monica
facilities,
pursuant to a drug manufacturing license obtained from the State of
California.
The Company's E5(R) manufacturing facilities are located in
Berkeley,
California.
The Company's manufacturing capabilities include:
recombinant
technology- based production; the purification of monoclonal
antibodies; the
isolation and purification of cytotoxic enzymes and their
fragments; the
conjugation of monoclonal antibodies to such enzymes and/or
fragments to form
immunoconjugates; the formulation of pharmaceutical products for
final sterile
filling and finishing; and the capacity to do small-scale filling.
FDA licensure
of XOMA's
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manufacturing facilities will be required prior to any commercial
use or sale of
Neuprex(TM), E5(R) or any other product.
XOMA obtains the unpurified ascites containing the
monoclonal
antibodies used in its E5(R) product from a single supplier,
Charles River
Laboratories ("CRL"), which has multiple manufacturing sites. XOMA
and CRL
entered into a supply agreement in February 1989 and renewed the
agreement in
October 1991, committing CRL to supply and the Company to purchase
its
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 FDA. If the Company must obtain ascites from other
sources,
including its own facilities or a different facility of the same
supplier,
regulatory licensure of such other sources will be required.
Although XOMA
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
relating to
E5(R).
Pfizer currently sterile-fills, packages and distributes
E5(R) at a
manufacturing plant in Brooklyn, New York. FDA licensure of this
facility and
the related process also is required. In the future, Pfizer may
carry out some
or all of the manufacturing processes for the production of the
purified bulk
E5(R) intermediate product, supplementing XOMA's current
manufacturing capacity.
If so, additional FDA licensure would be required.
During December 1991 and January 1992 XOMA, CRL and Pfizer
facilities
were inspected for licensure by the FDA with respect to E5(R) and
XOMA believes
that there are no major manufacturing issues outstanding. Such
licenses are
currently pending and will not be finalized unless and until E5(R)
has been
approved for sale.
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 pharmaceutical products are
uncertain, there
can be no assurance that the inventories of raw materials and
intermediates will
be usable. In connection with its October 1992 restructuring, the
Company
established a $6.0 million reserve for a portion of its E5(R)
inventory and
recorded a $2.5 million charge to earnings for future idle
manufacturing
capacity. The Company increased the reserve to $6.9 million in 1993
and to $11.1
million in 1995 to cover the entire value of the inventory.
DEVELOPMENT AND MARKETING ARRANGEMENTS
The Company has developed a strategy of entering into
arrangements with
established pharmaceutical company partners in order to facilitate
and help fund
the development and marketing 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.
Neuprex(TM)
The Company has engaged an investment banking firm to
assist it in
completing one or more strategic alliances with respect to its
Neuprex(TM)
product. The Company cannot predict whether or when any such
alliance(s) will be
consummated.
E5(R) Monoclonal Antibody Product
In June 1987, XOMA and Pfizer entered into agreements
relating to a
potentially wide range of monoclonal antibody-based products for
the treatment
of gram-negative sepsis. XOMA believes that Pfizer's
marketing force and
experience in the development and marketing of anti-infective
products, which
are expected to be used in conjunction with E5(R), make Pfizer a
strong partner
and will contribute to the effective marketing of E5(R). The
agreements provide
Pfizer
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with exclusive rights to E5(R) in exchange for funding of certain
clinical and development activities. In January 1994, the territory
covered by
the agreements was redefined to include only the countries of Japan
and the
United States. Pfizer paid XOMA an initial license fee and has made
payments
based on development progress. XOMA is reimbursed for manufacturing
costs and
will receive a portion of the gross profits obtained from any sales
on a formula
basis. 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. The
agreements can be
canceled with appropriate notice upon reimbursement by Pfizer of
certain of
XOMA's research and development expenses. XOMA has granted a
security interest
to Pfizer in assets related to its E5(R) program to secure
performance of XOMA's
obligations under the agreements under certain conditions,
including bankruptcy.
In the third quarter of 1995, XOMA and Pfizer agreed to modify the
funding
arrangement of the current E5(R) clinical trial and the payment
terms relating
to certain patent litigation costs (see Notes 1 and 6 to the
Financial
Statements). The Company believes that termination of its
relationship with
Pfizer could have a material adverse effect on its future revenues
and
prospects.
Other
From time to time, the Company reviews development
opportunities with
other biotechnology companies with a view toward providing process
scale-up,
regulatory and/or clinical services to them.
COMPETITION
The biotechnology and pharmaceutical industries are
subject to
continuous and substantial technological change. Competition 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 companies have
enhanced
their capabilities by entering into arrangements 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. Moreover,
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 processes competitive with or superior to those of the
Company. In
addition, a significant amount of research in biotechnology is
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.
Earlier in the 1990's, a number of corporations including
Centocor,
Inc., Synergen, Inc. and Chiron, Inc. discontinued development of
products (like
E5(R)) designed to treat gram negative sepsis. These actions may
have a material
adverse effect on the regulatory review of E5(R), and there can be
no assurance
that E5(R) will receive regulatory approval 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 is no assurance, however, that
products
currently unknown to the Company will not prove to be more
effective than or
receive regulatory approval prior to E5(R).
In addition, it is possible that Incyte or some other
company is
developing one or more products based on BPI, and there can be no
assurance that
such product(s) will not prove to be more effective than
Neuprex(TM).
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REGULATORY PROCESS
XOMA's products are subject to rigorous preclinical and
clinical
testing requirements and to approval processes by FDA and similar
authorities 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
regulation by the FDA Center for Biologics Evaluation and Research.
Approval of
a biologic for commercialization requires licensure of the product
and the
manufacturing facilities.
The FDA regulatory process is carried out in several
phases. Prior to
beginning clinical testing of a proposed new biologic product, an
IND is filed
with FDA. This document contains scientific information on the
proposed product,
including results of testing of the product in animal and in vitro
models. Also
included is information on manufacture of the product and studies
on toxicity in
animals, and a clinical protocol outlining the initial
investigation in humans.
The initial stage of clinical testing, Phase I, ordinarily
encompasses
safety, pharmacokinetics and pharmacodynamic evaluations. Phase II
testing
encompasses investigation in specific disease states designed to
provide
preliminary efficacy data and additional information on safety.
Phase III
studies are designed definitively to document clinical safety and
efficacy and
to provide information allowing proper labelling of the product
following
approval. Phase III studies are most commonly multicenter,
randomized, placebo-
controlled trials in which rigorous statistical methodology is
applied to
clinical results. Other designs are also appropriate in specific
circumstances.
Following completion of clinical trials, a PLA is
submitted to FDA to
request marketing approval. For biologic products, an internal FDA
committee is
formed which evaluates the application, including scientific
background
information, animal and in vitro efficacy studies, toxicology,
manufacturing and
control and clinical data. Concurrently with the filing of the PLA,
an
establishment license application is filed which describes in
detail the
manufacturing facility, personnel, procedures and equipment used in
the
manufacture of the product. During the review process, a dialogue
between FDA
and the applicant is established during which FDA questions on both
applications
are raised and additional information is submitted. During the
final stages of
the approval process, FDA generally requests presentation of
clinical or other
data before an FDA advisory committee. Also, during the later
stages of review,
FDA conducts an inspection of the manufacturing facility to
establish that the
product is made in conformity with good manufacturing practice. If
all
outstanding issues are satisfactorily resolved and labelling
established, FDA
issues licenses for the product and for the manufacturing facility,
thereby
authorizing commercial distribution.
In March 1989, XOMA filed a PLA for approval of E5(R), a
monoclonal
antibody product, for the treatment of gram-negative sepsis. FDA
responded to
the PLA with a request for additional information, including
clinical data. XOMA
made a further submission and met and corresponded with the FDA on
relevant
matters. In September 1991, an FDA advisory committee heard E5(R)
data
presentations but made no recommendations regarding the safety or
efficacy of
the product. In June 1992, 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 began with narrower entry criteria than the
previous
trials. The trial is being managed and co-funded by Pfizer Inc.
There can be no
assurance that the continuing trial will yield data that will
result in
licensure of E5(R) in the U.S. See "Product Areas--E5(R) Monoclonal
Antibody
Product" and Note 1 to the Financial Statements.
In December 1991 and January 1992 the manufacturing
facility for E5(R)
was inspected for licensure by FDA. XOMA believes there are no
major
manufacturing issues outstanding. The license is currently pending
but will not
be finalized unless and until the relevant product has been
approved for sale.
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In December 1992, the Company filed an IND with FDA to
begin Phase I
human testing of its Neuprex(TM) product and, in March 1993, began
the testing.
Three randomized, double-blind, placebo-controlled Phase I studies
have been
completed and three Phase II efficacy studies were initiated in
1995. See
"Product Areas--Neuprex(TM)". Other potential XOMA products will
require
significant additional development, including extensive clinical
testing. There
can be no assurance that any of the products under development by
the Company
will be developed successfully, obtain the requisite regulatory
approval or be
successfully manufactured or marketed.
FDA has substantial discretion in the product approval
process and it
is not possible to predict at what point, or whether, FDA will be
satisfied with
the Company's submissions or whether FDA will raise questions which
may delay or
preclude product approval. As additional clinical data are
accumulated, they
will be submitted to FDA and may have a material impact on the FDA
product
approval process. Given that regulatory review is an interactive
and continuous
process, the Company has adopted a policy of limiting announcements
and comments
upon the specific details of the ongoing regulatory review of its
products,
subject to its obligations under the securities laws, until
definitive action is
taken.
PATENTS AND TRADE SECRETS
As a result of its ongoing activities, the Company holds
and is in the
process of applying for a number of patents in the United States
and abroad to
protect its products and important processes. The Company also has
obtained or
has the right to obtain exclusive licenses to certain patents and
applications
filed by others. However, the patent position of biotechnology
companies
generally is highly uncertain and no consistent policy regarding
the breadth of
allowed claims has emerged from the actions of the Patent Office
with respect to
biotechnology patents. Accordingly, no assurance can be given that
the Company's
patents will afford protection against competitors with similar
technologies, or
that others will not obtain patents claiming aspects similar to
those covered by
the Company's patent applications.
During the period from September 1994 to February 1996,
the Patent
Office issued nine patents to the Company related to its BPI-based
products,
including novel compositions, their manufacture, formulation, assay
and use. The
Patent Office issued to the Company U.S. Patent No. 5,420,019 in
May 1995 which
is directed to novel recombinant amino-terminal fragments and
fragment analogs
of BPI and methods for their recombinant production. The Company
believes that
this patent will provide comprehensive protection for the
manufacture, use and
sale of its BPI-derived Neuprex(TM) and I-PREX(TM) products in the
U.S. In
September 1995, the Patent Office issued U.S. Patent No. 5,447,913
which
addresses novel pharmaceutical compositions of dimeric BPI protein
products,
including rBPI42, with enhanced biological activities.
In addition to such composition patents, U.S. Patent No.
5,439,807
issued to the Company in August 1995 addresses improved
manufacturing methods
for the Company's BPI-related products and U.S. Patent No.
5,488,034 issued to
the Company in January 1996 describes novel pharmaceutical
formulations of
BPI-based protein products, including the Company's Neuprex(TM)
product
formulation. The Company's first two diagnostic assay patents, U.S.
Patent Nos.
5,466,580 and 5,466,581, were issued in November 1995 and describe
methods for
quantifying BPI levels in blood as well as screening methods for
detecting
increased levels of BPI in septic patients. The Company's third
diagnostic assay
patent, U.S. Patent No. 5,484,705, was issued in January 1996
directed to
methods of measuring levels of lipopolysaccharide-binding protein
("LBP")
elevated in humans as a specific response to bacterial endotoxin
exposure.
In addition to such composition, manufacturing,
formulation and assay
patents, the Company has been issued two patents related to
therapeutic uses of
BPI-derived proteins. In September 1994, U.S. Patent No. 5,348,942
was issued
addressing the use of BPI protein products for neutralizing
anti-coagulant
effects of heparin. In February 1996, the Patent Office issued
U.S. Patent
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No. 5,494,896 directed to methods of treating burn injuries with
BPI protein
products.
In addition to the nine BPI-related U.S. patents issued to
the Company,
the Company is the exclusive licensee of three BPI-related patents
owned by NYU.
In March 1993, the Patent Office issued to NYU U.S. Patent No.
5,198,541 (the
"'541 patent") which contains claims covering the recombinant
production of BPI.
The Company believes the '541 patent has substantial value because
it covers
certain production methodologies that allow production of
commercial-scale
quantities of BPI for human use. In February 1996, the Patent
Office issued U.S.
Patent No. 5,489,676 to NYU, relating to the discovery of novel
polypeptides
that potentiate BPI's ability to kill gram-negative bacteria. In
May 1995, the
European Patent Office granted to NYU, EP 375724, with claims to
N-terminal BPI
fragments and their use, alone or in combination with antibiotics,
for the
treatment conditions associated with bacterial infections. This
patent is the
first and only BPI-related patent that has been granted to date in
Europe.
The Company has also received four more U.S. Notices of
Allowance and
has more than twenty pending patent applications for its BPI-based
products.
The Company is aware of an agreement between Genentech and
Incyte
pursuant to which Incyte claims to hold worldwide rights to all
Incyte and
Genentech technology related to BPI and through which Genentech
will receive a
royalty on Incyte's BPI product sales. Between 1992 and 1994, the
Patent Office
issued five patents related to BPI to Incyte. Based on the opinion
of its patent
counsel, Marshall, O'Toole, Gerstein, Murray & Borun, the Company
believes that
it does not infringe any valid claims of any of the Incyte patents.
The Company is the exclusive licensee of U.S. Patent No.
4,918,163 (the
"`163 Patent"), issued to The Regents of the University of
California in April
of 1990. The `163 Patent relates to a method of treating
gram-negative bacterial
infection using certain anti-endotoxin monoclonal antibodies. On
the date of
issuance, the Company filed suit against Centocor alleging
infringement of the
`163 Patent. Effective July 28, 1992, the Company, Centocor and all
other
interested parties resolved all outstanding litigation and disputes
worldwide
regarding products, patents and patent applications related to
anti-endotoxin
monoclonal antibodies by consent judgements which held the `163
Patent valid and
infringed by Centocor. Centocor has agreed to pay royalties to XOMA
for any
United States sales of its monoclonal antibody HA-1A, and the
companies have
agreed to forego all future litigation and administrative
proceedings regarding
certain of each other's patents and patent applications related to
anti-endotoxin monoclonal antibodies. In March, 1993, Centocor
announced the
cancellation of the Phase III trial of its HA-1A product.
If certain patents issued to others are upheld or if
certain patent
applications filed by others issue and are upheld, 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.
RESEARCH AND LICENSE AGREEMENTS
XOMA has contracted with a number of academic and
institutional
collaborators to conduct certain research and development. Under
these
agreements the Company generally funds either the research and
development or
evaluation of products, technologies or both, will own or obtain an
exclusive
license to products or technologies developed, and will pay
royalties on sales
of products covered by the license. The rates and durations of such
royalty
payments vary by product and institution, and range generally for
periods from
five years to indefinite duration. Aggregate expenses of the
Company under all
of its research agreements totalled $0.4 million, $0.4 million, and
$0.8 million
in 1995, 1994, and 1993, respectively. The Company has entered into
certain
license agreements with respect to the following products:
-9-
<PAGE>
Bactericidal/Permeability Increasing Protein
In August 1990, XOMA entered into a research collaboration
and license
agreement with NYU whereby XOMA obtained an exclusive license to
patent rights
for DNA materials and genetic engineering methods for the
production of BPI and
fragments thereof. BPI is part of the body's natural defense
against gram-
negative bacteria and XOMA is exploring the use of its Neuprex(TM)
and
I-PREX(TM) products, based on BPI, for various indications. XOMA
has obtained an
exclusive, worldwide license for the development, manufacture, sale
and use of
BPI products for human therapeutic and diagnostic uses, and it has
paid a
license fee and will make milestone payments and pay royalties to
NYU on the
sale of such products. The license becomes fully-paid upon the
later of the
expiration of the relevant patents or fifteen years after the first
commercial
sale, subject to NYU's right to terminate for certain events of
default.
E5(R) Monoclonal Antibody Product
In September 1986, XOMA obtained from the University of
California an
exclusive license to several monoclonal antibody cell lines related
to virulence
factors of gram-negative bacteria. One of these monoclonal
antibodies is being
used in the Company's E5(R) anti-endotoxin product described
herein. The Company
has entered into an exclusive, worldwide license agreement for this
product
which provides for the payment of royalties on sales of products
utilizing this
antibody. The license becomes fully paid upon the later of the
expiration of
relevant patents or ten years after the first commercial sale,
subject to the
University's right to terminate the license for certain events of
default.
Recombinant Technology
XOMA has obtained licenses under certain Stanford
University and
University of California patents relating to certain basic
processes of
recombinant DNA technology. The Stanford agreement provides that
the Company
will pay an annual fee and both agreements provide for royalties on
sales of
products should processes used in making those product(s) come
under the
licensed patents.
EMPLOYEES
As of December 31, 1995 XOMA employed 129 full-time
employees at its
Berkeley and Santa Monica, California facilities. The Company's
employees are
engaged in clinical, manufacturing, quality assurance and control,
research and
product development activities, and in executive, finance and
administrative
positions. The Company considers its employee relations to be
excellent.
The principal executive offices of XOMA are located at
2910 Seventh
Street, Berkeley, California 94710 (telephone 510-644-1170).
ITEM 2. PROPERTIES
XOMA's principal product development and manufacturing
facilities are
located in Berkeley, California. The Company leases 98,000 square
feet of space
including approximately 35,000 square feet of research and
development
laboratories, 32,000 square feet of production and production
support facilities
and 16,000 square feet of office space. The Company subleased
14,000 square feet
of office space as a result of the restructing. An additional
16,500 square foot
production facility was completed and purchased by XOMA during
1992. A decision
was made during the third quarter of 1995 to dispose of this
facility.
XOMA also maintains offices, laboratories and a
manufacturing facility
occupying approximately 15,000 square feet in leased space in Santa
Monica,
California. An additional 6,000 square foot facility for scale-up
of the
Neuprex(TM) product was completed in May 1993. The Company also
owns an
approximately 6,750 square foot parking lot in Santa Monica.
-10-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
In June 1992, the Company and one of its officers were
named in a
securities class action lawsuit entitled Warshaw et al. v. XOMA
Corporation, et
al. filed in the United States District Court for the Northern
District of
California. The suit alleges that the Company failed to adequately
disclose
information related to FDA review of the Company's application for
a license to
market its E5(R) product for the treatment of gram-negative sepsis.
The suit
seeks unspecified damages for alleged violations of Section 10(b)
of the
Securities Exchange Act of 1934. After permitting plaintiffs to
amend their
complaint three times, the District Court granted defendants'
motion to dismiss
the third amended complaint with prejudice by Memorandum and Order
dated June
23, 1994. Plaintiffs filed appeals with the U.S. Court of Appeals
for the Ninth
Circuit on July 22 and 26, 1994. On January 25, 1996, the Court of
Appeals
reversed the District Court and remanded the case to the District
Court for
further proceedings, finding that the allegations of the
plaintiffs' third
amended complaint were sufficient to withstand a motion to dismiss.
Defendants
filed a petition for rehearing and suggestion for rehearing en banc
on February
8, 1996. On February 16, 1996, the Court of Appeals requested that
plaintiffs
file a response to defendants' petition for rehearing, which
plaintiffs filed on
March 1, 1996. The Court of Appeals has not yet ruled on the
petition for
rehearing. The Company maintains that all material information
related to FDA
review of its application to market E5(R) had been publicly
disclosed on a
timely basis, and that neither the Company nor the officer named
engaged in any
wrongdoing. The Company believes that the allegations contained in
the suit are
without merit, and it intends to defend against the suit
vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
OFFICERS
The officers of the Company are as follows:
NAME AGE TITLE
John L. Castello 59 Chairman of the Board,
President
and Chief Executive
Officer
Patrick J.
Scannon, M.D., Ph.D. 48 Chief Scientific and
Medical Officer
and Director
Clarence L. Dellio 49 Senior Vice President,
Operations
Peter B. Davis 49 Vice President, Finance
and Chief Financial
Officer
Marvin J. Garrett 45 Vice President, Clinical
and
Regulatory Affairs
Christopher J. Margolin 49 Vice President, General
Counsel and
Secretary
W. C. McGregor, Ph.D. 54 Vice President,
Technical
Development and
Santa Monica
Operations
-11-
<PAGE>
Officers serve at the discretion of the Board of
Directors. There is no
family relationship among any of the officers or directors.
-12-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades in the over-the-counter
market on the
National Association of Securities Dealers, Inc. Automated
Quotation System
National Market ("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
periods indicated.
<TABLE>
<CAPTION>
Price
Range
- - -----------------------
High
Low
<S> <C>
<C>
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 4-1/4
1-11/16
Fourth Quarter 4-1/8
1-7/8
1996:
First Quarter (through February 29, 1996) $5-3/4
$3-3/8
</TABLE>
On February 29, 1996, there were approximately 2,636
record holders of
XOMA's Common Stock.
The Company has not paid dividends on its stock. The
Company currently
intends to retain any earnings for use in the development and
expansion of its
business. The Company, therefore, does not anticipate paying cash
dividends in
the foreseeable future (see Note 4 to the Financial Statements,
"CAPITAL
STOCK").
-13-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table contains selected financial
information including
income statement and balance sheet data of XOMA for the years 1991
through 1995.
The selected financial information has been derived from the
audited Financial
Statements of XOMA. The selected financial information should be
read in
conjunction with the Financial Statements and notes thereto set
forth beginning
on page 21 of this report, and "Management's Discussion and
Analysis of
Financial Condition and Results of Operations" contained in Item 7
below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- - ----------------------------------------------------
1995 1994 1993 1992
1991
---- ---- ---- ----
----
<S> <C> <C> <C> <C>
<C>
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
STATEMENT OF
OPERATIONS DATA
Total revenues $ 1,165 $ 1,729 $ 571 $
5,105 $ 17,140
Total operating
costs and
expenses(1) 27,469 38,460 35,259
53,999 58,400
Other income, net(2) 3,832 2,104 3,381
1,802 6,918
-------- -------- --------
- - -------- --------
Net loss $(22,472) $(34,627) $(31,307)
$(47,092) $(34,342)
======== ======== ========
======== ========
Net loss per share $ (0.95) $ (1.58) $ (1.46) $
(2.20) $ (1.77)
======== ======== ========
======== ========
BALANCE SHEET DATA
Cash(3) $ 26,405 $ 39,650 $ 70,246 $
83,413 $124,289
Total assets 40,878 62,429 94,131
109,269 154,289
Long-term debt (4) 7,692 120 425
1,054 1,503
Accumulated deficit (307,905) (284,847) (249,439)
(218,132) (171,040)
Stockholders' equity 26,836 43,461 78,397
88,473 134,456
<FN>
(1) In 1994, includes $2.5 million related to employee
termination benefits
associated with a restructuring and in 1992, includes
$10.0 million
related to an E5(R) inventory write-down, idle capacity
and personnel
costs associated with an earlier restructuring.
(2) Other income in 1995 principally consists of interest
income ($1.9
million), gain on write-down of a litigation accrual ($8.5
million),
loss on write-down of E5(R) inventory ($4.2 million), and
a loss on
write-down of certain fixed assets ($2.4 million), which
are being held
for sale.
(3) Includes cash, cash equivalents, and short-term
investments.
(4) Excludes current portion. In 1995, includes $6.5 million
aggregate
principal amount of convertible debentures due 1998. As of
February 29,
1996, $3.3 million aggregate principal amount of the
convertible
debentures had been converted into 992,205 shares of
Common Stock.
</TABLE>
-14-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
XOMA is a biopharmaceutical company engaged in the
development of
products for the treatment of infections and complications from
traumatic injury
and surgery. The Company is developing its Neuprex(TM) product for
the treatment
of gram-negative infections and bacterial endotoxin-related
complications. Other
BPI-derived products are in development, such as I-PREX(TM), for
treating
ophthalmic infections and disorders, and Mycoprex(TM), for treating
systemic
fungal infections. The Company's monoclonal antibody product,
E5(R), is in
clinical testing in the United States as a treatment for
gram-negative sepsis,
and has been submitted for approval in Japan as a treatment for
endotoxemia.
In December 1994, XOMA restructured its operations to
reduce costs and
focus on the development of its portfolio of advanced products.
Under the
restructuring, XOMA's work force was reduced at its facilities in
Berkeley and
Santa Monica, California. Although the restructuring will preserve
the functions
essential to the development of Neuprex(TM) and certain other
products derived
from BPI, several research programs with longer lead times and a
need for
substantial funding were curtailed or eliminated.
The Company incurred a net loss in each of the past three
years and is
expected to continue to operate at a loss at least until regulatory
approval and
commencement of commercial sales of its products occurs. However,
the timing of
product approvals is uncertain and there can be no assurance that
approvals will
be granted or that revenues from product sales will be sufficient
to attain
profitability.
REVENUES
Total revenues were $1.2 million in 1995, $1.7 million in
1994, and
$0.6 million in 1993. Revenues for 1995 and 1994 included $0.8
million and $1.4
million respectively in partial consideration for the sale of the
Company's
T-cell receptor ("TCR") technology.
Since it is not possible to predict when or whether it
will receive
regulatory approval for its products, the Company has established
a reserve of
$11.1 million for its entire E5(R) inventory.
COSTS AND EXPENSES
Due to the regulatory status of the Company's E5(R)
product, there has
been no significant production of this product, from 1993 through
1995.
In 1995, research and development expenses decreased by
$5.2 million
from 1994 expenses, which were $0.4 million above 1993 expenses.
The 1995
decrease was due primarily to the restructuring at the end of 1994.
The 1994
increase was due primarily to the cost of BPI toxicology studies,
partially
offset by lower personnel, supplies and outside research costs.
General and administrative expenses decreased by $3.3
million in 1995
primarily due to the effect of the 1994 restructuring. The $0.5
million increase
of 1994 over 1993 was principally the result of additional
corporate salaries
and overhead related to Neuprex(TM) and Genimune(TM) project
management.
In the fourth quarter of 1994, the Company recorded a $2.5
million
charge for the cost of termination benefits related to the
restructuring of
operations to reduce costs and to accelerate development of
Neuprex(TM) and the
other products derived from BPI.
Investment income decreased by $0.2 million in 1995
compared with 1994
and by $1.4 million in 1994 compared with 1993 due primarily to
lower average
investment balances partially offset by higher interest rates.
-15-
<PAGE>
During the third quarter of 1995, XOMA reached an
agreement with Pfizer
to amend the cost sharing arrangement for the current ongoing Phase
III clinical
trial for the Company's E5(R) product and certain other matters.
This amendment
gives the Company the option to pay a reduced share of future costs
for this
trial, in return for reduced future royalty payments by Pfizer on
U.S. sales of
the product. The Company has also increased its reserves against
its E5(R)
inventories to provide a 100 percent reserve. Finally, the Company
made the
decision to attempt to sell its facility which was to be used for
the production
of its CD5 Plus(TM) product and has re-classified it for financial
reporting
purposes as an asset held for sale. The net result of these actions
was a
one-time gain recorded in Other Income/(Expense) of $1.9 million
($0.08 per
share).
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, and short-term investments
decreased by $13.2
million during 1995 primarily as a result of operating cash
requirements of
$24.6 million, and capital expenditures and lease payments of $0.8
million,
offset by $1.8 million from a sale and leaseback transaction, $5.9
million from
debt incurrence, and $4.5 million from the issuance of equity.
Cash used in operating activities was $24.6 million in
1995. This was
primarily due to the net loss of $22.5 million plus a $3.9 million
reduction in
accrued liabilities and an $8.5 million reduction in non-current
liabilities,
partially offset by a $4.2 million increase to inventory reserves,
$2.9 million
in charges for depreciation and amortization and a $2.4 million
valuation
reduction in certain fixed assets which have been re-classified as
property
held for sale. The $3.9 million reduction in accrued liabilities
included $2.3
million in payments for re-structuring costs recorded in 1994, and
a $2.0
million payment to Pfizer for previously recorded clinical trial
costs.
The reduction in non-current liabilities related to the elimination
of an $8.5
million litigation liability to Pfizer (see Notes 1 and 6 to the
Financial
Statements).
Capital expenditures totalled $0.3 million in 1995, $1.3
million in
1994 and $1.8 million in 1993. Included in 1994 and 1993 were
purchases of
research and manufacturing equipment and capital costs associated
with the
expansion of the Neuprex(TM) product manufacturing facilities in
Santa Monica
and Berkeley. In the near term, the Company intends to continue to
fund capital
expenditures from internal cash resources supplemented by capital
financing
where appropriate and available.
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
for a minimum
of one year. The Company continues to evaluate strategic alliances,
potential
partnerships, and financing arrangements which would further
strengthen its
competitive position and provide additional funding. The Company
has engaged an
investment banking firm to assist in completing one or more
strategic alliances
with respect to the Neuprex(TM) product. The Company cannot predict
whether or
when any such alliance(s) will be consummated or whether additional
funding will
be available when required.
Although operations are influenced by general economic
conditions, the
Company does not believe that inflation had a material impact on
revenues or
expenses for the periods presented. The Company believes it is not
dependent on
materials or other resources which would be significantly impacted
by inflation
or changing economic conditions in the foreseeable future.
-16-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the
registrant,
related notes, and report of independent public accountants are set
forth
beginning on page 21 of this report.
Report of Independent Public Accountants
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCING
DISCLOSURES
None.
-17-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The section labeled "Proposal 1 -- Election of Directors"
appearing in
the Company's proxy statement for the 1996 annual meeting of
stockholders is
incorporated herein by reference. Information concerning the
Company's executive
officers is set forth in Part I of this Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The section labeled "Executive Compensation" appearing in
the Company's
proxy statement for the 1996 annual meeting of stockholders is
incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The section labeled "Stock Ownership" appearing in the
Company's proxy
statement for the 1996 annual meeting of stockholders is
incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section labeled "Certain Transactions" appearing in
the Company's
proxy statement for the 1996 annual meeting of stockholders is
incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) List of documents filed as part of this Report.
(1) Financial Statements:
All financial statements of the
registrant referred
to in Item 8 of this Report on Form
10-K.
(2) Financial Statement Schedules:
All financial statements schedules have
been omitted
since the required information is
included in the
financial statements or the notes
thereto, or is not
applicable or required.
(3) Exhibits:
See "Index to Exhibits."
(b) Reports on Form 8-K.
None.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the
Securities Exchange Act of 1934, the registrant has duly caused
this report to
be signed on its behalf by the undersigned, thereunto duly
authorized, on this
14th day of March, 1996.
XOMA CORPORATION
By /s/ JOHN L. CASTELLO
- - -------------------------------
John L. Castello,
Chairman of the Board,
President
and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934,
this report 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
/s/ JOHN L. CASTELLO Chairman of the Board, President
March 14, 1996
- - ------------------------ and Chief Executive Officer
(John L. Castello) (Principal Executive Officer)
/s/ PATRICK J. SCANNON Chief Scientific and
March 14, 1996
- - ----------------------- Medical Officer and Director
(Patrick J. Scannon)
/s/ PETER B. DAVIS Vice President, Finance
March 14, 1996
- - ----------------------- and Chief Financial Officer
(Peter B. Davis) (Principal Financial and
Accounting Officer)
-19-
<PAGE>
SIGNATURE TITLE
DATE
/s/ JAMES G. ANDRESS Director
March 14, 1996
- - -----------------------
(James G. Andress)
/s/ WILLIAM K. BOWES, JR. Director
March 14, 1996
- - ------------------------
(William K. Bowes, Jr.)
/s/ ARTHUR KORNBERG Director
March 14, 1996
- - ------------------------
(Arthur Kornberg)
/s/ STEVEN C. MENDELL Director
March 14, 1996
- - ------------------------
(Steven C. Mendell)
/s/ W. DENMAN VAN NESS Director
March 14, 1996
- - ------------------------
(W. Denman Van Ness)
/s/ GARY WILCOX Director
March 14, 1996
- - -------------------------
(Gary Wilcox)
-20-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants..........
22
Balance Sheets....................................
23
Statements of Operations..........................
24
Statements of Stockholders' Equity................
25
Statements of Cash Flows..........................
26
Notes to Financial Statements.....................
27
-21-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To XOMA Corporation:
We have audited the accompanying balance sheets of XOMA
Corporation (a
Delaware corporation) as of December 31, 1995 and 1994 and the
related
statements of operations, stockholders' equity and cash flows for
each of the
three years in the period ended December 31, 1995. These financial
statements
are the responsibility of the Corporation's management. Our
responsibility is to
express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain
reasonable assurance about whether the financial statements are
free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes
assessing the accounting principles used and significant estimates
made by
management, as well as evaluating the overall financial statement
presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present
fairly, in all material respects, the financial position of XOMA
Corporation as
of December 31, 1995 and 1994, and the results of its operations
and its cash
flows for each of the three years in the period ended December 31,
1995 in
conformity with generally accepted accounting principles.
San Francisco, California ARTHUR
ANDERSEN LLP
February 14, 1996
-22-
<PAGE>
<TABLE>
<CAPTION>
XOMA CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
December 31
- - -----------------------------------------
1995
1994
----
----
<S> <C>
<C>
CURRENT ASSETS:
Cash and cash equivalents (Notes 1 and 2) $ 20,400
$ 3,576
Short-term investments (Note 2) 6,005
36,074
Notes receivable 2,205
--
Related party receivables (Note 8) 276
291
Interest and other receivables 384
565
Inventories (Note 1) --
4,170
Prepaid expenses and other 210
822
---------
---------
Total current assets 29,480
45,498
NON-CURRENT ASSETS:
Property and equipment, net (Note 1) 6,181
15,448
Assets held for sale 4,442
--
Deposits and other 775
1,483
---------
---------
$ 40,878
$ 62,429
=========
=========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,120
$ 1,415
Accrued liabilities (Note 1) 3,684
8,662
Capital lease obligations due in one year
(Note 6) 546
306
---------
---------
Total current liabilities 6,350
10,383
---------
---------
NON-CURRENT LIABILITIES:
Capital lease obligations due after one year
(Note 6) 1,192
120
Convertible Debentures 6,500
--
Other non-current liabilities (Note 1) --
8,465
---------
---------
Total non-current liabilities 7,692
8,585
---------
---------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (Notes 4 and 5):
Preferred Stock, $.05 par value, 1,000,000 shares
authorized, 7,807 and 15,615 outstanding
(liquidation preference $7,807 and $15,615) at
December 31, 1995 and 1994, respectively
(Notes 4 and 5) --
1
Common Stock, $.0005 par value, 40,000,000 shares
authorized, 27,303,186 outstanding at December 31,
1995 and 22,173,994 at December 31, 1994 14
11
Paid-in capital 334,727
328,296
Accumulated deficit (307,905)
(284,847)
---------
---------
Total stockholders' equity 26,836
43,461
---------
---------
$ 40,878
$ 62,429
=========
=========
</TABLE>
The accompanying notes are an integral part of these
financial
statements.
-23-
<PAGE>
<TABLE>
<CAPTION>
XOMA CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Years ended
December 31
- - ----------------------------------------------------------------
1995
1994 1993
----
- - ---- ----
<S> <C>
<C> <C>
REVENUES:
Product sales and royalties $ 87 $
202 $ 260
Research and development fees
(Notes 1 and 3):
Collaborative agreements --
136 311
License fees 1,078
1,391 --
---------
- - --------- ---------
Total revenues 1,165
1,729 571
---------
- - --------- ---------
OPERATING COSTS AND EXPENSES:
Cost of sales --
3 172
Research and development
(Notes 1 and 3) 22,086
27,284 26,909
General and administrative 5,383
8,673 8,178
Restructuring charge (Note 1) --
2,500 --
---------
- - --------- ---------
Total operating costs and expenses 27,469
38,460 35,259
---------
- - --------- ---------
Loss from operations (26,304)
(36,731) (34,688)
OTHER INCOME (EXPENSE):
Investment income 1,934
2,169 3,590
Other income and expense 1,898
(65) (209)
---------
- - -------- ---------
Net loss $ (22,472) $
(34,627) $ (31,307)
=========
========= =========
NET LOSS PER COMMON SHARE (Note 1) $ (0.95) $
(1.58) $ (1.46)
=========
========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 23,671
21,920 21,470
=========
========= =========
</TABLE>
The accompanying notes are an integral part
of
these financial statements.
-24-
<PAGE>
<TABLE>
<CAPTION>
XOMA CORPORATION
STATEMENTS OF
STOCKHOLDERS' EQUITY
(IN
THOUSANDS)
Common Stock
Preferred Stock Total
------------
- - --------------
Paid-in Accumulated Stockholders'
Shares Amount
Shares Amount Capital Deficit Equity
------ ------
- - ------ ------ ------- ------- ------
<S> <C> <C> <C>
<C> <C> >C> <C>
BALANCE, DECEMBER 31, 1992 21,470 $ 11 --
-- $306,594 $(218,132) $88,473
Amortization of deferred
compensation -- -- --
-- 296 -- 296
Exercise of warrants -- -- --
-- 2 2
Issuance of warrants (Note 5) -- -- --
-- 5,992 -- 5,992
Sale of preferred stock
(Note 4) -- -- 19
1 14,940 14,941
Net loss -- -- --
-- -- (31,307) (31,307)
------ ----- -----
---- ------- --------- --------
BALANCE, DECEMBER 31, 1993 21,470 11 19
1 327,824 (249,439) 78,397
Contributions to 401(k) and
management incentive
plans 55 -- --
-- 360 -- 360
Amortization of deferred
compensation -- -- --
-- 240 -- 240
Conversion of preferred
stock (Note 4) 649 -- (3)
-- -- -- --
Unrealized gain (loss) on
investments (Note 2) -- -- --
-- (128) -- (128)
Dividends on preferred
stock (Note 4) -- -- --
-- -- (781) (781)
Net loss -- -- --
-- -- (34,627) (34,627)
------- ---- -----
---- -------- --------- --------
BALANCE, DECEMBER 31, 1994 22,174 $ 11 16
$ 1 $328,296 $(284,847) $ 43,461
Exercise of stock options 25 -- --
-- 12 -- 12
Contributions to 401(k) and
management incentive plans 149 -- --
-- 434 -- 434
Sale of common stock 471 1 --
-- 717 -- 718
Amortization of deferred
compensation -- -- --
-- 214 -- 214
Sale of preferred stock -- -- 5
-- 4,143 -- 4,143
Conversion of preferred
stock (Note 4) 4,230 2 (13)
(1) (1) -- --
Exercise of warrants 1 -- --
-- 7 -- 7
Unrealized gain (loss) on
investments (Note 2) -- -- --
-- 125 -- 125
Dividends on preferred
stock (Note 4) 253 -- --
-- 780 (586) 194
Net loss -- -- --
-- -- (22,472) (22,472)
------ ---- -----
---- ------- --------- --------
BALANCE, DECEMBER 31, 1995 27,303 $ 14 8
$ -- $334,727 $(307,905) $ 26,836
======= ==== =====
==== ======== ========= ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-25-
<PAGE>
<TABLE>
<CAPTION>
XOMA CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Years ended December 31,
- - ------------------------------------------------------------
1995
1994 1993
----
---- ----
<S> <C>
<C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $
(22,472) $ (34,627) $ (31,307)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 2,920
3,334 2,791
Inventory reserve 4,170
-- 900
Write-down of assets held for sale 2,400
-- --
Deferred compensation expense 214
240 296
Loss (gain) on retirement of capital
equipment
(145) -- 1
Changes in assets and liabilities:
Decrease (increase) in interest and
other receivables
(2,009) 274 (203)
Decrease (increase) in inventory --
-- 445
Decrease (increase) in prepaid
expenses 612
156 (195)
Decrease (increase) in deposits and
other assets 1,350
(1,350) --
Increase (decrease) in accounts payable 705
877 (417)
Increase (decrease) in accrued liabilities
(3,921) 2,563 (1,195)
Increase (decrease) in non-current liabilities
(8,465) -- --
- - --------- --------- ---------
Total adjustments
(2,169) 6,094 2,423
- - --------- --------- ---------
Net cash used in operating activities
(24,641) (28,533) (28,884)
- - --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of short-term investments 61,835
312,262 244,152
Payments for purchase of short-term
investments
(31,641) (301,708) (210,891)
Capital expenditures, net of proceeds
(350) (1,308) (1,767)
- - --------- --------- ---------
Net cash provided by (used in)
investing activities 29,844
9,246 31,494
- - --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale and leaseback 1,800
-- --
Principal payments under capital
lease obligations
(488) (627) (450)
Proceeds from issuance of debentures 5,858
-- --
Proceeds from issuance of warrants --
-- 2,994
Proceeds from issuance of common or
preferred stock 4,451
-- 14,940
---------
--------- ---------
Net cash provided by financing activities 11,621
(627) 17,484
---------
--------- ---------
Net increase (decrease) in cash and
cash equivalents 16,824
(19,914) 20,094
Cash and cash equivalents at beginning
of year 3,576
23,490 3,396
---------
--------- ---------
Cash and cash equivalents at end of year $ 20,400
$ 3,576 $ 23,490
=========
========= =========
</TABLE>
The accompanying
notes are an integral part of these
financial statements.
-26-
<PAGE>
XOMA CORPORATION
NOTES TO FINANCIAL
STATEMENTS
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
XOMA Corporation ("XOMA" or the "Company") is a
biotechnology and
pharmaceutical company engaged in the development of products for
the treatment
of infectious and immune system diseases and other serious
disorders. The
Company's products are presently in various stages of development
or regulatory
review and all are subject to regulatory approval before the
Company can
commercially introduce any products. There can be no assurance that
any of the
products under development by the Company will be developed
successfully, obtain
the requisite regulatory approval or be successfully manufactured
or marketed.
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
for a minimum
of one year. The Company continues to evaluate strategic alliances,
potential
partnerships, and financing arrangements which would further
strengthen its
competitive position and provide additional funding. The Company
has engaged an
investment banking firm to assist in completing one or more
strategic alliances
with respect to the Neuprex(TM) product. The Company cannot predict
whether or
when any such alliance(s) will be consummated or whether additional
funding will
be available when required.
Estimates
The preparation of financial statements in conformity
with
generally accepted accounting principles requires management to
make estimates
and assumptions that affect the reported amounts of assets and
liabilities and
disclosure of contingent assets and liabilities at the date of the
financial
statements and the reported amounts of revenues and expenses during
the
reporting period. Actual results could differ from those estimates.
Amendment to Pfizer Agreement
In the third quarter of 1995, XOMA and Pfizer Inc.
("Pfizer")
agreed to modify the funding arrangement of the current E5(R)
clinical trial, so
that XOMA may at its option reduce its contributions towards the
cost in return
for a reduction in future royalties otherwise payable by Pfizer.
The agreement
also modifies the payment terms relating to the Company's $8.5
million obligation
to Pfizer for patent litigation costs. See Note 6, Commitments and
Contingencies.
The maximum royalty reduction in any one year will be limited to
30% of the
royalties otherwise payable on Pfizer's U.S. sales of E5(R), until
such time as
the amounts owed are fully paid. Pfizer was also paid $2.0 million
for previously
recorded clinical trial costs.
Restructuring Charges
In the fourth quarter of 1994, the Company
restructured its
operations to reduce costs and to accelerate the development of its
Neuprex(TM)
and other BPI derived products. Other research programs will be
curtailed or
eliminated. The Company recorded a charge to earnings of $2.5
million, primarily
from the cost of termination benefits related to the elimination of
75 positions
in research and research support functions.
-27-
<PAGE>
The activities during 1995 affecting the restructuring
accrual
established in the fourth quarter of 1994 are as follows:
<TABLE>
<CAPTION>
In
Millions
<S> <C>
Original amount accrued $2.5
Charges against the accrual 2.3
Adjustments to the accrual --
</TABLE>
Net Loss Per Common Share
Net loss per common share is based on the weighted
average number
of common shares outstanding. Shares issuable upon exercise of
options and
warrants are not considered in the computation of net loss per
share because the
effect of including such shares in the computation would be
antidilutive. Shares
of Common Stock issuable upon conversion of Preferred Stock and
Convertible
Debentures outstanding at December 31, 1995 and 1994 are not
considered because
the shares of Preferred Stock and Convertible Debentures are not
Common Stock
equivalents.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, the
Company
considers all highly liquid debt instruments with maturities of
three months or
less at the time the Company acquires them to be cash equivalents,
except when
such debt instruments are part of a portfolio of investments
managed by an
independent, outside investment manager, in which case these
instruments are
classified as short-term investments.
Supplemental Cash Flow Information
Cash paid for interest during the years ended December
31, 1995,
1994, and 1993 was as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
1993
---- ----
----
<S> <C> <C>
<C>
Interest $105 $119
$206
</TABLE>
In addition, during the years ended December 31,
1995, 1994
and 1993, the Company had the following non-cash financing and
investing
activities (in thousands):
<TABLE>
<CAPTION>
1995 1994
1993
---- ----
----
<S> <C> <C>
<C>
Stock contribution to the 401(k) and
management incentive plans
(Notes 4 and 9) $ 434 $ 360
$--
Litigation settled with issuance of
warrants (Note 5) -- --
3,000
Stock issuance cost paid with common
or preferred stock (Note 4) 8 --
250
Unrealized loss(gain) on investments 125 128
--
</TABLE>
-28-
<PAGE>
Notes Receivable
The $2.2 million in notes receivable from Connective
Therapeutics,
Inc. was collected in February of 1996. In 1994, the note for $1.4
million was
classified as long-term in Deposits and other.
Inventories
Inventories are stated at the lower of
first-in-first-out cost or
market value. Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
- - ---------------------------
1995
1994
----
- - ----
<S> <C>
<C>
Raw materials $ --
$4,170
Work-in-process --
--
Finished goods --
--
------
- - ------
$ --
$4,170
======
======
</TABLE>
The inventories consist primarily of E5(R) raw
materials net of a
reserve of $11.1 million and $6.9 million in 1995 and 1994,
respectively. The
$4.2 million increase in the reserves in the third quarter of 1995
was charged
to Other income and expense.
Property and Equipment
Property and equipment, including equipment under
capital leases,
are stated at cost. Equipment depreciation is calculated using the
straight-line
method over the estimated useful lives of the assets (five to seven
years).
Leasehold improvements, buildings, and building improvements are
amortized and
depreciated using the straight-line method over the shorter of the
lease terms
or the useful lives (one to nine years).
Property and equipment consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
- - ---------------------------
1995
1994
----
- - ----
<S> <C>
<C>
Land $ -- $
459
Buildings --
1,714
Equipment 13,916
15,557
Leasehold and building improvements 14,483
20,342
Construction-in-progress 19
117
--------
- - ------
28,418
38,189
Less accumulated depreciation and
amortization 22,237
22,741
-------
- - ------
Property and equipment, net $ 6,181
$15,448
=======
=======
Assets held for sale $ 4,442 $
- - --
=======
=====
</TABLE>
In 1994, land, buildings, equipment and building
improvements
included approximately $7.2 million related to the net book value
of a facility
originally intended for the production of CD5 Plus(TM)
intermediates, which was
classified as assets held for sale in 1995. The facility was
written down to
estimated realizable value of $4.4 million which resulted in a
charge to other
income and expense of $2.4 million in the third quarter of 1995.
The amounts the
Company will ultimately realize could differ materially from the
amounts assumed
in arriving at the realizable value.
-29-
<PAGE>
Deposits and other
Deposits and other included $1.4 million in 1994 for
a note
receivable from Connective Therapeutics, Inc. and was reclassified
to notes
receivable in 1995.
Accrued Liabilities
Accrued liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
- - ---------------------------
1995
1994
----
- - ----
<S> <C>
<C>
Accrued legal costs $ 500 $
1,098
Accrued dividends 586
781
Accrued payroll costs 1,492
1,134
Restructuring costs 172
2,500
Clinical trial costs 593
2,611
Other 341
538
-------
- - -------
$ 3,684 $
8,662
=======
=======
</TABLE>
Other Non-current Liabilities
Liabilities or loss accruals are classified as
non-current if their
expected payment dates or amortization periods (if non-cash) occur
more than one
year from the balance sheet date. Other non-current liabilities in
1994 consisted
of $8.5 million of patent litigation costs.
Research and Development Fees
Research and development fees are recognized as
revenues as
research activities are performed or as development milestones are
completed
under the terms of research and development agreements. The excess
of total
research and development expense over revenues recognized under
collaborative
agreements amounted to $22.1 million, $27.0 million, and $26.6
million for the
years 1995, 1994, and 1993, respectively.
Reclassifications
Certain reclassifications have been made to conform
the prior years
to the 1995 presentation.
2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
On December 31, 1995 and 1994, cash and cash
equivalents consisted
mostly of money market mutual funds.
Effective January 1, 1994, the Company implemented the
provisions
of Statement of Financial Accounting Standards ("SFAS") 115,
"Accounting for
Certain Investment in Debt and Equity Securities". Adoption of SFAS
115, a
change in accounting principle, had no material cumulative effect
on retained
earnings as of that date.
The Company follows a policy of investing only in
marketable debt
securities and holding them to maturity; however, since the Company
has from
time to time sold certain securities to meet cash requirements or
improve
investment diversification, the Company's short-term investments
have been
categorized as available-for-sale as required by SFAS 115.
-30-
<PAGE>
The aggregate fair values, amortized cost, gross
unrealized holding
gain, and gross unrealized holding loss of the major types of debt
securities at
December 31, 1995 were as follows (in millions):
<TABLE>
<CAPTION>
Gross
Unrealized
Holding
- - -----------------
Fair Amortized
Value Cost Gain
Loss
----- --------- ----
----
<S> <C> <C> <C>
<C>
U.S. Treasury Securities $1.7 $1.7 $ --
$ --
U.S Government Agency Issues 3.0 3.0 --
--
Corporate Bonds and Other 1.3 1.3 --
--
</TABLE>
The contractual maturities of the Company's debt
securities as of
December 31, 1995 were as follows (in millions):
Less than 1 year $5.4
From 1 to 2 years 0.6
More than 2 years --
During the year ended December 31, 1995, gross
realized losses on
available-for-sale securities were negligible and the net change in
the
unrealized gain or loss was a $0.1 million gain. Gross realized
gains were
negligible. Gains and losses are determined on a specific
identification basis.
As of December 31, 1995, term investments includes $0.6 million in
certificates
of deposit which guarantees a standby letter of credit in favor of
the Lessor of
the $1.8 million sale and lease back of certain equipment in July
of 1995.
3. RESEARCH AND DEVELOPMENT AGREEMENTS
In June 1994, the Company assigned its exclusive
worldwide rights
in T-cell receptor ("TCR") peptide technology to Connective
Therapeutics, Inc.
The Company received a promissory note in the amount of $1.4
million and
warrants to purchase 450,000 shares of Connective Therapeutics,
Inc. stock, and
will receive milestone payments and royalties on product sales. In
1995, the
Company received an additional note in the amount of $0.8 million
pursuant to
the terms of the original assignment. The notes were paid in full
in February
1996.
In June 1987, the Company and Pfizer entered into
agreements
relating to monoclonal antibody-based products for the treatment of
gram-negative sepsis. The agreements provide Pfizer with exclusive
rights to
E5(R) in exchange for the funding of certain clinical and
development
activities. In January 1994, the territory covered by the
agreements was
redefined to include only the countries of Japan and the United
States. Research
and development fees earned under the agreements were negligible
over the last
three years. The Company is reimbursed for manufacturing costs and
will receive
a portion of the gross margins obtained from any sales on a formula
basis.
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. The agreements can be
canceled with
appropriate notice upon reimbursement by Pfizer of certain of
XOMA's research
and development expenses. XOMA has granted a security interest to
Pfizer in
assets related to its E5(R) program to secure performance of XOMA's
obligations
under the agreements under certain conditions, including
bankruptcy. In the
third quarter of 1995, XOMA and Pfizer agreed to modify the funding
-31-
<PAGE>
arrangement of the current E5(R) clinical trial and the payment
terms relating
to certain patent litigation costs (see Note 1, Operations and
Summary of
Significant Accounting Policies, Amendment to Pfizer Agreement, and
Note 6,
Commitments and Contingencies).
4. CAPITAL STOCK
Common Stock
In June and July 1995, the Company issued 470,859
shares of common
stock in reliance on Regulations S for net proceeds of $0.7
million.
Preferred Stock
The Company has authorized 650,000 shares of Series A
Cumulative
Preferred Stock of which none were outstanding at December 31, 1995
and 1994.
(See Stockholder Rights Plan, below.)
In December 1993, the Company issued 18,775 shares of
Senior
Convertible Preferred Stock, Series B ("Series B Preferred Stock"),
$.05 par
value, to two investors for proceeds of $18.8 million. In addition,
warrants to
purchase 1,787,210 shares of Common Stock were issued to the two
investors (see
Note 5, Stock Options and Warrants). Costs of the issue were
approximately $1.1
million. Of the net proceeds, $3.0 million have been allocated to
the warrants.
An additional 250 shares of Series B Preferred Stock and 23,770
warrants were
issued to the placement agent as part of the fee for investment
banking
services. A total of 30,000 shares of Series B Preferred Stock was
authorized
for this transaction.
Each share of Series B Preferred Stock has a
liquidation preference
of $1,000 per share and a cumulative annual dividend of $50 per
share payable
semiannually in cash or Common Stock at the Company's discretion,
and is
convertible into 206.2442 shares of Common Stock (subject to
certain
anti-dilution adjustments). In May of 1994, the placement agent
converted all
250 of its shares of preferred stock into 47,595 shares of Common
Stock. The
amounts payable as dividends at December 31, 1994 were paid with
252,745 shares
of common stock in January of 1995. During 1995, 7,808 shares of
the Series B
Preferred Stock had been converted into 1,501,731 shares of Common
Stock and the
warrants to purchase 1,787,210 shares of Common Stock had expired
unexercised.
In August 1995, the Company issued 4,799 shares of its
Convertible
Preferred Stock, Series C to foreign investors in an offering
exempt from
registration under the Securities Act of 1933 in reliance on
Regulation S
thereunder. The offering yielded net proceeds to the Company after
expenses of
$4.1 million. As of December 31, 1995, all of the Series C
Preferred Stock had
been converted into 2,728,190 shares of Common Stock.
Debentures
In November 1995, the Company issued $6.5 million
aggregate
principal amount of 4% Convertible Subordinated Debentures due in
1998 to
foreign investors in an offering exempt from registration under the
Securities
Act of 1933 in reliance on Regulation S thereunder. The offering
yielded net
proceeds to the Company after expenses of $5.9 million. Beginning
45 days after
issuance, 50% of the principal amount of the Debentures, and
beginning 75 days
thereafter, all of the outstanding principal amount thereof, will
be convertible
by the holder into Common Stock of the Company at a conversion
price equal to
80% of the then current market price of the Common Stock.
-32-
<PAGE>
After two years the Debentures may be converted by the Company at
the same
conversion price. The Company will not be required to issue more
than
approximately 4.9 million shares of Common Stock upon conversion of
the
Debentures.
Management Incentive Compensation Plan
The Board of Directors of the Company established a
Management
Incentive Compensation Plan effective July 1, 1993 (as amended, the
"Incentive
Plan"), in which management employees (other than the Chief
Executive Officer),
as well as certain additional discretionary participants chosen by
the Chief
Executive Officer, are eligible to participate. Under the Incentive
Plan, at the
beginning of each fiscal year, the Board of Directors (with advice
from the
Compensation Committee) establishes a target incentive compensation
pool, which
is adjusted at year-end to reflect the Company's performance in
achieving its
corporate objectives. After each fiscal year, the Board of
Directors and the
Compensation Committee make a determination as to the performance
of the Company
and Incentive Plan participants in meeting corporate objectives and
individual
objectives, which are determined from time to time by the Board of
Directors in
its sole discretion. Awards to Incentive Plan participants will
vary depending
upon the achievement of corporate objectives, the size of the
incentive
compensation pool, the Incentive Plan participants' base salaries
and the
Incentive Plan participants' performance during the fiscal year and
expected
ongoing contribution to the Company. The Company must meet a
minimum percentage
of its corporate objectives (currently 70%) before any awards will
be made under
the Incentive Plan.
Awards under the Incentive Plan vest over a three-year
period with
50% of each award payable on a date to be determined, expected to
be in the
first quarter of the following fiscal year, and 25% payable on each
of the next
two annual distribution dates, so long as the Incentive Plan
participant
continues to participate in the Incentive Plan. The portion payable
on the first
distribution date is payable 50% in cash and 50% in Common Stock
(based on a
10-day average market price). Incentive Plan participants must
choose prior to
the end of the first year of the three-year period whether the
balance is to be
paid in cash or Common Stock.
If, within a year after a "change in control" (as
defined) of the
Company, an Incentive Plan participant's employment is
involuntarily terminated
other than for cause or an Incentive Plan participant voluntarily
terminates his
or her employment because his or her duties or compensation are no
longer
substantially equivalent to what they were at the time of the
"change in
control," then all awards authorized but not yet distributed to the
Incentive
Plan participant will be distributed. The amounts accrued under the
Incentive
Plan were $0.6 million and $0.3 million for the plan years 1995 and
1993
respectively. There was no accrual for 1994.
Stockholder Rights Plan
In October 1993, the Company's Board of Directors
unanimously
adopted a Stockholder Rights Plan (the "Rights Plan"). Under the
Rights Plan,
Preferred Stock Purchase Rights ("Rights") were distributed as a
dividend at the
rate of one Right for each share of the Company's Common Stock held
of record as
of the close of business on November 12, 1993. Each Right entitles
the
registered holder of Common Stock to buy a fraction of a share of
the new series
of Preferred Stock (the "Series A Preferred Stock") at an exercise
price of
$30.00, subject to adjustment. The Rights will be exercisable, and
will detach
from the Common Stock, only if a person or group acquires 20
percent or more of
the Common Stock, announces a tender or exchange offer that, if
consummated will
result in a person or group beneficially owning 20 percent or more
of the
Common Stock, or if the Board of Directors declares a
-33-
<PAGE>
person or group owning 10 percent or more of the outstanding shares
of Common
Stock to be an Adverse Person (as defined in the Rights Plan). Once
exercisable,
each Right will entitle the holder (other than the acquiring
person) to purchase
units of Series A Preferred Stock (or, in certain circumstances,
common stock of
the acquiring person) with a value of twice the Rights exercise
price. The
Company will generally be entitled to redeem the Rights at $.001
per Right at
any time until the close of business on the tenth day after the
Rights become
exercisable. The Rights will expire at the close of business on
December 31,
2002.
5. STOCK OPTIONS AND WARRANTS
Stock Option Plan
Under the Company's amended 1981 Stock Option Plan
(the "Option
Plan"), qualified and non-qualified options of the Company's Common
Stock may be
granted to certain employees and other individuals as determined by
the Board of
Directors at not less than the fair market value of the stock at
the date of
grant. Options granted under the Option Plan may be exercised when
vested and
expire five years and two months to ten years from the date of
grant or three
months from the date of termination of employment. Options granted
generally
vest over five years. The Option Plan will terminate on November
15, 2001. As of
December 31, 1995, options covering 2,392,401 shares of Common
Stock were
outstanding under the Option Plan.
Restricted Stock Plan
The Company also has a Restricted Stock Plan (the
"Restricted
Plan") which provides for the issuance of options or the direct
sale of Common
Stock to certain employees and other individuals as determined by
the Board of
Directors at not less than 85% of fair market value of the Common
Stock on the
grant date. Individuals eligible to receive option grants or stock
issuances
under the Restricted Plan will be limited to those employees
(including officers
and directors) who have contributed to the management, growth or
financial
success of the Company. During 1992 the number of shares of Common
Stock
authorized for issuance over the term of the Restricted Plan was
increased to
1,000,000, subject to the aggregate limitation discussed below.
Each option
issued under the Restricted Plan will be a non-statutory option
under the
federal tax laws and will have a term not in excess of ten years
from the grant
date. Options granted generally vest over five years. The
Restricted Plan will
terminate on December 15, 2003.
The Company has granted options with exercise prices
at 85% of fair
market value on the date of grant. As of December 31, 1995, options
covering
412,720 shares of Common Stock were outstanding under the
Restricted Plan.
The Company amortizes deferred compensation, which is
the
difference between the issuance price or exercise price and the
fair market
value of the shares as determined by the Board of Directors at the
date of sale
or grant over the period benefitted.
-34-
<PAGE>
Directors Stock Option Plan
In 1992, the stockholders approved a Directors Stock
Option Plan
(the "Directors Plan") which provides for the issuance of options
to purchase
shares of Common Stock to non-employee directors of the Company at
100% of the
fair market value of the stock on the date of the grant. Up to
150,000 shares
are authorized for issuance during the term of the Directors Plan.
Options vest
on the date of grant and have a term of up to ten years. As of
December 31,
1995, options for 33,000 shares of Common Stock were outstanding
under the
Directors Plan.
Ingene Plan
In connection with the merger with International
Genetic
Engineering, Inc. ("Ingene"), the Company assumed the rights and
obligations of
Ingene under then outstanding options to purchase shares of Ingene
Common Stock.
After the merger, the outstanding Ingene options became options to
purchase
134,800 shares of XOMA Corporation Common Stock. No options can be
granted under
the Ingene Plan subsequent to the merger. These options expire ten
years after
the date of original grant by Ingene and become exercisable ratably
over periods
of up to four years starting from one year after the date of
original grant. All
options are fully vested at December 31, 1994. As of December 31,
1995, options
for 8,896 shares of common stock were outstanding under this plan.
The aggregate number of shares of Common Stock that
may be issued
under the Option Plan, the Restricted Plan, the Directors Plan and
the Ingene
Plan is 4,300,000 shares. The following table summarizes the
activity under the
Company's stock option plans:
<TABLE>
<CAPTION>
Year ended
Year ended Year ended
December 31,
December 31, December 31,
1995
1994 1993
------
------ -----
Exercise
Exercise Exercise
Options Price
Options Price Options Price
------- --------
------- --------- ------- --------
<S> <C> <C>
<C> <C> <C> <C>
Outstanding, beginning of period 3,000,692 $2.07-26.50
2,861,854 $4.99-26.50 2,806,700 $7.00-28.00
Granted 2,239,855 $1.70-2.94
517,000 $2.07-4.38 846,300 $4.99-7.50
Exercised (5,315) $1.81-2.56
-- -- -- --
Canceled (2,388,215) $2.38-26.50
(378,162) $3.72-26.50 (791,146) $6.38-28.00
-----------
-------- --------
Outstanding, end of period 2,847,017 $1.70-22.75
3,000,692 $2.07-26.50 2,861,854 $4.99-26.50
-----------
--------- ---------
Exercisable, end of period 1,310,938 $1.70-22.75
1,480,886 $2.07-26.50 1,364,943 $4.99-26.50
==========
========= =========
</TABLE>
Warrants
Warrants to purchase 1,810,980 shares of Common Stock
issued in
conjunction with the issuance of the Series B Preferred Stock in
December 1993
expired on December 19, 1995. These warrants were valued at $3.0
million and are
reflected in Paid-in capital.
Warrants with an aggregate value of $3.0 million at
the time of
issuance were issued during the second quarter of 1993 to conclude
the
settlement of certain stockholder and derivative litigation brought
in 1991. A
total of 2,214,633 warrants were issued, and warrants for 2,213,476
shares of
Common Stock expired unexercised in June of 1995.
-35-
<PAGE>
6. COMMITMENTS AND CONTINGENCIES
Clinical Trial
In the third quarter of 1995, the Company and Pfizer
reached an
agreement regarding the funding of the current Phase III E5(R)
clinical trial
and payment terms relating to the $8.5 million of patent litigation
costs
due to Pfizer. Under this agreement, the Company may, at its
option, reduce
its minimum funding commitment ($3.6 million at December 31, 1995)
for the
remainder of the trial in return for a reduction in future
royalties otherwise
payable to XOMA by Pfizer on Pfizer's U.S. sales of E5(R). The
agreement also
provides that XOMA will repay the $8.5 million of patent litigation
costs by
reducing the future royalties otherwise payable to XOMA by Pfizer
on Pfizer's
U.S. sales of E5(R). As a result, the $8.5 million was credited to
Other
income and expense in the third quarter of 1995. The maximum
royalty reduction
in any one year related to these items will be limited to 30% of
the royalties
otherwise payable on Pfizer's U.S. sales of E5(R), until such time
as the
amounts owed ($9.9 million at December 31, 1995) are fully paid.
Collaborative Agreements and Royalties
As of December 31, 1995, the Company has commitments
under research
agreements with universities and other research institutions that
require the
Company to fund research in the amount of $0.2 million through
December 1996.
Research and development expenses include research agreement
expenses of
approximately $0.4 million, $0.4 million, and $0.8 million for the
years ended
December 31, 1995, 1994 and 1993, respectively. The Company is also
obligated to
pay royalties, ranging generally from 1.5% to 5% of the selling
price of the
licensed component and up to 25% of sublicense fee income, to
various
universities and other research institutions based on future sales
or licensing
of products that incorporate certain products and technologies
developed by
those institutions.
Leases
As of December 31, 1995, the Company leased
administrative,
research facilities, certain laboratory and office equipment under
operating and
capital leases expiring on various dates through 2003.
-36-
<PAGE>
Future minimum lease commitments are as follows (in
thousands):
<TABLE>
<CAPTION>
Capital Leases
Operating Leases
<S> <C>
<C>
1996 $ 744 $
1,824
1997 623
1,761
1998 753
916
1999 --
571
2000 --
571
Thereafter --
1,569
-------
- - --------
Net minimum lease payments 2,120
$ 7,212
=======
Less--Amount representing interest
expense 382
Present value of net minimum
lease payments 1,738
Less--Current maturities 546
-------
Long-term capital lease obligations $ 1,192
=======
</TABLE>
Total rental expense was approximately $2.3 million,
$2.3 million,
and $2.5 million for the years ended December 31, 1995, 1994, and
1993,
respectively.
Patents
As a result of its ongoing activities, the Company
owns and is in
the process of applying for a number of patents in the United
States and abroad
which may protect its products and important processes. The Company
also has
obtained or has the right to obtain exclusive licenses to certain
patents and
applications filed by others. However, the patent position of
biotechnology
companies generally is highly uncertain and no consistent policy
regarding the
breadth of allowed claims has emerged from the actions of the
Patent Office with
respect to biotechnology patents. Accordingly, no assurance can be
given that
the Company's patents will afford protection against competitors
with similar
technologies, or that others will not obtain patents claiming
aspects similar to
those covered by the Company's patent applications.
During the period from September 1994 to February
1996, the U.S.
Patent and Trademark Office (the "Patent Office") issued nine
patents to the
Company related to its BPI-based products, including novel
compositions, their
manufacture, formulation, assay and use. The Patent Office issued
to the Company
U.S. Patent No. 5,420,019 in May 1995 which is directed to novel
recombinant
amino-terminal fragments and fragment analogs of BPI and methods
for their
recombinant production. The Company believes that this patent will
provide
comprehensive protection for the manufacture, use and sale of its
BPI- derived
Neuprex(TM) and I-PREX(TM) products in the U.S. In September 1995,
the Patent
Office issued U.S. Patent No. 5,447,913 which addresses novel
pharmaceutical
compositions of dimeric BPI protein products, including rBPI42,
with enhanced
biological activities.
In addition to such composition patents, U.S. Patent
No. 5,439,807
issued to the Company in August 1995 addresses improved
manufacturing methods
for the Company's BPI-related products and U.S. Patent No.
5,488,034 issued to
the Company in January 1996 describes novel pharmaceutical
formulations of
BPI-based protein products, including the Company's Neuprex(TM)
product
formulation. The Company's first two diagnostic assay patents, U.S.
Patent Nos.
5,466,580 and 5,466,581, were issued in November 1995 and describe
methods for
quantifying BPI levels in blood as well as screening methods for
detecting
increased levels of BPI in septic patients. The Company's third
diagnostic assay
patent, U.S. Patent No. 5,484,705, was issued in January 1996
directed to
methods of measuring levels of lipopolysaccharide-binding protein
-37-
<PAGE>
("LBP") elevated in humans as a specific response to bacterial
endotoxin
exposure.
In addition to such composition, manufacturing,
formulation and
assay patents, the Company has been issued two patents related to
therapeutic
uses of BPI-derived proteins. In September 1994, U.S. Patent No.
5,348,942 was
issued addressing the use of BPI protein products for neutralizing
anti-
coagulant effects of heparin. In February 1996, the Patent Office
issued U.S.
Patent No. 5,494,896 directed to methods of treating burn injuries
with BPI
protein products.
In addition to the nine BPI-related U.S. patents
issued to the
Company, the Company is the exclusive licensee of three BPI-related
patents
owned by New York University ("NYU"). In March 1993, the Patent
Office issued to
NYU U.S. Patent No. 5,198,541 (the "`541 patent") which contains
claims covering
the recombinant production of BPI. The Company believes the '541
patent has
substantial value because it covers certain production
methodologies that allow
production of commercial-scale quantities of BPI for human use. In
February
1996, the Patent Office issued U.S. Patent No. 5,489,676 to NYU,
relating to the
discovery of novel polypeptides that potentiate BPI's ability to
kill
gram-negative bacteria. In May 1995, the European Patent Office
granted to NYU,
EP 375724, with claims to N-terminal BPI fragments and their use,
alone or in
combination with antibiotics, for the treatment conditions
associated with
bacterial infections. This patent is the first and only BPI-related
patent that
has been granted to date in Europe.
The Company has also received four more U.S. Notices
of Allowance
and has more than twenty pending patent applications for its
BPI-based products.
The Company is aware of an agreement between Genentech
and Incyte
pursuant to which Incyte claims to hold worldwide rights to all
Incyte and
Genentech technology related to BPI and through which Genentech
will receive a
royalty on Incyte's BPI product sales. Between 1992 and 1994, the
Patent Office
issued five patents related to BPI to Incyte. Based on the opinion
of its patent
counsel, Marshall, O'Toole, Gerstein, Murray & Borun, the Company
believes that
it does not infringe any valid claims of any of the Incyte patents.
The Company is the exclusive licensee of U.S. Patent
No. 4,918,163
(the "`163 Patent"), issued to The Regents of the University of
California in
April 1990. The `163 Patent relates to a method of treating
gram-negative
bacterial infection using certain anti-endotoxin monoclonal
antibodies. On the
date of issuance, the Company filed suit against Centocor alleging
infringement
of the `163 Patent. Effective July 28, 1992, the Company, Centocor
and all other
interested parties resolved all outstanding litigation and disputes
worldwide
regarding products, patents and patent applications related to
anti-endotoxin
monoclonal antibodies by consent judgements which held the `163
Patent valid and
infringed by Centocor. Centocor has agreed to pay royalties to XOMA
for any
United States sales of its monoclonal antibody HA-1A, and the
companies have
agreed to forego all future litigation and administrative
proceedings regarding
certain of each other's patents and patent applications related to
anti-endotoxin monoclonal antibodies. In March, 1993, Centocor
announced the
termination of a Phase III trial of its HA-1A product.
If certain patents issued to others are upheld or if
certain patent
applications filed by others issue and are upheld, 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.
-38-
<PAGE>
Legal Proceedings
In June 1992, the Company and one of its officers were
named in a
securities class action lawsuit entitled Warshaw et al. v. XOMA
Corporation, et
al. filed in the United States District Court for the Northern
District of
California. The suit alleges that the Company failed to adequately
disclose
information related to FDA review of the Company's application for
a license to
market its E5(R) product for the treatment of gram-negative sepsis.
The suit
seeks unspecified damages for alleged violations of Section 10(b)
of the
Securities Exchange Act of 1934. After permitting plaintiffs to
amend their
complaint three times, the District Court granted defendants'
motion to dismiss
the third amended complaint with prejudice by Memorandum and Order
dated June
23, 1994. Plaintiffs filed appeals with the U.S. Court of Appeals
for the Ninth
Circuit on July 22 and 26, 1994. On January 25, 1996, the Court of
Appeals
reversed the District Court and remanded the case to the District
Court for
further proceedings, finding that the allegations of the
plaintiffs' third
amended complaint were sufficient to withstand a motion to dismiss.
Defendants
filed a petition for rehearing and suggestion for rehearing en banc
on February
8, 1996. On February 16, 1996, the Court of Appeals requested that
plaintiffs
file a response to defendants' petition for rehearing, which
plaintiffs filed on
March 1, 1996. The Court of Appeals has not yet ruled on the
petition for
rehearing. The Company maintains that all material information
related to FDA
review of its application to market E5(R) had been publicly
disclosed on a
timely basis, and that neither the Company nor the officer named
engaged in any
wrongdoing. The Company believes that the allegations contained in
the suit are
without merit, and it intends to defend against the suit
vigorously.
Liability Insurance
The testing and marketing of medical and food additive
products
entails an inherent risk of allegations of product liability. XOMA
believes that
its product liability insurance levels are adequate for its
clinical trial
activity. XOMA 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.
The Company insures and indemnifies its directors and officers
against
actions brought against them as a result of their management of the
Company's
operations. There can be no assurance that adequate directors and
officers
insurance coverage will be available or be available at acceptable
costs or that
a claim against the directors and officers would not materially
adversely affect
the business or financial condition of the Company.
-39-
<PAGE>
7. INCOME TAXES
The significant components of net deferred tax assets
and
liabilities as of December 31, are as follows (in $ millions):
<TABLE>
<CAPTION>
1995
1994
----------
---------
<S> <C>
<C>
Property and equipment $1.4
$ 1.1
Purchased technology 6.3
7.0
Capitalized R&D expense 40.1
29.5
Accrued liabilities and other 1.3
5.0
Net operating loss carryforwards 68.1
66.1
R&D and other credit carryforwards 11.9
12.2
Valuation allowance (129.1)
(120.9)
--------
-------
Total deferred tax asset $ --
$ --
========
=======
</TABLE>
There were no deferred tax liabilities, no current or deferred
expense, and no
current or non-current net deferred income tax assets or
liabilities for any tax
jurisdiction.
The net change in the valuation allowance for the year
ended
December 31, 1995 was a $8.2 million increase.
XOMA's accumulated federal and state tax net operating
losses
("NOLs") and credits as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Amounts
Expiration
(in millions)
Dates
-------------
- - ----------
<S> <C>
<C>
Federal
NOLs $203.1
1996-2010
Credits 9.2
1996-2010
State
NOLs 38.6
1996-1999
Credits 2.7
2002-2010
</TABLE>
These amounts are subject to audit by federal and
state tax
authorities and could change.
Certain future changes in the ownership of significant
shareholders
could limit utilization of the Company's tax NOLs and credits.
8. RELATED PARTY TRANSACTIONS
Certain directors and stockholders of the Company are
or have been
principals of investment banking firms which have performed
investment banking
services for the Company. These firms have received customary
discounts, fees,
and commissions in connection with these services. In 1993, the
Company granted
a short-term, secured loan to an officer, director and stockholder
of the
Company.
-40-
<PAGE>
9. DEFERRED SAVINGS PLAN
Under section 401(k) of the Internal Revenue Code of
1986, the
Board of Directors adopted, effective June 1, 1987, a tax-qualified
deferred
compensation plan for employees of the Company. Participants may
make
contributions which defer up to 15% of their total salary, up to a
maximum for
1995 of $9,240. The Company may, at its sole discretion, make
contributions each
plan year, in cash or in shares of the Company's Common Stock in
amounts which
match up to 100% of the salary deferred by the participants. The
expense of
these contributions was $326,000, $431,000, and $166,000, for the
years ended
December 31, 1995, 1994 and 1993, respectively.
-41-
INDEX TO
EXHIBITS
EXHIBIT
NUMBER
[S]
3.1 Restated Certificate of Incorporation, as
amended.<F12>
3.2 Amended and Restated Bylaws.<F12>
3.3 Stockholder Rights Agreement dated October 27,
1993
between the Company and First Interstate Bank of
California, as Rights Agent.<F13>
3.4 Certificate of Designation of Preferences and
Rights of Convertible Preferred Stock, Series C
of the Company.
4.1 Form of 4% Convertible Subordinated Debenture due
November __, 1998 and form of 4% Convertible
Subordinated Debenture due November 30, 1998,
Series A.
10.1 Form of Stock Option Agreement
for 1981 Stock Option Plan.<F15>
10.2 Form of Stock Option Agreement for
Restricted Stock Plan.<F15>
10.3 Warrant Agreement dated as of October 11,
1985 between the Company and Equitec Leasing
Company.<F1>
10.4 License Agreement dated July 5, 1983 between
the Company and ICRF Patent Limited.<F1>
10.5 License Agreement dated October 26, 1984
between the Company and Carlton Medical
Products Limited.<F1>
10.6 License Agreement dated February 3, 1986
between the Company and the Kallestad
Laboratories Division of Erbamont, Inc.
(with certain confidential information
deleted.)<F1>
10.7 Restricted Stock Plan as amended and restated
and further amended.<F7>
10.8 Restricted Stock Purchase Agreement.<F2>
10.9 License Agreement dated September 3, 1986
between the Company and the Regents of the
University of California (with certain
confidential information deleted).<F2>
10.10 Research, Development and Option Agreement,
License Agreement, Supply Agreement, and
Security Agreement all dated as of June 9,
1987 between the Company and Pfizer,
Inc. (with certain confidential
information deleted).<F3>
-42-
<PAGE>
Exhibit
Number
10.11 Manufacturing Agreement dated as of January
1, 1991 between the Company and Pfizer, Inc.<F9>
10.12 Lease of premises at 890 Heinz Street,
Berkeley, California dated as of July 22,
1987.<F4>
10.13 Lease of premises at Building E at Aquatic
Park Center, Berkeley, California dated as
of July 22, 1987 and amendment thereto dated
as of April 21, 1988.<F4>
10.14 Lease of premises at Building C at Aquatic
Park Center, Berkeley, California dated as
of July 22, 1987 and amendment thereto dated
as of August 26, 1987.<F4>
10.15 Letter of Agreement regarding CPI adjustment
dates for leases of premises at Buildings
C, E and F at Aquatic Park Center, Berkeley,
California dated as of July 22, 1987.<F4>
10.16 Form of indemnification agreement for
officers.<F9>
10.17 Form of indemnification agreement for
employee directors.<F9>
10.18 Form of indemnification agreement for
non-employee directors.<F9>
10.19 XOMA Corporation 1981 Stock Option Plan
as amended and restated and further
amended.<F7>
10.20 Lease of premises at 2910 Seventh Street,
Berkeley, California dated March 25, 1992.<F15>
10.21 Master Equipment Lease Agreement between
Equitable Life Leasing Corporation and
the Company.<F6>
10.22 Supply Agreement effective February 27,
1989 between the Company and Charles River
Biotechnical Services, Inc. (with certain
confidential information deleted).<F6>
10.23 Amendment Agreement dated as of October
17, 1991 between the Company and Charles
River Laboratories, Inc. (with certain
confidential information deleted).<F9>
10.24 License Agreement dated as of August 31,
1988 between the Company and Sanofi (with
certain confidential information
deleted).<F5>
10.25 1985 Non-Qualified Stock Option Plan and
form of Stock Option Agreement.<F8>
-43-
<PAGE>
Exhibit
Number
10.26 Lease dated June 22, 1992, between the
Company and Richard B. Gomez,
Josephine L. Gomez, TTEE-U/A/D, 10,31-90,
FBO Gomez Family Trust.<F15>
10.27 Lease dated October 2, 1992, between the
Company and Virginia Merritt, as Trustee
of the Bowman Merritt and Virginia Merritt
Trust.<F15>
10.28 [Omitted]
10.29 [Omitted]
10.30 Research and License Agreement dated
August 6, 1990 between the Company
and New York University (with certain
confidential information deleted).<F9>
10.31 First Amendment to Agreement dated
November 6, 1992 between the Company and
New York University (with certain confidential
information deleted).<F15>
10.32 [Omitted]
10.33 License Agreement dated June 11, 1991
between the Company and Sterling Drug Inc.
(with certain confidential information
deleted).<F9>
10.34 Employment Agreement dated April 29, 1992
between the Company and John L. Castello.<F15>
10.35 Employment Agreement dated April 29, 1992
between the Company and Steven C. Mendell.<F15>
10.36 Stipulation and Agreement of Settlement,
Compromise and Dismissal dated May 10, 1992.<F10>
10.37 Settlement Agreement for Litigation with
Centocor dated July 28, 1992 (with certain
confidential information deleted).<F11>
10.38 Securities Purchase Agreement dated November 19,
1993 among the Company, Ortelius and GDK.<F14>
10.39 Subscription Agreement dated November 21, 1993
between the Company and Shipley Raidy Capitol
Corporation.<F16>
10.40 Letter Agreement dated July 14, 1993 between the
Company and Pfizer, Inc. (with certain
confidential
information deleted).<F16>
10.41 Cross License Agreement dated December 15, 1993
between Research Development Foundation and the
Company (with certain confidential information
deleted).<F16>
-44-
<PAGE>
Exhibit
Number
10.42 Cross License Agreement dated December 15, 1993
between the Company and Research Development
Foundation (with certain confidential information
deleted).<F16>
10.43 Management Incentive Compensation Plan.<F16>
10.44 Employment Agreement dated March 29, 1993 between
the Company and Patrick J. Scannon, M.D.,
Ph.D.<F16>
10.45 [Omitted]
10.46 Technology Acquisition Agreement dated
June 3, 1994 between Connective Therapeutics,
Inc. and the Company (with certain confidential
information deleted).<F17>
10.47 Employment Agreement dated April 1, 1994 between
the Company and Peter B. Davis.<F17>
10.48 Letter Agreement dated November 7, 1995 between
the
Company and Pfizer, Inc. (with certain
confidential
information deleted).
10.49 Amendment No. 1 to License Agreement dated
March 23, 1995 between the Company and Burroughs
Wellcome Co. (with certain confidential
information
deleted).
10.50 Form of Offshore Subscription Agreement relating
to
the Company's Convertible Preferred Stock, Series
C.
10.51 Form of Offshore Securities Subscription
Agreement
relating to the Company's 4% Convertible
Subordinated
Debentures due 1998.
10.52 Form of Letter Agreement relating to the
Company's
4% Convertible Subordinated Debentures due
November 30, 1998, Series A.
23.1 Consent of Independent Public Accountants.
27.1 Financial Data Schedule.
- - -------------------------
[FN]
1 Incorporated by reference to the Company's
initial Registration Statement on Form S-1
(File No. 33-4793).
2 Incorporated by reference to the Company's
Registration Statement on Form S-1
(File No. 33-12832).
3 Incorporated by reference to the Company's
report on Form 10-Q for the quarter ended
June 30, 1987 (File No. 0-14710).
4 Incorporated by reference to the Company's report
on Form 10-K for the year ended December 31, 1987
-45-
<PAGE>
(File No. 0-14710).
5 Incorporated by reference to the Company's report
on Form 10-Q for the quarter ended September 30,
1988 (File No.0-14710).
6 Incorporated by reference to the Company's
Registration Statement on Form S-1
(File No. 33-27319).
7 Incorporated by reference to the Company's
Registration
Statement on Form S-8 (File No. 33-39155).
8 Incorporated by reference to Ingene Registration
Statement
on Form S-1 (File No. 33-5150).
9 Incorporated by reference to the Company's Annual
Report
on Form 10-K for the fiscal year ended December
31, 1991
(File No. 0-14710).
10 Incorporated by reference to the Company's
Current
Report on Form 8-K dated May 28, 1992.
11 Incorporated by reference to the Company's
Current Report on
Form 8-K dated September 18, 1992, as amended.
12 Incorporated by reference to the Company's
Registration
Statement on Form S-3 (File No. 33-74982).
13 Incorporated by reference to the Company's
Current
Report on Form 8-K dated October 27, 1993.
14 Incorporated by reference to the Company's
Current
Report on Form 8-K dated December 21, 1993.
15 Incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1992 (File No. 0-14710).
16 Incorporated by reference to the Company's Annual
Report
on Form 10-K for the fiscal year ended December
31, 1993
(File No. 0-14710).
17 Incorporated by reference to the Company's Annual
Report
on Form 10-K for the fiscal year ended December
31, 1994
(File No. 0-14710).
-46-
<PAGE>
<PAGE>
Exhibit 3.4
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>
"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.
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<PAGE>
"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 the 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.
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<PAGE>
"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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
(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
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<PAGE>
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 at 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
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<PAGE>
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 share 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
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<PAGE>
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 Cor-
poration 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
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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 FOL-
LOWING THE ORIGINAL ISSUANCE
THEREOF."
"THESE SECURITIES ARE NOT CONVERTIBLE
AT THE OPTION OF THE HOLDER HEREOF
UNTIL ON OR AFTER THE 90TH DAY FOL-
LOWING 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.
-15-
<PAGE>
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 day of August, 1995.
XOMA CORPORATION
By: _____________________________
Name:
Title:
ATTEST:
By: ____________________________
Christopher J. Margolin
Secretary
-16-
<PAGE>
<PAGE>
Exhibit 4.1
DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
OR UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES
ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR
TRANSFERRED
PRIOR TO THE 40TH DAY FOLLOWING THE ORIGINAL ISSUANCE HEREOF
AND
THEREAFTER ONLY IN ACCORDANCE WITH REGULATION S UNDER THE
ACT, OR AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM
AS EVIDENCED BY AN OPINION (WHICH SHALL BE IN FORM AND
SUBSTANCE
SATISFACTORY TO THE COMPANY) OF COUNSEL SATISFACTORY TO THE
COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED.
No. --------- US
$----------------
XOMA CORPORATION
4% CONVERTIBLE SUBORDINATED DEBENTURE DUE NOVEMBER ___,
1998
THIS DEBENTURE is one of a duly authorized issue of
Debentures of XOMA
CORPORATION, a corporation duly organized and existing under the
laws of the
State of Delaware (the "Company") designated as its 4% Convertible
Subordinated
Debentures due November ___, 1998.
FOR VALUE RECEIVED, the Company promises to pay to
- - -----------------,
the registered holder hereof (the "Holder"), the
principal sum of -------------------------- United States Dollars
(US
$--------------) on November ---, 1998 (the "Maturity Date") and to
pay interest
on the principal sum outstanding from time to time in arrears on
the Maturity
Date, at the rate of four per cent (4%) per annum accruing on a
calendar year
basis from the date of initial issuance. Accrual of interest shall
commence on
the first such business day to occur after the date hereof until
payment in full
of the principal sum has been made or duly provided for. All
interest so payable
will be paid to the person in whose name this Debenture (or one or
more
predecessor Debentures) is registered on the records of the Company
regarding
registration and transfers of the Debentures (the "Debenture
Register") on the
tenth day prior to the Maturity Date; provided, however, that the
Company's
obligation to a transferee of this Debenture arises only if such
transfer, sale
or other disposition is made in accordance with the terms and
conditions of the
Offshore Securities Subscription Agreement executed by the original
Holder. The
principal of, and interest on, this Debenture are payable in such
coin or
currency of the United States of
<PAGE>
America as at the time of payment is legal tender for payment of
public and
private debts, at the address last appearing on the Debenture
Register of the
Company as designated in writing by the Holder from time to time.
The Company
will pay the principal of and interest on this Debenture on the
Maturity Date,
less any amounts required by law to be deducted, by check payable
to the
registered holder of this Debenture as of the tenth day prior to
the Maturity
Date and addressed to such holder at the last address appearing on
the Debenture
Register. The forwarding of such check shall constitute a payment
of interest
hereunder and shall satisfy and discharge the liability for
principal of and
interest on this Debenture to the extent of the sum represented by
such check
plus any amounts so deducted.
This Debenture is subject to the following additional
provisions:
1. The Debentures are issuable in denominations of Fifty
Thousand
United States Dollars (US $50,000) and integral multiples thereof.
Subject to
the foregoing, the Debentures are exchangeable for an equal
aggregate principal
amount of Debentures of different authorized denominations, as
requested by the
Holders surrendering the same. No service charge will be made for
such
registration or transfer or exchange.
2. The Company shall be entitled to withhold from all
payments of
principal of, and interest on, this Debenture any amounts required
to be
withheld under the applicable provisions of the United States
income tax laws or
other applicable laws at the time of such payments, and Holder
shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment
representations
of the original purchaser hereof and may be transferred or
exchanged only in
compliance with the U.S. Securities Act of 1933, as amended (the
"Act"), and
other applicable state and foreign securities laws. In the event of
any proposed
transfer of this Debenture, the Company may require, prior to
issuance of a new
Debenture in the name of such other person, that it receive
transfer
documentation including an opinion or opinions (which shall be in
form and
substance satisfactory to the Company) of counsel satisfactory to
the Company to
the effect that the issuance of the Debenture in such other name
does not and
will not cause a violation of the Act or any applicable state or
foreign
securities laws. Prior to due presentment for transfer of this
Debenture and
such documentation, the Company and any agent of the Company may
treat the
person in whose name this Debenture is duly registered on the
Company's
Debenture Register as the owner hereof for the purpose of receiving
payment as
herein provided and for all other purposes, whether or not this
Debenture be
overdue, and neither the Company nor any such agent shall be
affected by notice
to the contrary.
4. The Holder of this Debenture is entitled, at its
option, to convert
at any time (a) commencing forty-five (45) days after the closing
of the sale of
this Debenture (the "Closing") until maturity hereof, fifty percent
(50%) of the
principal amount of this Debenture, and (b) commencing seventy-five
(75) days
after the Closing until maturity hereof, all of the outstanding
principal amount
of this Debenture, provided the principal amount is at least Fifty
Thousand
United States Dollars (US $50,000) (unless at the time of such
election to
convert the aggregate principal amount of all outstanding
Debentures registered
in the name of the Holder is less than Fifty Thousand United States
Dollars (US
$50,000), in which event the entire principal amount thereof shall
be so
convertible), into shares of Common Stock, par value $.0005 per
share, of the
Company (the "Common Stock") at a conversion price per share of
Common Stock
equal to Eighty Percent (80%) of the Market Price of the Company's
Common Stock
on the applicable Conversion Date. For purposes of this Section 4,
(y) the
Market Price on any date means (i) if the Common Stock is listed on
a national
securities exchange, the numerical
2
<PAGE>
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
of the Company in good faith after taking into account such factors
as the Board
of Directors may deem appropriate, including one or more
professional
valuations, and (z) Conversion Date means the date selected by the
Holder
converting this Debenture as the date for conversion hereof, which
date shall be
set forth in a written notice received by the Company on or before
such date
(which may be provided by facsimile transmission or other means of
same day
delivery), as well as appearing below such Holder's signature on a
properly
executed Conversion Notice (defined below) delivered to the Company
promptly
thereafter. Such conversion shall be effectuated by surrendering
the Debentures
to be converted to the Company with the form of conversion notice
attached
hereto as Exhibit A (the "Conversion Notice"), executed by the
Holder of the
Debenture evidencing such Holder's election to convert this
Debenture or a
specified portion (as above provided) hereof, and accompanied, if
required by
the Company, by proper assignment hereof in blank. Interest accrued
or accruing
from the date of issuance to the date of conversion, less all
amounts required
by law to be deducted, shall be paid upon conversion by issuance of
shares of
Common Stock of the Company at the Market Price. No fractional
shares of Common
Stock or scrip representing fractions of shares will be issued on
conversion,
but the number of shares issuable shall be rounded to the nearest
whole share.
Facsimile delivery of the Conversion Notice shall be accepted by
the Company.
Subject to Section 5 hereof, commencing ------------------, 1996,
the Company
shall have the right, at any time and from time to time, to convert
this
Debenture into shares of Common Stock, such right of the Company to
be
exercisable by the Company in whole or in part. Each $1,000 of
principal amount
of Debenture converted pursuant to the preceding sentence will be
converted 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 Company
Conversion Date. As
promptly as practicable after the applicable Company Conversion
Date, the
Company will send a written notice (a "Company Conversion Notice")
by
first-class mail, postage prepaid, to the Holder, at its address as
the same
appears on the Debenture Register for the Debentures setting forth
the
applicable Market Price, together with a certificate or
certificates for the
number of shares of Common Stock issuable upon conversion of such
Debentures.
Each conversion pursuant to the foregoing sentence shall be deemed
to have
occurred on the date of mailing of the Company Conversion Notice,
and this
Debenture shall no longer be outstanding for any purpose
thereafter. Company
Conversion Date means the date selected by the Company for
conversion of this
Debenture as set forth in the applicable Company Conversion Notice.
5. Notwithstanding any other provision herein to the
contrary, unless
the Stockholder Approval shall have been obtained, the Company
shall not be
required to convert any Debentures into shares of Common Stock to
the extent
that as a consequence of such conversion, together with all prior
conversions of
Debentures, greater than 4,908,474 shares of Common Stock shall
have been issued
upon conversion of Debentures. The Company shall promptly give
notice to each
Holder (by first class mail, postage prepaid, at such Holder's
address as the
same appears on the Debenture Register) if for any five (5) trading
days of an
eight (8) consecutive trading day period, the Company would not
have been
3
<PAGE>
required to convert Debentures as a consequence of the foregoing
limitation had
all outstanding Debentures been surrendered for conversion into
Common Stock on
such date. If at any time any Debentures surrendered for conversion
are not
converted into Common Stock as a consequence of the foregoing
limitation, the
Company 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
prepay the principal amount of the outstanding Debentures so
surrendered for
conversion, together with accrued interest to the date of
conversion, less all
amounts required by law to be deducted. In the event the
Stockholder Approval
contemplated in subclause (i) above is not obtained at such meeting
or any
adjournment thereof, the Company shall thereafter promptly prepay
the principal
amount of the outstanding Debentures so surrendered for conversion,
together
with accrued interest to the date of prepayment, less all amounts
required by
law to be deducted. Stockholder Approval means the approval by a
majority of the
votes cast by the holders of shares of Common Stock (in person or
by proxy) at a
meeting of the stockholders of the Company (duly convened at which
a quorum was
present) of the issuance by the Company of 20% or more of the
outstanding Common
Stock of the Company for less than the greater of the book or
market value of
such Common Stock upon conversion of the Debentures, as and to the
extent
required under Section 6(i) or Part III of Schedule D to the
By-Laws of the
National Association of Securities Dealers, Inc. (or any successor
or
replacement provision thereof).
6. No provision of this Debenture shall alter or impair
the obligation
of the Company, which is absolute and unconditional, to pay the
principal of,
and interest on, this Debenture at the time, place, and rate, and
in the coin or
currency, herein proscribed. This Debenture is a direct obligation
of the
Company. This Debenture ranks equally with all other Debentures now
or hereafter
issued under the terms set forth herein.
7. No recourse shall be had for the payment of the
principal of, or the
interest on, this Debenture, or for any claim based hereon, or
otherwise in
respect hereof, against any incorporator, shareholder, officer or
director, as
such, past, present or future, of the Company or any successor
corporation,
whether by virtue of any constitution, statute or rule of law, or
by the
enforcement of any assessment or penalty or otherwise, all such
liability being,
by the acceptance hereof and as part of the consideration for the
issue hereof,
expressly waived and released.
8. If the Company merges or consolidates with another
corporation or
sells or transfers all or substantially all of its assets to
another person and
the holders of the Common Stock are entitled to receive stock,
securities or
property in respect of or in exchange for Common Stock, then as a
condition of
such merger, consolidation, sale or transfer, the Company and any
such
successor, purchaser or transferee shall amend this Debenture to
provide that it
may thereafter be converted on the terms and subject to the
conditions set forth
above into the kind and amount of stock, securities or property
receivable upon
such merger, consolidation, sale or transfer by a holder of the
number of shares
of Common Stock into which this Debenture might have been converted
immediately
before such merger, consolidation, sale or transfer, subject to
adjustments
which shall be as nearly equivalent as may be practicable. In the
event of any
proposed merger, consolidation or sale or transfer of all or
substantially all
of the assets of the Company (a "Sale"), the Holder hereof shall
have the right
to convert by delivering a Notice of Conversion to the Company
within fifteen
(15) days of receipt of notice of such Sale from the Company. In
the event the
Holder hereof shall elect not to convert prior to the expiration of
such fifteen
(15) day period, the Company may prepay all outstanding principal
and accrued
interest on this Debenture to the date of such prepayment, less all
amounts
required by law to be deducted, upon which tender of payment
following such
notice, the right of conversion shall terminate.
4
<PAGE>
9. The Holder of the Debenture, by acceptance hereof,
agrees that this
Debenture is being acquired for investment and that such Holder
will not offer,
sell or otherwise dispose of this Debenture or the shares of Common
Stock
issuable upon conversion thereof prior to the 40th day following
the original
issuance hereof and thereafter only under circumstances which will
not result in
a violation of the Act or any applicable state Blue Sky or foreign
laws or
similar laws relating to the sale of securities.
10. This Debenture shall be governed by and construed in
accordance
with
the laws of the State of New York.
11. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of
principal or
interest on this Debenture; or
b. Any of the representations or warranties made by
the
Company herein, in the Subscription Agreement, or
in
any certificate or financial or other written
statements heretofore or hereafter furnished by or
on
behalf of the Company in connection with the
execution and delivery of this Debenture or the
Subscription Agreement shall be false or misleading
in any material respect at the time made; or
c. The Company shall fail to perform or observe, in
any
material respect, any other covenant, term,
provision, condition, agreement or obligation of
the
Company under this Debenture and such failure shall
continue uncured for a period of thirty (30) days
after notice from the Holder of such failure; or
d. The Company shall (1) make an assignment for the
benefit of
creditors or commence proceedings for its
dissolution; or (2)
apply for or consent to the appointment of a
trustee,
liquidator or receiver for its or for a substantial
part of its property or business; or
e. A trustee, liquidator or receiver shall be
appointed for the
Company or for a substantial part of its property
or business
without its consent and shall not be discharged
within sixty
(60) days after such appointment; or
f. Bankruptcy, reorganization, insolvency or
liquidation
proceedings or other proceedings for relief under
any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company and,
if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceeding; or
g. The Company shall have its Common Stock delisted
from
an exchange or over-the-counter market or suspended
from trading, and shall not have its Common Stock
listed on the same or another exchange or market or
have such suspension lifted, as the case may be,
within thirty (30) days; provided that in no event
shall
5
<PAGE>
a change in the listing of the Company's stock from
NASDAQ/NMS to the NASDAQ Small Cap Market
constitute
a default hereunder.
Then, or at any time thereafter, and in each and every such case,
unless such
Event of Default shall have been waived in writing by the Holder
(which waiver
shall not be deemed to be a waiver of any subsequent default) at
the option of
the Holder and in the Holder's sole discretion, the Holder may,
upon written
notice to the Company, consider this Debenture immediately due and
payable,
without presentment, demand, protest or notice of any kind, all of
which are
hereby expressly waived, anything herein or in any note or other
instruments
contained to the contrary notwithstanding, and the Holder may
immediately, and
without expiration of any period of grace, enforce any and all of
the Holder's
rights and remedies provided herein or any other rights or remedies
afforded by
law.
12. Nothing contained in this Debenture shall be construed
as
conferring upon the Holder the right to vote or to receive
dividends or to
consent or receive notice as a shareholder in respect of any
meeting of
shareholders or any rights whatsoever as a shareholder of the
Company, unless
and to the extent converted into shares of Common Stock in
accordance with the
terms hereof.
13. The Company and each Holder of this Debenture covenant
and agree
that the payment of the principal of and interest on this Debenture
shall be
subordinated in right of payment to the prior payment in full in
cash of all of
the Company's indebtedness or obligations of any kind whatsoever
outstanding
from time to time that is not expressly designated as subordinated
indebtedness
(the "Senior Debt"). In the event of any insolvency, bankruptcy or
similar
proceedings relative to the Company or to its property, then:
a. the holders of Senior Debt shall be entitled to
receive payment
in full in cash of all amounts due on or in respect of
all Senior
Debt before the Holder of this Debenture is entitled
to receive
any payment or distribution of any kind or character
on account
of this Debenture;
b. any payment or distribution by the Company of any kind
or
character to which the Holder of this Debenture would
be entitled
but for the provisions of this Section shall be paid,
ratably,
directly to the holders of Senior Debt or their
representative or
representatives; and
c. in the event that, notwithstanding the foregoing, the
Holder
of this Debenture shall have received any payment or
distribution by the Company of any kind or character,
from and
after the date of any such event set forth above
before all
Senior Debt is paid in full in cash, then and in such
event
such payment or distribution shall be paid over or
delivered
forthwith to the trustee in bankruptcy or other person
or
entity making payment or distribution of assets of the
Company
for application to the payment of all Senior Debt
remaining
unpaid.
In case any payment or distribution shall be paid or
delivered to any
Holder of this Debenture in violation or contravention of the terms
of this
Section, such payment or distribution shall, upon such Holder's
receipt of
notice of such violation or contravention, be held in trust for and
paid and
delivered ratably to the holders of Senior Debt (or their duly
authorized
representatives), until all Senior Debt shall have been paid in
full.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly
executed by an officer thereunto duly authorized.
Dated: ------------------------
XOMA CORPORATION
By:
- - -----------------------------
[Name and Title]
7
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to
Convert a
4% Convertible Subordinated Debenture due November ---,
1998)
The undersigned hereby irrevocably elects to convert US
$-----------
(not less than US $50,000, unless at the time of such election
to convert the aggregate principal amount of all outstanding
Debentures
registered in the name of the Holder is less than Fifty Thousand
United States
Dollars (US $50,000)) of the principal amount of the above
Debenture No. ---
into shares of Common Stock, par value $.0005 per share, of XOMA
CORPORATION
(the "Company") according to the conditions thereof, as of the date
written
below.
1. The Holder understands that the Debenture was issued by
the Company
pursuant to the exemption from registration under the United States
Securities
Act of 1933, as amended (the "1933 Act"), provided by Regulation S
thereunder
("Regulation S").
2. The undersigned represents that it is not a U.S.
Person as
defined in
Regulation S promulgated under the Securities Act of 1933 and is
not converting
the Debenture on behalf of any U.S. Person.
3. The Holder represents and warrants that all offers and
sales by the
Holder of the shares of Common Stock of the Company issued to the
Holder upon
such conversion of the Debenture (the "Common Shares") shall be
made in
compliance with Regulation S, pursuant to the registration
provisions of the
1933 Act or pursuant to an exemption from registration.
4. The Holder is familiar with and understands the terms
and conditions
and
requirements contained in Regulation S.
5. The undersigned has not engaged in any "directed
selling efforts"
(as
such term is defined in Regulation S) with respect to the Common
Shares.
Date of Conversion* ---------------------------------------
Applicable Market Price ----------------------------------
Signature --------------------------------------------------
[Name]
Address: ---------------------------------------------------
---------------------------------------------------
* The original Debenture and the original of this Notice of
Conversion
must be received by the Company by the fifth business date
following
the Conversion Date. Written notice of the conversion to
which this
notice relates must be received by the Company on the
Conversion Date
(which may be provided by facsimile transmission or other
means of same
day delivery).
8
<PAGE>
DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE OR UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THE SECURITIES
ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR
TRANSFERRED
PRIOR TO THE 40TH DAY FOLLOWING THE ORIGINAL ISSUANCE
HEREOF AND
THEREAFTER ONLY IN ACCORDANCE WITH REGULATION S UNDER THE
ACT, OR AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR
EXEMPTION
THEREFROM.
No. A- US $
XOMA CORPORATION
4% CONVERTIBLE SUBORDINATED DEBENTURE DUE NOVEMBER 30, 1998,
SERIES A
THIS DEBENTURE is one of a duly authorized issue of
Debentures of XOMA
CORPORATION, a corporation duly organized and existing under the
laws of the
State of Delaware (the "Company"), designated as its 4% Convertible
Subordinated
Debentures due November 30, 1998, Series A.
FOR VALUE RECEIVED, the Company promises to pay to
- - ----------------------------, the registered holder hereof (the
"Holder"), the
principal sum of -------------------------- United States Dollars
(US
$--------------) on November 30, 1998 (the "Maturity Date") and to
pay interest
on the principal sum outstanding from time to time in arrears on
the Maturity
Date, at the rate of four per cent (4%) per annum accruing on a
calendar year
basis from the date of initial issuance. Accrual of interest shall
commence on
the first such business day to occur after the date hereof until
payment in full
of the principal sum has been made or duly provided for. All
interest so payable
will be paid to the person in whose name this Debenture (or one or
more
predecessor Debentures) is registered on the records of the Company
regarding
registration and transfers of the Debentures (the "Debenture
Register") on the
tenth day prior to the Maturity Date; provided, however, that the
Company's
obligation to a transferee of this Debenture arises only if such
transfer, sale
or other disposition is made in accordance with the terms and
conditions of the
Offshore Securities Subscription Agreement ("Subscription
Agreement") executed
by the original Holder. The principal of, and interest on, this
Debenture are
payable in such coin or currency of the United States of America as
at the time
of payment is legal tender for payment of public and private debts,
at the
address last appearing on the Debenture Register of the Company as
designated in
writing by the Holder from time to time. The Company will pay the
principal of
and interest on this Debenture on the Maturity Date, less any
amounts required
by law to be deducted, by check payable to the registered holder of
this
Debenture as of the tenth day prior to the Maturity Date and
addressed to such
holder at the last address appearing on the Debenture Register. The
forwarding
of such check shall constitute a payment of interest hereunder and
shall satisfy
and discharge the liability for principal of and interest on this
Debenture to
the extent of the sum represented by such check plus any amounts so
deducted.
-1-
<PAGE>
This Debenture is subject to the following additional
provisions:
1. The Debentures are issuable in denominations of Fifty
Thousand
United States Dollars (US$ 50,000) and integral multiples thereof.
Subject to
the foregoing, the Debentures are exchangeable for an equal
aggregate principal
amount of Debentures of different authorized denominations, as
requested by the
Holders surrendering the same. No service charge will be made for
such
registration or transfer or exchange.
2. The Company shall be entitled to withhold from all
payments of
principal of, and interest on, this Debenture any amounts required
to be
withheld under the applicable provisions of the United States
income tax laws or
other applicable laws at the time of such payments, and Holder
shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment
representations
of the original purchaser hereof and may be transferred or
exchanged only in
compliance with the U.S. Securities Act of 1933, as amended (the
"Act"), and
other applicable state and foreign securities laws. In the event of
any proposed
transfer of this Debenture, the Company may require, prior to
issuance of a new
Debenture in the name of such other person, that it receive
transfer
documentation including an opinion or opinions (which shall be in
form and
substance satisfactory to the Company) of counsel satisfactory to
the Company to
the effect that the issuance of the Debenture in such other name
does not and
will not cause a violation of the Act or any applicable state or
foreign
securities laws. Prior to due presentment for transfer of this
Debenture and
such documentation, the Company and any agent of the Company may
treat the
person in whose name this Debenture is duly registered on the
Company's
Debenture Register as the owner hereof for the purpose of receiving
payment as
herein provided and for all other purposes, whether or not this
Debenture be
overdue, and neither the Company nor any such agent shall be
affected by notice
to the contrary.
4. The Holder of this Debenture is entitled, at its
option, to convert
at any time (a) commencing forty-five (45) days after the closing
of the sale of
this Debenture (the "Closing") until maturity hereof, fifty percent
(50%) of the
principal amount of this Debenture, and (b) commencing seventy-five
(75) days
after the Closing until maturity hereof, all of the outstanding
principal amount
of this Debenture, provided the principal amount is at least Fifty
Thousand
United States Dollars (US $50,000) (unless at the time of such
election to
convert the aggregate principal amount of all outstanding
Debentures registered
in the name of the Holder is less than Fifty Thousand United States
Dollars (US
$50,000), in which event the entire principal amount thereof shall
be so
convertible), into shares of Common Stock, par value $.0005 per
share, of the
Company (the "Common Stock") at a conversion price per share of
Common Stock
equal to Eighty Percent (80%) of the Market Price of the Company's
Common Stock
on the applicable Conversion Date. For purposes of this Section 4,
(y) the
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
2
<PAGE>
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 of the Company in good faith after taking into account
such factors as
the Board of Directors may deem appropriate, including one or more
professional
valuations, and (z) Conversion Date means the date selected by the
Holder
converting this Debenture as the date for conversion hereof, which
date shall be
set forth in a written notice received by the Company on or before
such date
(which may be provided by facsimile transmission or other means of
same day
delivery), as well as appearing below such Holder's signature on a
properly
executed Conversion Notice (defined below) delivered to the Company
promptly
thereafter. Such conversion shall be effectuated by surrendering
the Debentures
to be converted to the Company with the form of conversion notice
attached
hereto as Exhibit A (the "Conversion Notice"), executed by the
Holder of the
Debenture evidencing such Holder's election to convert this
Debenture or a
specified portion (as above provided) hereof, and accompanied, if
required by
the Company, by proper assignment hereof in blank. Interest accrued
or accruing
from the date of issuance to the date of conversion, less all
amounts required
by law to be deducted, shall be paid upon conversion by issuance of
shares of
Common Stock of the Company at the Market Price. No fractional
shares of Common
Stock or scrip representing fractions of shares will be issued on
conversion,
but the number of shares issuable shall be rounded to the nearest
whole share.
Facsimile delivery of the Conversion Notice shall be accepted by
the Company.
Subject to Section 5 hereof, commencing November 30, 1996, the
Company shall
have the right, at any time and from time to time, to convert this
Debenture
into shares of Common Stock, such right of the Company to be
exercisable by the
Company in whole or in part. Each $1,000 of principal amount of
Debenture
converted pursuant to the preceding sentence will be converted 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 Company Conversion Date. As
promptly as
practicable after the applicable Company Conversion Date, the
Company will send
a written notice (a "Company Conversion Notice") by first-class
mail, postage
prepaid, to the Holder, at its address as the same appears on the
Debenture
Register for the Debentures setting forth the applicable Market
Price, together
with a certificate or certificates for the number of shares of
Common Stock
issuable upon conversion of such Debentures. Each conversion
pursuant to the
foregoing sentence shall be deemed to have occurred on the date of
mailing of
the Company Conversion Notice, and this Debenture shall no longer
be outstanding
for any purpose thereafter. Company Conversion Date means the date
selected by
the Company for conversion of this Debenture as set forth in the
applicable
Company Conversion Notice.
5. Notwithstanding any other provision herein to the
contrary, unless
the Stockholder Approval shall have been obtained, the Company
shall not be
required to convert any Debentures into shares of Common Stock to
the extent
that as a consequence of such conversion, together with all prior
conversions of
Debentures and the Company's 4% Convertible Subordinated Debentures
due November
21, 1995 (the "November 21 Debentures"), greater than 4,908,474
shares of Common
Stock shall have been issued upon conversion of either Debentures
or the
November 21 Debentures, or any combination thereof. The Company
shall promptly
give notice to each Holder (by first class mail, postage prepaid,
at such
Holder's address as the same appears on the Debenture Register) if
for any five
(5) trading days of an eight (8) consecutive trading day period,
the Company
would not have been required to convert Debentures as a consequence
of the
foregoing limitation had all outstanding Debentures and November 21
Debentures
been surrendered for conversion into Common Stock on such date. If
at any time
any Debentures surrendered for conversion are not converted into
Common Stock as
a consequence of the foregoing limitation, the Company 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 prepay the principal amount
of the
outstanding Debentures so surrendered for conversion,
3
<PAGE>
together with accrued interest to the date of conversion, less all
amounts
required by law to be deducted. In the event the Stockholder
Approval
contemplated in subclause (i) above is not obtained at such meeting
or any
adjournment thereof, the Company shall thereafter promptly prepay
the principal
amount of the outstanding Debentures so surrendered for conversion,
together
with accrued interest to the date of prepayment, less all amounts
required by
law to be deducted. Stockholder Approval means the approval by a
majority of the
votes cast by the holders of shares of Common Stock (in person or
by proxy) at a
meeting of the stockholders of the Company (duly convened at which
a quorum was
present) of the issuance by the Company of 20% or more of the
outstanding Common
Stock of the Company for less than the greater of the book or
market value of
such Common Stock upon conversion of the Debentures and the
November 21
Debentures, as and to the extent required under Section 6(i) or
Part III of
Schedule D to the By-Laws of the National Association of Securities
Dealers,
Inc. (or any successor or replacement provision thereof).
6. No provision of this Debenture shall alter or impair
the obligation
of the Company, which is absolute and unconditional, to pay the
principal of,
and interest on, this Debenture at the time, place, and rate, and
in the coin or
currency, herein proscribed. This Debenture is a direct obligation
of the
Company. This Debenture ranks equally with all other Debentures now
or hereafter
issued under the terms set forth herein.
7. No recourse shall be had for the payment of the
principal of, or the
interest on, this Debenture, or for any claim based hereon, or
otherwise in
respect hereof, against any incorporator, shareholder, officer or
director, as
such, past, present or future, of the Company or any successor
corporation,
whether by virtue of any constitution, statute or rule of law, or
by the
enforcement of any assessment or penalty or otherwise, all such
liability being,
by the acceptance hereof and as part of the consideration for the
issue hereof,
expressly waived and released.
8. If the Company merges or consolidates with another
corporation or
sells or transfers all or substantially all of its assets to
another person and
the holders of the Common Stock are entitled to receive stock,
securities or
property in respect of or in exchange for Common Stock, then as a
condition of
such merger, consolidation, sale or transfer, the Company and any
such
successor, purchaser or transferee shall amend this Debenture to
provide that it
may thereafter be converted on the terms and subject to the
conditions set forth
above into the kind and amount of stock, securities or property
receivable upon
such merger, consolidation, sale or transfer by a holder of the
number of shares
of Common Stock into which this Debenture might have been converted
immediately
before such merger, consolidation, sale or transfer, subject to
adjustments
which shall be as nearly equivalent as may be practicable. In the
event of any
proposed merger, consolidation or sale or transfer of all or
substantially all
of the assets of the Company (a "Sale"), the Holder hereof shall
have the right
to convert by delivering a Notice of Conversion to the Company
within fifteen
(15) days of receipt of notice of such Sale from the Company. In
the event the
Holder hereof shall elect not to convert prior to the expiration of
such fifteen
(15) day period, the Company may prepay all outstanding principal
and accrued
interest on this Debenture to the date of such prepayment, less all
amounts
required by law to be deducted, upon which tender of payment
following such
notice, the right of conversion shall terminate.
9. The Holder of the Debenture, by acceptance hereof,
agrees that this
Debenture is being acquired for investment and that such Holder
will not offer,
sell or otherwise dispose of this Debenture or the shares of Common
Stock
issuable upon conversion hereof prior to the 40th day following the
original
issuance hereof and thereafter only under circumstances which will
not result in
a violation of the Act or any applicable state Blue Sky or foreign
laws or
similar laws relating to the sale of securities.
4
<PAGE>
10. This Debenture shall be governed by and construed in
accordance
with
the laws of the State of New York.
11. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of
principal or
interest on this Debenture; or
b. Any of the representations or warranties made by
the
Company herein, in the Subscription Agreement, or
in
any certificate or financial or other written
statements heretofore or hereafter furnished by or
on
behalf of the Company in connection with the
execution and delivery of this Debenture or the
Subscription Agreement shall be false or misleading
in any material respect at the time made; or
c. The Company shall fail to perform or observe, in
any
material respect, any other covenant, term,
provision, condition, agreement or obligation of
the
Company under this Debenture or the Subscripton
Agreement and such failure shall continue uncured
for
a period of ten (10) business days after notice
from
the Holder of such failure; or
d. The Company shall (1) make an assignment for the
benefit of
creditors or commence proceedings for its
dissolution; or (2)
apply for or consent to the appointment of a
trustee,
liquidator or receiver for its or for a substantial
part of its property or business; or
e. A trustee, liquidator or receiver shall be
appointed for the
Company or for a substantial part of its property
or business
without its consent and shall not be discharged
within sixty
(60) days after such appointment; or
f. Bankruptcy, reorganization, insolvency or
liquidation
proceedings or other proceedings for relief under
any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company and,
if
instituted against the Company, shall not be
dismissed within sixty(60) days after such
institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceeding; or
g. The Company shall have its Common Stock delisted
from
an exchange or over-the-counter market or suspended
from trading, and shall not have its Common Stock
listed on the same or another exchange or market or
have such suspension lifted, as the case may be,
within thirty (30) days; provided that in no event
shall a change in the listing of the Company's
stock
from NASDAQ/NMS to the NASDAQ Small Cap Market
constitute a default hereunder.
Then, or at any time thereafter, and in each and every such case,
unless such
Event of Default shall have been waived in writing by the Holder
(which waiver
shall not be deemed to be a waiver of any subsequent default) at
the option of
the Holder and in the Holder's sole discretion, the Holder may,
upon written
5
<PAGE>
notice to the Company, consider this Debenture immediately due and
payable,
without presentment, demand, protest or notice of any kinds, all of
which are
hereby expressly waived, anything herein or in any note or other
instruments
contained to the contrary notwithstanding, and the Holder may
immediately, and
without expiration of any period of grace, enforce any and all of
the Holder's
rights and remedies provided herein or any other rights or remedies
afforded by
law.
12. Nothing contained in this Debenture shall be construed
as
conferring upon the Holder the right to vote or to receive
dividends or to
consent or receive notice as a shareholder in respect of any
meeting of
shareholders or any rights whatsoever as a shareholder of the
Company, unless
and to the extent converted into shares of Common Stock in
accordance with the
terms hereof.
13. The Company and each Holder of this Debenture covenant
and agree
that the payment of the principal of and interest on this Debenture
shall be
subordinated in right of payment to the prior payment in full in
cash of all of
the Company's indebtedness or obligations of any kind whatsoever
(other than
accounts payable or liabilities to trade creditors in the ordinary
course of
business) outstanding from time to time that is not expressly
designated as
subordinated indebtedness (the "Senior Debt"). In the event of any
insolvency,
bankruptcy or similar proceedings relative to the Company or to its
property,
then:
a. the holders of Senior Debt shall be entitled to
receive payment
in full in cash of all amounts due on or in respect of
all Senior
Debt before the Holder of this Debenture is entitled
to receive
any payment or distribution of any kind or character
on account
of this Debenture;
b. any payment or distribution by the Company of any kind
or
character to which the Holder of this Debenture would
be entitled
but for the provisions of this Section shall be paid,
ratably,
directly to the holders of Senior Debt or their
representative or
representatives; and
c. in the event that, notwithstanding the foregoing, the
Holder
of this Debenture shall have received any payment or
distribution by the Company of any kind or character,
from and
after the date of any such event set forth above
before all
Senior Debt is paid in full in cash, then and in such
event
such payment or distribution shall be paid over or
delivered
forthwith to the trustee in bankruptcy or other person
or
entity making payment or distribution of assets of the
Company
for application to the payment of all Senior Debt
remaining
unpaid.
In case any payment or distribution shall be paid or
delivered to any
Holder of this Debenture in violation or contravention of the terms
of this
Section, such payment or distribution shall, upon such Holder's
receipt of
notice of such violation or contravention, be held in trust for and
paid and
delivered ratably to the holders of Senior Debt (or their duly
authorized
representatives), until all Senior Debt shall have been paid in
full.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly
executed by an officer thereunto duly authorized.
Dated: November 30, 1995
XOMA CORPORATION
By:
- - -------------------------------
John L. Castello
Chairman of the Board,
President and Chief
Executive Officer
7
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert a
4% Convertible Subordinated Debenture due November 30, 1998, Series
A)
The undersigned hereby irrevocably elects to convert US
$------------ (not less than US $50,000, unless at the time of such
election
to convert the aggregate principal amount of all outstanding
Debentures
registered in the name of the Holder is less than Fifty Thousand
United States
Dollars (US $50,000)) of the principal amount of the above
Debenture No. A----
into shares of Common Stock, par value $.0005 per share, of XOMA
CORPORATION
(the "Company") according to the conditions thereof, as of the date
written
below.
1. The Holder understands that the Debenture was issued by
the Company
pursuant to the exemption from registration under the United States
Securities
Act of 1933, as amended (the "1933 Act"), provided by Regulation S
thereunder
("Regulation S").
2. The undersigned represents that it is not a U.S.
Person as
defined in
Regulation S promulgated under the Securities Act of 1933 and is
not converting
the Debenture on behalf of any U.S. Person.
3. The Holder represents and warrants that all offers and
sales by the
Holder of the shares of Common Stock of the Company issued to the
Holder upon
such conversion of the Debenture (the "Common Shares") shall be
made in
compliance with Regulation S, pursuant to the registration
provisions of the
1933 Act or pursuant to an exemption from registration.
4. The Holder is familiar with and understands the terms
and conditions
and
requirements contained in Regulation S.
5. The undersigned has not engaged in any "directed
selling efforts"
(as
such term is defined in Regulation S) with respect to the Common
Shares.
Date of Conversion* ------------------------------------------
Applicable Market Price -------------------------------------
Signature ----------------------------------------------------
[Name]
Address: -----------------------------------------------------
-----------------------------------------------------
* The original Debenture and the original of this Notice of
Conversion
must be received by the Company by the fifth business date
following
the Conversion Date. Written notice of the conversion to
which this
notice relates must be received by the Company on the
Conversion Date
(which may be provided by facsimile transmission or other
means of same
day delivery).
8
<PAGE>
<PAGE>
Exhibit 10.48
XXXX Confidential treatment has been requested for this information
pursuant to Rule 24B-2.
November 7, 1995
John L. Castello
Chairman, President and Chief Executive Officer
XOMA Corporation
2910 Seventh Street
Berkeley, California 94710
Re: E5(r) Agreement
Dear Jack:
This letter agreement ("Agreement") amends the letter
agreement dated July 14, 1993 (the "Letter") between XOMA
Corporation ("XOMA") and Pfizer Inc. ("Pfizer") with respect to
the parties' continuing collaboration on a double-blinded,
placebo-controlled clinical trial (the "Trial") of the E5(r)
product (the "Product") in the United States.
1. Estimated Costs of Trial
(a) The parties currently anticipate that the Trial
may cost as much as XXXX. Attached hereto as Appendix A
is a budget reflecting the parties' current estimated costs of
the Trial, which estimate includes, but is not limited to, past
and anticipated costs of Trial design; institutional grants for
patient enrollment and evaluation; clinical supplies; use of
one or more CROs to monitor the Trial; and analysis, reporting
and preparation of Trial results. For purposes of this
Agreement, the parties' internal costs (overhead, salaries,
etc.) will be borne by the parties and will not be charged to
the Trial or otherwise paid or reimbursed out of the
XXXX.
(b) Without the prior written approval of both
parties, the costs of the Trial will not exceed XXXX.
If either party anticipates that such costs will, or are
reasonably likely to, exceed XXXX, such party will
notify the other and the parties will promptly negotiate in
good faith to determine whether to continue the Trial and, if
so, to establish responsibility for funding such excess.
2. Trial Expenses: Accounting and Payment
<PAGE>
(a) Of the XXXX in budgeted costs referred to
above and in Appendix A, over XXXX has been incurred as
of the date hereof. The parties acknowledge that XOMA has
fulfilled its obligation to fund its share of the first
XXXX of the costs in accordance with the letter dated
September 7, 1995 from XOMA to Pfizer, a copy of which is
attached as Appendix B. In this connection, XOMA hereby
confirms that it has transferred ownership to Pfizer of
approximately 450 liters of ascites identified on Appendix C,
attached hereto, and that it will store such ascites at XOMA
for up to two years from the date hereof. Accordingly, the
parties agree that there is no remaining liability or
obligation due from either party to the other with respect to
the first XXXX. Pfizer will supply all bulk E5 material
for the remainder of the Trial (currently estimated to have a
cost of approximately XXXX) at no cost to XOMA. All
future budgeted cash out-of-pocket expenditures beyond those
included in the XXXX referred to above (up to a maximum
of XXXX) will be shared equally by Pfizer and XOMA as
set forth in more detail below. Any unbudgeted expenditure
which exceeds $50,000 will require the prior written approval
of both parties.
(b) The provisions of the Letter calling for
alternate payments of the Trial costs (i.e., the first sentence
of paragraph 4(b) and Appendix C attached to the Letter) are
hereby nullified. In the future, Pfizer will send quarterly
invoices to XOMA for fifty percent (50%) of the costs
(excluding bulk E5 material costs) incurred during each such
quarter. (The amount to be invoiced to XOMA is sometimes
referred to in this Agreement as the "Invoiced Amount" and the
total quarterly costs, excluding bulk E5 material costs, are
sometimes referred to in this Agreement as the "Full Quarterly
Costs." The Invoiced Amount will be 50% of the Full Quarterly
Costs.) Within 30 days after XOMA's receipt of each invoice
and the related complete expenditure and patient accrual report
described in paragraph 2(c) below. XOMA will either (i) pay
the total Invoiced Amount in cash, or (ii) XXXX
will become a credit against any future royalties payable by
Pfizer from U.S. sales of the Product under the License
Agreement between the parties dated June 9, 1987 (the "License
Agreement"). Each thirty-day option will relate to a specific
invoice and will not be applicable to or otherwise affect any
previous or future invoices. If XOMA fails to make timely any
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<PAGE>
payment on an invoice XXXX,
Pfizer will have the option of either treating the
nonpayment or underpayment as a material breach or taking a
credit against royalties equal to XXXX.
Royalties will not be reduced under
this paragraph 2(b) by more than thirty percent (30%) in any
year. Credits in excess of thirty percent (30%) will be
deferred from year to year, as necessary.
(c) Within forty-five (45) days of the close of each
calendar quarter during which the Trial expenses are incurred,
Pfizer shall provide XOMA with a report on Trial expenditures
and patient accruals and an invoice for costs for which XOMA is
responsible hereunder, covering such costs incurred during the
quarter then most recently ended. Each quarterly report shall
be in the form of Appendix D attached hereto and shall set
forth both patient accruals and actual or forecast expenditures
during (i) the quarter then most recently ended; (ii) the
entire period of the Trial to date; (iii) the then current
quarter; and (iv) the then current calendar year. In the case
of a report for the fourth quarter of a year, the current year
will be replaced by the following year. All historical
expenditure information will be supplied with comparative
information on budgeted levels of expenditure. Each invoice
for costs for which XOMA is responsible hereunder shall reflect
only expenditures contemplated by the budget and shall be
accompanied by reasonable supporting documentation.
3. Centocor Litigation Expense Sharing
Pfizer and XOMA have earlier agreed orally that as a
result of past litigation with Centocor Inc., if the Product is
approved by the FDA, XOMA has an obligation to reimburse Pfizer
a total amount equal to Eight Million Four Hundred Sixty-Four
Thousand Nine Hundred Forty Dollars ($8,464,940) for attorneys
fees and other legal costs incurred, provided that such
reimbursement will be made only through the reduction of
royalties otherwise payable by Pfizer to XOMA on U.S. sales of
the Product and provided further that the combined reduction of
royalties for Centocor litigation costs and the deferred Trial
costs described in Paragraph 2(b) above will not reduce
royalties otherwise payable to XOMA by more than thirty percent
(30%) in the aggregate in any year. Amounts in excess of
thirty percent (30%) in any year will be deferred from year to
year, as necessary.
-3-
<PAGE>
4. Termination
(a) Early Termination of Trial. It is possible
that, after reviewing interim data of the Trial, the Safety
Monitoring Board will determine that the Trial should be
terminated before completion, either because of positive or
negative results. If such a determination is made, the parties
will share equally the reasonable costs of closing out the
study sites and winding down the Trial.
(b) Trial Costs Exceed XXXX. Either party
may terminate its obligations to fund any future costs or
expenses of the Trial by giving thirty (30) days' prior written
notice to the other party if Trial costs exceed XXXX and
the parties have not then agreed, pursuant to Paragraph l(b),
to fund such excess. If either party terminates under this
Paragraph 4(b) and the other party, by written notice, elects
to continue the Trial, the terminating party shall use
commercially reasonable efforts to cooperate with the
continuing party at the election and expense of the continuing
party. If XOMA is the continuing party, Pfizer shall attempt
to minimize any delay or interruption in the Trial's progress
occasioned by a change in the identity of the sponsor of the
IND for the Trial.
(c) Termination for Breach. If either party commits
a material breach of this Agreement and fails to cure the
breach within thirty (30) days after receipt of written notice
of breach, the non-breaching party may, by written notice to
the breaching party, elect either (i) to continue the Trial at
its own cost or (ii) close out the study sites and wind down
the Trial, in which case the breaching party shall, subject to
the maximum expenditure level set forth in paragraph 2(a), be
responsible for one-half of the costs of doing so. In either
case, the non-breaching party shall also be free to pursue any
remedies for the breach to which is it entitled.
(d) Termination without Cause. Either party may
terminate its obligations to fund any future costs or expenses
of the Trial without cause at any time, by giving ninety (90)
days' prior written notice to the other party. If a party
terminates under this paragraph 4(d), the provisions of
paragraph 4(b) shall apply as if the Trial costs exceeded
XXXX and the parties did not agree to fund such excess.
If Pfizer elects to continue the Trial after termination by
XOMA pursuant to this paragraph 4(d), the result of multiplying
50% of the Trial costs incurred by Pfizer after the date of
termination,
-4-
<PAGE>
up to the difference between (i) XXXX; and
(ii) the total Trial costs incurred by the parties as of the
date of termination, by XXXX will become a credit
against any future U.S. royalties payable by Pfizer under the
License Agreement. XOMA'S obligation in the preceding sentence
shall be subject to the maximum expenditure level set forth in
paragraph 2(a).
5. Future Purchases of Ascites
If Pfizer desires to purchase additional ascites from
XOMA, the purchase price will be XXXX/liter, for any
orders placed and paid for before two years from the date
hereof. For any subsequent orders, the parties will negotiate
prices in good faith.
6. Effect on Other Agreements
(a) Except as modified hereby, the terms of the
Letter shall remain in full force and effect. In particular,
Paragraphs 1(b), 2, 4(c), 6 and 7 of the Letter remain in full
force and effect, and essentially unchanged.
(b) In the event of any conflict between this
Agreement and the Letter, this Agreement shall govern.
If you are in agreement with the foregoing, please so
indicate by signing and returning the enclosed copy of this
Agreement.
Sincerely yours,
Pfizer Inc.
By/s/ Karen Katen
____________________
Karen L. Katen
Acknowledged and agreed
this 9th day of November, 1995.
XOMA Corporation
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<PAGE>
By/s/ John L. Castello
_______________________
John L. Castello
Chairman, President and Chief Executive Officer
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<PAGE>
EXHIBIT
10.49
XXXX Confidential treatment has been requested for this information
pursuant to Rule 24B-2.
AMENDMENT NO. 1 TO LICENSE AGREEMENT
THIS AMENDMENT NO. 1 TO LICENSE AGREEMENT (the "First
Amendment") is
made as o the 23d day of March, 1995 by and between XOMA
Corporation, a Delaware
corporation ("XOMA"), and Burroughs Wellcome Co., a North Carolina
corporation
(as more fully described below, "BWCo").
W I T N E S S E T H:
WHEREAS, XOMA and Sterling Drug Inc., a Delaware
corporation
("Sterling"), entered into a License Agreement as of June 11, 1991
(the
"Agreement") pursuant to which XOMA granted to Sterling (i) an
exclusive
worldwide license to develop and market products utilizing the
Engineered
Antibody (as defined in the Agreement) designated ING-1 ("ING-1"),
and (ii) a
non-exclusive license to develop and market products utilizing
certain genetic
engineering technology, information and know-how for uses in the in
vivo
localization (imaging) and/or treatment of human cancers;
WHEREAS, on January 21, 1994, with the prior written
approval of XOMA,
Sterling sold, granted, assigned and conveyed to BWCo all of
Sterling's right,
title and interest in and to the Agreement, and BWCo assumed and
agreed to
perform all of the obligations of Sterling that arise on or after
January 21,
1994 under and pursuant to the Agreement;
WHEREAS, BWCo and XOMA desire to amend the Agreement in
certain
respects, which amendment shall govern the parties' rights and
obligations
under and pursuant to the Agreement from and after the date hereof;
NOW, THEREFORE, in consideration of the premises and the
mutual
covenants and agreements herein contained, and for other good and
valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged by
both BWCo and XOMA, the parties hereto, intending to be legally
bound hereby,
do thereby agree as follows:
1. Definitions.
a. The following definitions contained in the Agreement
are hereby
amended as follows:
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(1) "Engineered Antibody" set forth in Section 1.7
of the
Agreement is amended by adding the following sentence after the end
of the
current text:
"Engineered Antibody" shall also include any
humanized antibody derived from DNA encoding such an
Engineered Antibody.
(2) "ING-1" set forth in Section 1.13 of the
Agreement is
amended to read, in its entirety, as follows:
"ING-1" means the Engineered Antibody derived from
the BA-Br1 hybridoma described in Schedule 1.17
hereto.
b. A new Section 1.30 is added to the Agreement
which shall
read, in its entirety, as follows:
1.30 "BWCo" means Burroughs Wellcome Co., a North
Carolina corporation and the successor to all of
Sterling's right, title and interest in and to the
Agreement, and to all of Sterling's obligations that
arise on or after January 21, 1994 under and
pursuant to the Agreement.
2. Grant. The final clause of Section 2.1 of the
Agreement is
hereby amended to read as follows:
. . . and the related XOMA Patent Rights and XOMA
Technology and Know-How to make, have made, use and
sell ING-1 Products in the Field of Use.
3. License Fees. Section 4.1(c) is hereby amended to
read, in its
entirety, as follows:
$200,000 payable within five (5) Business Days after
the execution of the First Amendment.
4. Royalties.
a. Section 4.2(c) of the Agreement is amended as
follows: The
words "or non-exclusive" are hereby added after the word
"exclusive"
appearing in the heading of
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Section 4.2(c), the ninth line of the first paragraph of Section
4.2(c), the
denominator of the fraction appearing in the first paragraph of
Section 4.2(c),
and the fifth line of the second paragraph of Section 4.2(c).
b. Section 4.2(d) of the Agreement is amended to
read, in its
entirety, as follows:
(d) Non-exclusive License or Lack of Valid Claim.
If (i) for any reason the license granted in Section 2.1 above
is made non-exclusive, or (ii) at any time prior to the end of
time for paying royalties as determined pursuant to Section
4.2(f) below (the "Royalty Period") all of the claims
contained in the XOMA Patent Rights that read on BWCo's
exercise of the license granted by Section 2.1 hereof (the
"ING-1 Claims") expire or are declared invalid by the patent
office or court of competent jurisdiction in any country in
the Territory, or (iii) for so long prior to the end of the
Royalty Period as none of the ING-1 Claims has been issued or
granted by the U.S. Patent office or its counterpart in any
foreign country, then the Basic Royalty Rate described in
Section 4.2(a) above in respect of the applicable country or
countries shall equal XXXX, and shall be subject to
further downward adjustments, if applicable, as described in
Section 4.2(b) above and/or Section 4.2(c) above. XOMA shall
have the right to make the license granted in Section 2.1 a
non-exclusive license pursuant to a breach of the royalty
payment obligations or the ING-1 Product development
obligations as described in Section 10.1(a).
c. Subsection (ii) of the second sentence of
Section 4.2(h) is revised to read as follows:
(ii) possess and use the then current technology
developed and owned by BWCo to the extent reasonably
necessary for the production and purification of
ING-1, such use to be restricted to the production
and purification of ING-1.
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<PAGE>
5. Examination of Existing Antibodies.
a. The first sentence of Section 9.1(b) of the
Agreement is
hereby amended to read, in its entirety, as follows:
Until January 21, 1996, XOMA shall permit BWCo
to examine samples of the Engineered Antibodies and
murine antibodies/cell lines described in Schedules
1.7 and 1.17, respectively; provided, that if one or
more XOMA scientists is reasonably required to
perform services to permit BWCo to conduct its
examination or, thereafter, to ensure that adequate
samples are created and preserved for BWCo's future
use, BWCo shall pay XOMA XXXX per
man-day reasonably expended by such XOMA scientists.
b. Section 9.1(b) is further amended by adding a
new sentence
after the end of the currrent text, as modified by Section 5.a of
this
First Amendment, which sentence shall read, in its entirety, as
follows:
For so long as the license granted by
Section 2.1 of this Agreement remains exclusive,
however, nothing in this section or any other
provision of this Agreement shall be construed to
permit XOMA to grant any party other than BWCo,
whether or not such person is an Affiliate to XOMA,
any license or transfer of any rights related to
ING-1 Antibody or the ING-1 Antibody in the Field of
Use.
6. Patent Maintenance and Applications. Section 9.2 is
revised to
include a new Subsection 9.2(e) reading as follows:
(e) XOMA undertakes to keep BWCo reasonably
informed throughout the term of this Agreement
concerning the status and progress of the XOMA
Patent Rights. Without limiting the foregoing, BWCo
or
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its representatives shall have the right during
normal business hours and on reasonable prior notice
to inspect and have copied correspondence and other
records of XOMA pertaining to the XOMA Patent
Rights. To the extent XOMA has not previously done
so, XOMA shall provide BWCo with such additional
relevant documentation as BWCo may reasonably
request to permit BWCo to propose suitable
amendments to such XOMA Patent Rights; provided,
that BWCo shall reimburse XOMA for one-half (1/2)
the
outside counsel fees and other out-of-pocket costs
reasonably incurred by XOMA in considering,
addressing and/or implementing BWCo's requests and
proposed amendments.
7. Diligence Obligations.
a. Section 10.1(a)(i) is amended in its entirety to
read as
follows:
(i) undertake reasonably diligent efforts
to file an IND in any of the United States,
Japan, the United Kingdom, or Germany for an
ING-1 Product by December 31, 1996; provided,
that BWCo, at its sole option exercised anytime
prior to December 31, 1996, may elect to extend
the filing of such an IND until no later than
June 11, 1997, by providing XOMA with written
notice thereof, which notice shall be
accompanied by an additional fee of XXXX.
b. Section 10.1(a)(ii) is amended revising the
words
"XXXX per year" to read "XXXX per year during calendar 1995
and each year thereafter."
c. Section 10.1(a)(iv) is amended in its entirety
to read as
follows:
(iv) in the event BWCo, an Affiliate or
authorized sublicensee
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<PAGE>
has not commenced a pivotal, FDA fileable Phase
III
efficacy study or equivalent study for an ING-1
Product
in any of the United States, the United
Kingdom,
Germany or Japan by June 30, 1999, then BWCo
will pay XOMA XXXX, per year, for every
year until such trial is commenced; provided,
that BWCo at its sole option exercised anytime
prior to June 30, 1999, may elect to extend the
commencement of such trial until no later than
December 31, 1999, by providing XOMA with
written notice thereof, which notice shall be
accompanied by an additional fee of XXXX;
and
d. Section 10.1(a)(v) is amended to delete the
words "within
nine (9) years after the date of this Agreement" and insert, in
their
place, the words "by June 11, 2002."
8. Failure to Satisfy Diligence Requirements.
a. The first sentence of Section 10.1(b) is hereby
amended to
read as follows:
BWCo shall be deemed to have failed to meet its
diligence obligations under this Agreement if (A) it
has failed to satisfy any of the diligence
requirements imposed by Section 10.1(a) above, or
(B) prior to filing a PLA as contemplated by
Section 10.1(a)(v), BWCo and its Affiliates and
sublicensees have failed for a period of twelve (12)
or more consecutive months to conduct, either
themselves or through some third party, development,
testing, regulatory or manufacturing activity
reasonably necessary in order to prepare and file
such a PLA, unless such failure was due to (x) valid
safety or efficacy reasons as reasonably determined
by BWCo, (y) a circumstance described in
Section 14.8 hereof, or (z) the failure by XOMA to
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<PAGE>
perform its obligations hereunder. If XOMA notifies
BWCo in writing that it has failed under the
standard established by the preceding sentence to
meet its diligence obligations, then BWCo shall have
ninety (90) days after such written notice to cure
such failure without penalty.
b. Subsection (ii) of the sixth sentence of Section
10.1(b) (as
modified by this Paragraph 8) is revised to read as follows:
(ii) possess and use the then current
technology developed and owned by BWCo to the extent
reasonably necessary for the production and
purification of ING-1, such use to be restricted to
the production and purification of ING-1.
9. Termination.
a. Section 13.1 of the Agreement is amended by
designating the
current text as Subsection (a) and adding a new Section 13.1(b) to
read as
follows:
(b) Notwithstanding any other provision of
this Agreement, on thirty (30) days prior written
notice, from time to time, BWCo may teminate this
Agreement either in its entirety or with respect to
all, but not less than all, of the countries in any
of the following regions of the world: (i) the
countries forming the European Economic Union,
(ii) the countries comprising the continent of North
America, or (iii) the rest of the world.
b. Section 13.2 of the Agreement is amended to
read, in its
entirety, as follows:
13.2 Effect of Termination. Upon termination
of this Agreement, in whole or part, by XOMA where
permitted by this Agreement, all of the rights and
licenses so terminated shall revert to
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<PAGE>
XOMA and XOMA shall have the rights set forth in
Section
4.2(h) or 10.1(b), as applicable. If, prior to the
filing of
a PLA for an ING-1 Product, BWCo terminates this
Agreement in its entirety pursuant to
Section 13.1(b) hereof, BWCo shall pay XOMA a
termination fee of XXXX. Upon
termination of this Agreement in whole or part by
BWCo pursuant to Section 13.1 hereof, all of the
rights so terminated shall revert to XOMA.
10. Notices. Section 14.4 of the Agreement is hereby
amended by
adding the following language immediately prior to the last two
lines of
such section:
To BWCo:
BY FACSIMILE: (919) 315-8376
BY COURIER OR U.S. MAIL:
Burroughs Wellcome Co.
3030 Cornwallis Road
Research Triangle Park, NC 27709
Attn: Company Secretary
With a copy to:
Burroughs Wellcome Co.
3030 Cornwallis Road
Research Triangle Park, NC 27709
Attn: Vice President - Business Development
BY FACSIMILE: (919) 315-4966
11. Each party represents and warrants to the other that
(i) the
Agreement is in full force and effect and such party is not in
default
thereunder, (ii) it has the requsite power and authority to enter
into this
First Amendment, (iii) that this First Amendment has been duly
authorized,
executed and delivered by such party, (iv) that this First
Amendment
constitutes the legal, valid and binding obligation of such party,
enforceable in accordance with its terms, except as
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<PAGE>
such enforcement may be limited by applicable bankruptcy,
insolvency,
reorganization, moratorium, or other similar laws affecting
generally the
enforcement of creditors' rights and by general principles of
equity, and (v)
that the execution and delivery of this First Amendment by such
party, and the
performance by such party of its obligations hereunder, will not
(A) violate
or conflict with any provision of the charter or by-laws of such
party, or (B)
violate or conflict with, or result in a breach of any provision
of, or
constitute a default (or an event which with notice or passage of
time, or
both, would constitute a default) under, or give any party any
right to
terminate, modify, cancel or accelerate the performance required
by, any of the
provisions of, or require the consent of any other party to, any
material
note, bond, mortgage, indenture, deed of trust, license, loan
agreement,
lease or sublease with respect to real property, or other agreement
or
obligation to which such party is bound. Without limiting the
foregoing,
XOMA further represents and warrants that (x) it has sufficient
right,
title and interest in the XOMA Patent Rights and XOMA Technology
and Know-
How to grant the rights contemplated by the Agreement as modified
by this
First Amendment, (y) to the extent XOMA obtained such right, title
and
interest by license from a third party, such license is in full
force and
effect as of the date of this First Amendment and neither XOMA nor,
to the
best of XOMA's knowledge, any such third party has committed any
act or
omission that constitutes, or with the passage of time will likely
constitute, a breach or default under the terms of the license, and
(z) during the term of the Agreement, it shall pay such fees and
royalties
and take such other actions as may be required to keep the licenses
referenced by subsection (y) in full force and effect.
12. Except as expressly set forth herein, the Agreement
remains in
full force and effect as originally executed on June 11, 1991.
13. This First Amendment shall be governed by and
construed in
accordance with the laws of the State of California, without regard
to its
principles of conflicts of laws.
14. This First Amendment may be executed in two or more
counterparts,
each of which shall be deemed an original, but all of which
together shall
constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this
First
Amendment to be duly executed and delivered as of the date and year
first
above written.
XOMA CORPORATION
By: /s/ Christopher J. Margolin
-------------------------------
Title: Vice President,
General Counsel and
Secretary
BURROUGHS WELLCOME CO.
By: /s/ Chris A. Rallis
-------------------------------
Title: Vice President,
Planning and
Business Development
<PAGE>
<PAGE>
Exhibit 10.50
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
This Offshore Securities Subscription Agreement
("Agreement") is
executed in reliance upon the transaction exemption afforded by
Regulation S
("Regulation S") as promulgated by the Securities and Exchange
Commission
("SEC"), under the Securities Act of 1933, as amended ("1933 Act").
This Agreement has been executed by the undersigned in
connection with
the private placement of Convertible Preferred Stock, Series C
(hereinafter
referred to as the "Preferred Shares") of Xoma Corporation, a
corporation
organized and existing under the laws of the State of Delaware,
U.S.A., NASDAQ
National Market Symbol "XOMA" (hereinafter referred to as the
"COMPANY"). The
Preferred Shares being sold pursuant to this Agreement have not
been registered
under the 1933 Act and may not be offered or sold in the United
States or to
U.S. persons, other than distributors (as such terms are defined in
Regulation
S), unless the Preferred Shares are registered under the 1933 Act,
or an
exemption from the registration provisions of the 1933 Act is
available. The
terms on which the Preferred Shares may be converted into common
stock (the
"Shares") and the other terms of the Preferred Shares are set forth
in ANNEX I
annexed hereto. This subscription and, if accepted by the COMPANY,
the offer and
sale of Preferred Shares and the Shares issuable upon conversion
thereof
(collectively the "Securities"), are being made in reliance upon
the provisions
of Regulation S ("Regulation S") under the 1933 Act.
The undersigned
NAME:
- - --------------------------------------------------------------
ADDRESS:
- - --------------------------------------------------------------
- - -----------------------------------------------------------------
- - ------
- - -----------------------------------------------------------------
- - ------
if applicable, a [Corporation][Partnership][Trust] organized under
the laws
of __________, a non USA jurisdiction (hereinafter referred to as
the
"PURCHASER")
hereby represents and warrants to, and agrees with, the COMPANY as
follows:
<PAGE>
1. AGREEMENT TO SUBSCRIBE;
a. SUBSCRIPTION AMOUNT. The undersigned hereby subscribes
for
$_________________ in liquidation preference of Preferred
Shares.
b. FORM OF PAYMENT. The PURCHASER shall pay the purchase
price
for the Preferred Shares by delivering good funds in
United
States Dollars to the escrow agent identified in the
Joint
Escrow Instructions attached hereto as ANNEX II (the
"Escrow
Agent"). Delivery of such funds to the COMPANY by the
Escrow
Agent shall be made against delivery by the COMPANY of
one or
more certificates for the Preferred Shares in accordance
with
this Agreement. Promptly following notice by the Escrow
Agent
of payment from the PURCHASER of the subscription price
for
the Preferred Shares, the COMPANY shall determine whether
to
accept such subscription and, if so accepted, shall
deliver
one or more certificates for the Preferred Shares to the
Escrow Agent. By signing this Agreement, the PURCHASER
and the
Company each agrees to all of the terms and conditions
of, and
becomes a party to, the Joint Escrow Instructions
attached
hereto as ANNEX II, all of the provisions of which are
incorporated herein by this reference as if set forth in
full.
c. METHOD OF PAYMENT. Payment of the purchase price for
the Preferred
Shares shall be made by wire transfer of funds to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For Further Credit to A/C# 6371415554
for credit to the account of Krieger &
Prager,
Attorneys
Escrow Account: ITF Closing A/C
Not later than five (5) business days after acceptance
and
execution of this Agreement by the COMPANY, the
PURCHASER
shall deposit with the Escrow Agent the aggregate
subscription
price for the Preferred Shares.
2. SUBSCRIBER REPRESENTATIONS; ACCESS TO INFORMATION;
INDEPENDENT
INVESTIGATION.
a. OFFSHORE TRANSACTION. PURCHASER represents and
warrants to
COMPANY as follows:
(i) PURCHASER is not a U.S. person as that term is
defined
under
Regulation S.
(ii) PURCHASER is outside the United States
as of the date of the execution and delivery
of this Agreement.
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(iii) PURCHASER is purchasing the Preferred
Shares for its own account and not on behalf
of any U.S. person, and PURCHASER is the
sole beneficial owner of the Preferred
Shares, and has not pre-arranged any sale
with purchasers in the United States.
(iv) PURCHASER represents and warrants and
hereby agrees that all offers and sales of
the Preferred Shares prior to the expiration
of a period commencing on the date of the
receipt of funds by the COMPANY and ending
40 days thereafter shall only be made in
compliance with the safe harbor contained in
Regulation S, pursuant to registration
provisions under the 1933 Act or pursuant to
an exemption from registration, and all
offers and sales after the expiration of the
40-day period shall be made only pursuant to
such registration or to such exemption from
registration.
(v) PURCHASER acknowledges that the purchase
of the Preferred Shares involves a high
degree of risk , is aware of the risks and
further acknowledges that it can bear the
economic risk of the purchase of the
Preferred Shares, including the total loss
of its investment.
(vi) PURCHASER understands that the
Preferred Shares are being offered and sold
to it in reliance on specific exemptions
from the registration requirements of U.S.
securities laws and that the COMPANY is
relying upon the truth and accuracy of the
representations, warranties, agreements,
acknowledgements and understandings of
PURCHASER set forth herein in order to
determine the applicability of such
exemptions and the suitability of PURCHASER
to acquire the Preferred Shares.
(vii) PURCHASER is sufficiently experienced
in financial and business matters to be
capable of evaluating the merits and risks
of its investments, and to make an informed
decision relating thereto.
(viii) In evaluating its investment,
PURCHASER has consulted its own investment
and/or legal and/or tax advisors.
(ix) PURCHASER understands that in the view
of the SEC the statutory basis for the
exemption claimed for this transaction would
not be present if the offering of Preferred
Shares, although in technical compliance
with Regulation S, is part of a plan or
scheme to evade the registration provisions
of the 1933 Act. PURCHASER is acquiring the
Preferred Shares for investment purposes and
has no present intention to sell the
Preferred Shares
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<PAGE>
in the United States or to a U.S. Person or
for the account
or benefit of a U.S. Person either now or
after the
expiration of the Restricted Period.
(x) PURCHASER is not an underwriter of, or dealer
in, the
Securities, and PURCHASER is not
participating, pursuant
to a contractual agreement, in the
distribution of the
Securities.
(xi) During the Restricted Period (as
hereinafter defined), neither PURCHASER nor
any of its affiliates will, directly or
indirectly, maintain any short position in
the Securities of the COMPANY.
b. CURRENT PUBLIC INFORMATION. PURCHASER acknowledges
that PURCHASER
has been furnished with or has acquired copies of the
COMPANY's
most recent Annual Report on the Form 10-K filed with
the SEC and
the Forms 10-Q and 8-K filed thereafter (collectively
the "SEC
Filings").
c. INDEPENDENT INVESTIGATION; ACCESS. PURCHASER
acknowledges that PURCHASER, in making the decision
to purchase the Preferred Securities subscribed for,
has relied upon independent investigations made by it
and its representatives, if any, and PURCHASER and
such representatives, if any, have, prior to any sale
to it, been given access and the opportunity to
examine all material publicly available, books and
records of the COMPANY, all material contracts and
documents relating to this offering and an
opportunity to ask questions of, and to receive
answers from the COMPANY or any person acting on its
behalf concerning the terms and conditions of this
offering. PURCHASER and its advisors, if any, have
been furnished with access to all publicly available
materials relating to the business, finances and
operation of the COMPANY and materials relating to
the offer and sale of the Preferred Preferred
Securities which have been requested. PURCHASER and
its advisors, if any, have received complete and
satisfactory answers to any such inquiries.
d. NO GOVERNMENT RECOMMENDATION OR APPROVAL. PURCHASER
understands that no federal or state agency has passed
on or made
any recommendation or endorsement of the Securities.
e. ENTITY PURCHASERS. If PURCHASER is a partnership,
corporation or
trust, the person executing this Agreement on its
behalf
represents and warrants that:
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(i) He or she has made due inquiry to determine the
truthfulness
of the representations and warranties made
pursuant to this
Agreement.
(ii) He or she is duly authorized (if the
undersigned is a trust, by the trust
agreement) to make this investment and to
enter into and execute this Agreement on
behalf of such entity.
3. COMPANY REPRESENTATIONS.
a. REPORTING COMPANY STATUS. The COMPANY is a
reporting issuer as defined by Rule 902 of Regulation
S. The COMPANY is in full compliance, to the extent
applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The COMPANY has registered its
common stock pursuant to Section 12 of the Exchange
Act and the common stock trades on NASDAQ.
b. OFFSHORE TRANSACTION. The COMPANY has not offered
these
securities to any person in the United States or to
any U.S.
person as that term is defined in Regulation S.
c. NO DIRECTED SELLING EFFORTS. In regard to this
transaction, the COMPANY has not conducted any
"direct selling efforts" as that term is defined in
Rule 902 of Regulation S nor has the COMPANY
conducted any general solicitation relating to the
offer and sale of the within securities to persons
resident within the United States or elsewhere.
d. TERMS OF PREFERRED SHARES. The COMPANY will issue
the Preferred Shares in accordance with the terms of
ANNEX I attached hereto and a Certificate of
Designation will be filed by the COMPANY with the
Secretary of State of the State of Delaware promptly
after acceptance of one or more subscription
agreements.
e. LEGALITY. The COMPANY has the requisite corporate
power and
authority to enter into this Agreement and to sell and
deliver the
Preferred Shares; this Agreement and the issuance of
the Preferred
Shares have been duly and validly authorized by all
necessary
corporate action by the COMPANY; this Agreement been
duly and
validly executed and delivered by and on behalf of the
COMPANY, and
is
a valid and binding agreement of the COMPANY,
enforceable against
it in accordance with its terms, except as
enforceability may be
limited by general equitable principles, bankruptcy,
insolvency,
fraudulent conveyance, reorganization, moratorium or
other laws
affecting creditors rights generally.
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f. NON-CONTRAVENTION. The execution and delivery of
the Agreement and the consummation of the issuance of
the Preferred Securities and the consummation of the
transactions contemplated by this Agreement by the
COMPANY do not and will not conflict with or result
in a breach by the COMPANY of any of the terms or
provisions of, or constitute a default under, the
Certificate of Incorporation or by-laws of the
COMPANY, or any material indenture, mortgage, deed of
trust, or other material agreement or instrument to
which the COMPANY is a party or by which it or any of
its properties or assets are bound or (assuming that
the representations and warranties of the PURCHASER
in Section 2 hereof, and the representations and
warranties of the distributor to the COMPANY, are
true and correct), any existing applicable U.S. law,
rule, or regulation or any applicable decrees,
judgment or order of any U.S. court, federal or state
regulatory body, administrative agency or other U.S.
governmental body having jurisdiction over the
COMPANY or any of its properties or assets, the
conflict, breach, violation or default of or under
which would have a material adverse effect on the
COMPANY's business or financial condition.
g. FILINGS. The COMPANY undertakes and agrees to make all
necessary
filings in connection with the sale of the Preferred
Shares as
required by United States laws and regulations or of
any domestic
securities exchange or trading market.
h. ABSENCE OF CERTAIN CHANGES. Since March 31, 1995,
there has been
no material adverse development in the assets,
liabilities,
business, properties, operations, financial condition
or results
of operations of the COMPANY, except as disclosed in
the SEC
filings.
4. EXPIRATION OF RESTRICTED PERIOD.
a. Promptly following the delivery by PURCHASER of the
subscription
price in accordance with Section 1(c) hereof, the COMPANY will
determine
whether to accept such subscription and, if so accepted, will
prepare and
issue one or more certificates for the Preferred Shares registered
in such
name or names as specified by the PURCHASER and cause the same to
be delivered
to the Escrow Agent. The COMPANY's transfer agent will be
instructed to issue
one or more certificates for the Shares without restrictive legend
upon
conversion of the Preferred Shares, registered in the name of the
holder of
Preferred Shares in accordance with this Agreement who converts any
Preferred
Shares or its nominee and in such denominations to be specified by
the such
holder in connection with such conversion. The COMPANY warrants
that no
restriction or instruction other than these instructions and a
"stop transfer"
restriction on the COMPANY's stock ledger relating to the Preferred
Shares until
the end of the forty (40) day Restricted Period applicable under
Regulation S
will be imposed by the COMPANY or given by the COMPANY to its
transfer agent for
the Shares and that the Preferred Shares and
6
<PAGE>
the Shares shall otherwise be freely transferable on the books and
records of
the Company as and to the extent provided in this Agreement.
Nothing in this
Section shall affect in any way the PURCHASER's obligations and
agreement to
comply with all applicable securities laws and PURCHASER's
representations and
warranties set forth herein.
b. In connection with the exercise of conversion rights
relating to the Preferred Shares, if the Preferred Shares and the
Shares have
not been registered under the 1933 Act prior to such conversion,
PURCHASER or
any subsequent holder of the Preferred Shares shall, in addition to
any other
requirement imposed by the terms of the Preferred Shares as set
forth in the
Certificate of Designation, be required to complete, sign and
furnish to the
COMPANY a conversion certificate in the form attached hereto as
Exhibit 1 to
ANNEX I. PURCHASER acknowledges that the COMPANY is under no
obligation to
register the Preferred Shares or the Shares issuable upon
conversion thereof
under the 1933 Act.
c. If, soley as a result of the COMPANY'S wrongful
refusal to
honor PURCHASER'S instruction, or willful refusal or failure to
transfer or
issue the Shares, PURCHASER incurs any loss (other than any
consequential,
indirect, incidential or special damages), the COMPANY shall
reimburse PURCHASER
for such loss unless PURCHASER shall have breached any of its
representations,
warranties or covenants set forth in this Agreement, or otherwise
taken or
omitted to take actions, which actions or omissions constitute
gross negligence,
bad faith or willful misconduct.
5. EXEMPTION; RELIANCE ON REPRESENTATION. PURCHASER
understands that
the offer and sale of the Preferred Shares is not being registered
under the
1933 Act. The COMPANY is relying on the rules governing offers and
sales made
outside the United States pursuant to Regulation S. Rules 901
through 904 of the
Regulation S govern this transaction.
6. CLOSING DATE AND ESCROW AGENT. The date of the issuance of
the
Preferred Shares and the sale of the Preferred Shares as evidenced
by receipt by
the COMPANY of PURCHASER's purchase funds (the "Closing Date")
shall be no later
than ten (10) business days after execution hereof by all parties
or such other
mutually agreed to time. PURCHASER shall, within five (5) days
after acceptance
and execution of this Agreement by the COMPANY, deliver the
necessary funds as
indicated in Paragraph 1 to the Escrow Agent. Preferred Shares will
be delivered
to the Escrow Agent at the instructions of the COMPANY. PURCHASER
agrees that
the Escrow Agent has no liability as a result of any fraudulent or
unlawful
conduct of any other party, and agrees to hold the Escrow Agent
harmless.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. PURCHASER
understands
that COMPANY'S obligation to sell the Preferred Shares is
conditioned upon:
a. The receipt and acceptance by the COMPANY of this
Agreement as
evidenced
by execution of this Agreement by the President or any
Vice President
of the COMPANY. The acceptance of funds by the
7
<PAGE>
COMPANY shall be deemed to be constructive acceptance of
this
Agreement;
b. Delivery to the Escrow Agent by PURCHASER of good funds
as payment in
full for the purchase of the Preferred Shares; and
c. The accuracy on the Closing Date of the
representations and warranties of PURCHASER contained
in this Agreement and the performance by PURCHASER on
or before the Closing Date of all covenants and
agreements of PURCHASER required to be performed on
or before the Closing Date.
8. CONDITION TO PURCHASER'S OBLIGATION TO PURCHASE. The
COMPANY understands
that PURCHASER'S obligation to purchase the Preferred Shares is
conditioned
upon:
a. Acceptance by PURCHASER of an Agreement for the sale of
Preferred
Shares;
b. Delivery of Preferred Shares to Escrow Agent as herein
set forth;
c. The accuracy on the Closing Date of the representations
and
warranties
of the COMPANY contained in this Agreement and the
performance by
the COMPANY on or before the Closing Date of all
covenants and
agreements of the COMPANY required to be performed on
or before
the Closing Date; and
d. Delivery to the Escrow Agent of an opinion of counsel
for the
COMPANY, dated the Closing Date and addressed to
PURCHASER, in the
form attached hereto as ANNEX III.
9. GOVERNING LAW. This Agreement shall be governed by and
construed under
the laws of the State of New York without giving effect to
principles governing
the conflicts of laws. A facsimile transmission of this signed
Agreement shall
be legal and binding on all parties hereto.
10. NOTICES. Any notice required or permitted hereunder shall
be given
in writing (unless otherwise specified herein) and shall be deemed
effectively
given upon personal devliery or three business days after deposit
in the United
States Postal Service, by registered or certified mail with postage
and fees
prepaid, addressed to each of the other parties thereunto entitled
at the
following addresses, or at such other addresses as a party may
designate by ten
days advance written notice to each of the other parties hereto.
8
<PAGE>
COMPANY: Xoma Corporation
2910 Seventh Street
Berkeley, California 94710
ATT: General Counsel
PURCHASER: At the address set forth on the first page of
this
Agreement.
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
9
<PAGE>
SIGNATURE(S) FOR INDIVIDUAL SUBSCRIBER(S)
IN WITNESS WHEREOF, the undersigned represents that the
foregoing
statements are true and correct and that he, she or they have
executed this
Offshore Securities Subscription Agreement this ----- day of
- - -------------,
1995.
- - -----------------------------------
- - --------------------------
Printed Name Signature
- - -----------------------------------
- - --------------------------
Printed Name Signature
10
<PAGE>
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the
following
statements are true and correct and that it has caused this
Offshore Securities
Subscription Agreement to be duly executed on its behalf this -----
day of
- - ------------------------, 1995.
-------------------------------------
Printed Name of Subscriber
By: ---------------------------------
(Signature of Authorized Person)
-------------------------------------
Printed Name and Title
Accepted this -------- day of the month of ----------------, 199--.
XOMA CORPORATION
By: -------------------------------------
Title: ------------------------------
11
<PAGE>
All correspondence and delivery of certificates and
confirmations
should be addressed to the above named person and sent by the
COMPANY to his
- - ----- business ----- home address (check one).
Capacity of Subscriber (check one):
Individual ----------
Corporation ----------
Partnership ----------
Other ---------- (please
specify)
Ownership of Preferred Shares (check one):
Individual ----------
Joint Tenants, with right of
survivorship ----------*
Tenants in Common ----------*
Tenants in Entirety ----------*
Community Property ----------*
Country of Citizenship:
- - ----------------------------------------------
Country of incorporation or formation:
- - ---------------------------------
* If you are purchasing Preferred Shares with only your
spouse as
co-owner, both you and your spouse must sign the signature
page. If any
co-owner is not your spouse, all co-owners must sign the
signature
page.
Name of Purchaser Representative, if any:
- - ----------------------------
Address:
- - ----------------------------
- - ----------------------------
Telephone:
- - ----------------------------
12
<PAGE>
FULL NAME AND ADDRESS OF PURCHASER FOR REGISTRATION PURPOSES:
NAME:
- - ------------------------------------------------
ADDRESS:
- - ------------------------------------------------
- - ------------------------------------------------
- - ------------------------------------------------
TEL. NO.
- - ------------------------------------------------
FAX. NO.
- - ------------------------------------------------
CONTACT NAME:
- - ------------------------------------------------
DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME):
NAME:
- - ------------------------------------------------
ADDRESS:
- - ------------------------------------------------
- - ------------------------------------------------
- - ------------------------------------------------
TEL. NO.
- - ------------------------------------------------
FAX. NO.
- - ------------------------------------------------
CONTACT NAME:
- - ------------------------------------------------
SPECIAL
INSTRUCTIONS:
- - ------------------------------------------------
- - ------------------------------------------------
- - ------------------------------------------------
13
<PAGE>
<PAGE>
Exhibit
10.51
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
This Offshore Securities Subscription Agreement
("Agreement") is
executed in reliance upon the transaction exemption afforded by
Regulation S
("Regulation S") as promulgated by the Securities and Exchange
Commission
("SEC"), under the Securities Act of 1933, as amended ("1933 Act").
This Agreement has been executed by the undersigned in
connection with
the private placement of up to U.S. $9,000,000 in principal amount
of 4%
Convertible Subordinated Debentures due November ___, 1998
(hereinafter referred
to as the "Debentures") of Xoma Corporation, a corporation
organized and
existing under the laws of the State of Delaware, U.S.A., NASDAQ
National Market
Symbol "XOMA" (hereinafter referred to as the "COMPANY"). The
Debentures being
purchased pursuant to this Agreement ("Purchaser's Debentures")
have not been
registered under the 1933 Act and may not be offered or sold in the
United
States or to U.S. persons, other than distributors (as such terms
are defined in
Regulation S), unless the Debentures are registered under the 1933
Act, or an
exemption from the registration provisions of the 1933 Act is
available. The
terms on which the Debentures may be converted into common stock
(the "Shares")
and the other terms of the Debentures are set forth in the form of
Debenture
annexed hereto as ANNEX I. This subscription and, if accepted by
the COMPANY,
the offer and sale of Debentures and the Shares issuable upon
conversion thereof
(collectively the "Securities"), are being made in reliance upon
the provisions
of Regulation S ("Regulation S") under the 1933 Act.
The undersigned
NAME: ----------------------------------------------------
ADDRESS: ----------------------------------------------------
- - --------------------------------------------------------------
- - --------------------------------------------------------------
if applicable, a [Corporation][Partnership][Trust] organized under
the laws
of __________, a non USA jurisdiction (hereinafter referred to as
the
"PURCHASER")
hereby represents and warrants to, and agrees with, the COMPANY as
follows:
<PAGE>
1. AGREEMENT TO SUBSCRIBE.
a. SUBSCRIPTION AMOUNT. The undersigned hereby
subscribes for U.S. $______________ in principal amount of
Debentures.
b. FORM OF PAYMENT. The PURCHASER shall pay the purchase price
for the Purchaser's Debentures by delivering good funds in
United States Dollars to the escrow agent identified in the
Joint Escrow Instructions attached hereto as ANNEX II (the
"Escrow Agent"). Promptly following notice by the Escrow
Agent
of receipt of payment from the PURCHASER of the
subscription
price for the Purchaser's Debentures, the COMPANY shall
determine whether to accept such subscription and, if so
accepted, shall deliver one or more certificates for the
Purchaser's Debentures to the Escrow Agent. Delivery of
such
funds to the COMPANY by the Escrow Agent shall be made
against
delivery by the COMPANY of one or more Debentures in
accordance with this Agreement. By signing this Agreement,
the
PURCHASER and the COMPANY each agrees to all of the terms
and
conditions of, and becomes a party to, the Joint Escrow
Instructions attached hereto as ANNEX II, all of the
provisions of which are incorporated herein by this
reference
as if set forth in full.
c. METHOD OF PAYMENT. Payment of the purchase price for the
Purchaser's
Debentures shall be made by wire transfer of funds to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For Further Credit to A/C# 105-0036843
for credit to the account of Krieger & Prager,
Attorneys
Escrow Account: Master Escrow Account
Not later than five (5) business days after acceptance and
execution of this Agreement by the COMPANY, the PURCHASER
shall deposit with the Escrow Agent the aggregate
subscription
price for the Purchaser's Debentures.
2. SUBSCRIBER REPRESENTATIONS; ACCESS TO INFORMATION;
INDEPENDENT
INVESTIGATION.
a. OFFSHORE TRANSACTION. PURCHASER represents and warrants
to COMPANY
as follows:
(i) PURCHASER is not a U.S. person as that term is
defined under
Regulation S.
2
<PAGE>
(ii) PURCHASER is outside the United States
as of the date of the execution and delivery
of this Agreement.
(iii) PURCHASER is purchasing the
Purchaser's Debentures for its own account
and not on behalf of any U.S. person, and
PURCHASER is the sole beneficial owner of
the Purchaser's Debentures, and has not
pre-arranged any sale with purchasers in the
United States.
(iv) PURCHASER represents and warrants and
hereby agrees that all offers and sales of
the Debentures prior to the expiration of a
period commencing on the date of the receipt
of funds by the COMPANY and ending 40 days
thereafter shall only be made in compliance
with the safe harbor contained in Regulation
S, pursuant to the registration provisions
under the 1933 Act or pursuant to an
exemption from registration, and all offers
and sales after the expiration of the 40-day
period shall be made only pursuant to such
registration or to such exemption from
registration.
(v) PURCHASER acknowledges that the purchase
of the Debentures involves a high degree of
risk, is aware of the risks and further
acknowledges that it can bear the economic
risk of the purchase of the Purchaser's
Debentures, including the total loss of its
investment.
(vi) PURCHASER understands that the
Debentures are being offered and sold to it
in reliance on specific exemptions from the
registration requirements of U.S. securities
laws and that the COMPANY is relying upon
the truth and accuracy of the
representations, warranties, agreements,
acknowledgements and understandings of
PURCHASER set forth herein in order to
determine the applicability of such
exemptions and the suitability of PURCHASER
to acquire the Purchaser's Debentures.
(vii) PURCHASER is sufficiently experienced
in financial and business matters to be
capable of evaluating the merits and risks
of its investments, and to make an informed
decision relating thereto.
(viii) In evaluating its investment,
PURCHASER has consulted its own investment
and/or legal and/or tax advisors.
(ix) PURCHASER understands that in the view
of the SEC the statutory basis for the
exemption claimed for this transaction would
not be present if the offering of
Debentures, although in technical compliance
with Regulation S, is part of a plan or
scheme to evade the registration provisions
of the 1933 Act. PURCHASER is
3
<PAGE>
acquiring the Purchaser's Debentures for
investment purposes and has no present
intention to sell the Debentures in the
United States or to a U.S. Person or for the
account or benefit of a U.S. Person either
now or after the expiration of the
Restricted Period.
(x) PURCHASER is not an underwriter of, or dealer in,
the
Securities, and PURCHASER is not participating,
pursuant to a
contractual agreement, in the distribution of the
Securities.
(xi) During the Restricted Period (as
hereinafter defined), neither PURCHASER nor
any of its affiliates will, directly or
indirectly, maintain any short position in
the securities of the COMPANY.
b. CURRENT PUBLIC INFORMATION. PURCHASER acknowledges
that PURCHASER
has been furnished with or has acquired copies of the
COMPANY'S
most recent Annual Report on the Form 10-K filed with
the SEC and
the Forms 10-Q and 8-K filed thereafter (collectively
the "SEC
Filings").
c. INDEPENDENT INVESTIGATION; ACCESS. PURCHASER
acknowledges that PURCHASER, in making the decision
to purchase the Debentures subscribed for, has relied
upon independent investigations made by it and its
representatives, if any, and PURCHASER and such
representatives, if any, have, prior to any sale to
it, been given access and the opportunity to examine
all material publicly available, books and records of
the COMPANY, all material contracts and documents
relating to this offering and an opportunity to ask
questions of, and to receive answers from the COMPANY
or any person acting on its behalf concerning the
terms and conditions of this offering. PURCHASER and
its advisors, if any, have been furnished with access
to all publicly available materials relating to the
business, finances and operation of the COMPANY and
materials relating to the offer and sale of the
Debentures which have been requested. PURCHASER and
its advisors, if any, have received complete and
satisfactory answers to any such inquiries.
d. NO GOVERNMENT RECOMMENDATION OR APPROVAL. PURCHASER
understands
that no federal or state agency has passed on or made
any
recommendation or endorsement of the Securities.
e. ENTITY PURCHASERS. If PURCHASER is a partnership,
corporation or
trust, the person executing this Agreement on its behalf
represents
and warrants that:
4
<PAGE>
(i) He or she has made due inquiry to determine the
truthfulness
of the representations and warranties made
pursuant to this
Agreement.
(ii) He or she is duly authorized (if the
undersigned is a trust, by the trust
agreement) to make this investment and to
enter into and execute this Agreement on
behalf of such entity.
3. COMPANY REPRESENTATIONS.
a. REPORTING COMPANY STATUS. The COMPANY is a
reporting issuer as defined by Rule 902 of Regulation
S. The COMPANY is in full compliance, to the extent
applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The COMPANY has registered its
common stock pursuant to Section 12 of the Exchange
Act and the common stock trades on NASDAQ.
b. OFFSHORE TRANSACTION. The COMPANY has not offered these
securities
to any person in the United States or to any U.S. person
as that
term is defined in Regulation S.
c. NO DIRECTED SELLING EFFORTS. In regard to this
transaction, the COMPANY has not conducted any
"direct selling efforts" as that term is defined in
Rule 902 of Regulation S nor has the COMPANY
conducted any general solicitation relating to the
offer and sale of the within securities to persons
resident within the United States or elsewhere.
d. TERMS OF DEBENTURES. The COMPANY will issue the
Debentures in
accordance with the terms of the form of Debenture
contained in
ANNEX I attached hereto.
e. LEGALITY. The COMPANY has the requisite corporate power
and
authority to enter into this Agreement and to sell and
deliver the
Debentures; this Agreement and the issuance of the
Debentures have
been duly and validly authorized by all necessary
corporate action
by the COMPANY; this Agreement has been duly and validly
executed
and delivered by and on behalf of the COMPANY, and is a
valid
and binding agreement of the COMPANY, enforceable
against it in
accordance with its terms, except as enforceability may
be limited
by general equitable principles, bankruptcy, insolvency,
fraudulent
conveyance, reorganization, moratorium or other laws
affecting
creditors rights generally.
5
<PAGE>
f. NON-CONTRAVENTION. The execution and delivery of
this Agreement and the issuance of the Debentures,
and the consummation of the transactions contemplated
by this Agreement by the COMPANY do not and will not
conflict with or result in a breach by the COMPANY of
any of the terms or provisions of, or constitute a
default under, the Certificate of Incorporation or
by-laws of the COMPANY, or any material indenture,
mortgage, deed of trust, or other material agreement
or instrument to which the COMPANY is a party or by
which it or any of its properties or assets are bound
or (assuming that the representations and warranties
of the PURCHASER in Section 2 hereof, and the
representations and warranties of the distributor to
the COMPANY, are true and correct) any existing
applicable U.S. law, rule, or regulation or any
applicable decrees, judgment or order of any U.S.
court, federal or state regulatory body,
administrative agency or other U.S. governmental body
having jurisdiction over the COMPANY or any of its
properties or assets, the conflict, breach, violation
or default of or under which would have a material
adverse effect on the COMPANY'S business or financial
condition.
g. FILINGS. The COMPANY undertakes and agrees to make all
necessary
filings in connection with the sale of the Debentures as
required
by United States laws and regulations or by the rules of
any
domestic securities exchange or trading market.
h. ABSENCE OF CERTAIN CHANGES. Since June 30, 1995, there
has been no
material adverse development in the assets, liabilities,
business,
properties, operations, financial condition or results
of operations
of the COMPANY, except as disclosed in the SEC filings.
4. EXPIRATION OF RESTRICTED PERIOD.
a. Promptly following the delivery by PURCHASER of the
subscription price in accordance with Section 1(c) hereof, the
COMPANY will
determine whether to accept such subscription and, if so accepted,
will prepare
and issue one or more Debentures registered in such name or names
as specified
by PURCHASER and cause the same to be delivered to the Escrow
Agent. The
COMPANY'S transfer agent will be instructed to issue one or more
certificates
for the Shares without restrictive legend upon conversion of the
Purchaser's
Debentures in accordance with this Agreement, registered in the
name of the
holder of Purchaser's Debentures who converts any Purchaser's
Debentures or its
nominee and in such denominations to be specified by the such
holder in
connection with such conversion. The COMPANY warrants that no
restriction or
instruction (other than these instructions and a "stop transfer"
restriction on
the COMPANY'S Debenture Register relating to the Debentures until
the end of the
forty (40) day Restricted Period applicable under Regulation S)
will be imposed
by the COMPANY or given by the COMPANY to its transfer agent for
the Shares and
that the Purchaser's Debentures and the Shares issuable upon
conversion thereof
shall otherwise be freely
6
<PAGE>
transferable on the books and records of the COMPANY as and to the
extent
provided in this Agreement. Nothing in this Section shall affect in
any way
PURCHASER'S obligations and agreement to comply with all applicable
securities
laws and PURCHASER'S representations and warranties set forth
herein.
b. In connection with the exercise of conversion rights
relating to the Debentures, if the Debentures and the Shares have
not been
registered under the 1933 Act prior to such conversion, PURCHASER
or any
subsequent holder of the Debentures shall, in addition to any other
requirement
imposed by the terms of the Debentures, be required to complete,
sign and
furnish to the COMPANY a conversion certificate in the form
attached as Exhibit
1 to ANNEX I hereto. PURCHASER acknowledges that the COMPANY is
under no
obligation to register the Debentures or the Shares issuable upon
conversion
thereof under the 1933 Act.
c. If, solely as a result of the COMPANY'S wrongful refusal
to
honor PURCHASER'S instruction, or wrongful refusal or failure to
transfer or
issue the Shares, PURCHASER incurs any loss (other than any
consequential,
indirect, incidental or special damages), the COMPANY shall
reimburse PURCHASER
for such loss unless PURCHASER shall have breached any of its
representations,
warranties or covenants set forth in this Agreement, or otherwise
taken or
omitted to take actions, which actions or omissions constitute
gross negligence,
bad faith or willful misconduct.
5. EXEMPTION; RELIANCE ON REPRESENTATION. PURCHASER understands
that
the offer and sale of the Debentures is not being registered under
the 1933 Act.
The COMPANY is relying on the rules governing offers and sales made
outside the
United States pursuant to Regulation S. Rules 901 through 904 of
Regulation S
govern this transaction.
6. CLOSING DATE AND ESCROW AGENT. The date of the issuance of
the
Purchaser's Debentures and the sale of the Purchaser's Debentures
as evidenced
by receipt by the COMPANY of PURCHASER'S purchase funds (the
"Closing Date")
shall be no later than ten (10) business days after execution
hereof by all
parties or such other mutually agreed to time. PURCHASER shall,
within five (5)
business days after acceptance and execution of this Agreement by
the COMPANY,
deliver the necessary funds as indicated in Paragraph 1 to the
Escrow Agent.
Purchaser's Debentures will be delivered to the Escrow Agent at the
instructions
of the COMPANY. PURCHASER agrees that the Escrow Agent has no
liability as a
result of any fraudulent or unlawful conduct of any other party,
and agrees to
hold the Escrow Agent harmless.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. PURCHASER
understands
that COMPANY'S obligation to sell the Purchaser's Debentures is
conditioned
upon:
a. The receipt and acceptance by the COMPANY of this
Agreement as
evidenced by execution of this Agreement by the
President or any
Vice President of the COMPANY. The acceptance of funds
by the
7
<PAGE>
COMPANY shall be deemed to be constructive acceptance of
this
Agreement;
b. Delivery to the Escrow Agent by PURCHASER of good funds
as payment
in full for the purchase of the Purchaser's Debentures;
and
c. The accuracy on the Closing Date of the
representations and warranties of PURCHASER contained
in this Agreement and the performance by PURCHASER on
or before the Closing Date of all covenants and
agreements of PURCHASER required to be performed on
or before the Closing Date.
8. CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE. The
COMPANY
understands that PURCHASER'S obligation to purchase the
Purchaser's
Debentures is conditioned upon:
a. Acceptance by PURCHASER of an Agreement for the sale of
Purchaser's
Debentures;
b. Delivery of Purchaser's Debentures to Escrow Agent as
herein set
forth;
c. The accuracy on the Closing Date of the representations
and
warranties of the COMPANY contained in this Agreement and
the
performance by the COMPANY on or before the Closing Date
of all
covenants and agreements of the COMPANY required to be
performed on
or before the Closing Date; and
d. Delivery to the Escrow Agent of an opinion of counsel
for the
COMPANY, dated the Closing Date and addressed to
PURCHASER, in the
form attached hereto as ANNEX III.
9. GOVERNING LAW. This Agreement shall be governed by and
construed under
the laws of the State of New York without giving effect to
principles governing
the conflicts of laws. A facsimile transmission of this signed
Agreement shall
be legal and binding on all parties hereto.
10. NOTICES. Any notice required or permitted hereunder shall
be given
in writing (unless otherwise specified herein) and shall be deemed
effectively
given upon personal delivery or three business days after deposit
in the United
States Postal Service, by registered or certified mail with postage
and fees
prepaid, addressed to each of the other parties thereunto entitled
at the
following addresses, or at such other addresses as a party may
designate by ten
days advance written notice to each of the other parties hereto.
8
<PAGE>
COMPANY: Xoma Corporation
2910 Seventh Street
Berkeley, California 94710
ATT: General Counsel
PURCHASER: At the address set forth on the first page of
this Agreement.
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
9
<PAGE>
SIGNATURE(S) FOR INDIVIDUAL SUBSCRIBER(S)
IN WITNESS WHEREOF, the undersigned represents that the
foregoing
statements are true and correct and that he, she or they have
executed this
Offshore Securities Subscription Agreement this ------ day of
- - --------------,
1995.
- - -----------------------------------
- - --------------------------------
Printed Name Signature
- - -----------------------------------
- - --------------------------------
Printed Name Signature
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the
following
statements are true and correct and that it has caused this
Offshore Securities
Subscription Agreement to be duly executed on its behalf this
- - -------- day of
- - -------------------, 1995.
-------------------------------------
Printed Name of Subscriber
By: ---------------------------------
(Signature of Authorized Person)
-------------------------------------
Printed Name and Title
Accepted this ---------- day of the month of -------------------,
199---.
XOMA CORPORATION
By: ------------------------------------------
Title: -----------------------------------
10
<PAGE>
All correspondence and delivery of certificates and
confirmations
should be addressed to the above named person and sent by the
COMPANY to his
- - ----- business ----- home address (check one).
Capacity of Subscriber (check one):
Individual ----------
Corporation ----------
Partnership ----------
Other ----------
(please specify)
Ownership of Debentures (check one):
Individual ----------
Joint Tenants, with right of survivorship ----------*
Tenants in Common ----------*
Tenants in Entirety ----------*
Community Property ----------*
Country of Citizenship: ----------------------------------------
Country of incorporation or formation:
- - ------------------------------
* If you are purchasing Debentures with only your spouse as
co-owner,
both you and your spouse must sign the signature page. If any
co-owner
is not your spouse, all co-owners must sign the signature
page.
Name of PURCHASER Representative, if any:
- - ------------------------------
Address:
- - ------------------------------
- - ------------------------------
Telephone:
- - ------------------------------
11
<PAGE>
FULL NAME AND ADDRESS OF PURCHASER FOR REGISTRATION PURPOSES:
NAME:
- - ----------------------------------------------
ADDRESS:
- - ----------------------------------------------
- - ----------------------------------------------
- - ----------------------------------------------
TEL. NO.
- - ----------------------------------------------
FAX. NO.
- - ----------------------------------------------
CONTACT NAME:
- - ----------------------------------------------
DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME):
NAME:
- - ----------------------------------------------
ADDRESS:
- - ----------------------------------------------
- - ----------------------------------------------
- - ----------------------------------------------
TEL. NO.
- - ----------------------------------------------
FAX. NO.
- - ----------------------------------------------
CONTACT NAME:
- - ----------------------------------------------
SPECIAL
INSTRUCTIONS:
- - ----------------------------------------------
- - ----------------------------------------------
- - ----------------------------------------------
12
<PAGE>
<PAGE>
Exhibit 10.52
XOMA Corporation
2910 Seventh Street
Berkeley, California 94710
November 30, 1995
[Name and Address
of Purchaser]
Gentlemen:
Reference is made to the Offshore Securities
Subscription Agreement (the "Subscription Agreement"), dated as
of the date hereof, by and between you and XOMA Corporation
(the "Company"). In connection with the consummation of the
transactions contemplated by the Subscription Agreement and in
order to induce you to enter into the Subscription Agreement,
the Company hereby agrees with you as follows:
1. Capitalized terms used herein but not otherwise
defined are used with the meanings given to such terms in the
Subscription Agreement.
2. This letter agreement supplements and, in
certain instances, amends and supersedes the provisions of the
Subscription Agreement. In the event of any inconsistencies
between the provisions of the Subscription Agreement and this
letter agreement, the provisions of this letter agreement shall
control.
3. Notwithstanding the provisions of Sections 1(b),
4(a) and 6 of the Subscription Agreement, the delivery by
Purchaser of the purchase price for Purchaser's Debentures will
not be required to be made to the Escrow Agent until after the
Company has executed the Subscription Agreement and this letter
agreement.
4. Notwithstanding any other provisions of the
Subscription Agreement to the contrary, the maximum principal
amount of Debentures shall not exceed $6,500,000.
<PAGE>
5. The 40-day restricted period referred to in the
Subscription Agreement will commence on the date hereof (which
shall be the Closing Date) and will expire on January 9, 1996
(which shall be 40 days after the Closing Date).
6. In addition to the Company's representations and
warranties set forth in Section 3 of the Subscription
Agreement, the Company hereby represents and warrants to
Purchaser as follows:
(a) The Company is a corporation, duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified as a
foreign corporation in all jurisdictions where the failure to
be so qualified would have a materially adverse effect on its
business, taken as a whole.
(b) Except as disclosed in the SEC Filings, there is
no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending
or, to the knowledge of the Company, threatened, against or
affecting the Company, or any of its properties, which would
have a material adverse effect on the condition (financial or
otherwise) or on the earnings, or business affairs of the
Company, or which might materially and adversely affect the
properties or assets thereof taken as a whole.
(c) The Company is not in default in the performance
or observance of any material obligation, agreement, covenant
or condition contained in any material indenture, mortgage,
deed of trust or other material instrument or agreement to
which it is a party or by which it or its property may be
bound; and neither the execution, nor the delivery by the
Company of, nor the performance by the Company of its
obligations under, the Subscription Agreement, this letter
agreement or the Purchaser's Debentures will conflict with or
result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the
creation or imposition of any lien or charge on any assets or
properties of the Company under any material indenture,
mortgage, deed of trust or other material agreement or
instrument to which the Company is a party or by which it is
bound or the Certificate of Incorporation or Bylaws of the
Company, or (assuming that the representations and warranties
of the Purchaser in Section 2 of the Subscription Agreement and
of the distributor to the Company are true and correct) any
U.S. statute or decree, judgment, order, rule or regulation of
any U.S. court or U.S.
-2-
<PAGE>
governmental agency or body having jurisdiction over the Company
or its properties, the conflict of, breach, violation or default
of or under which would have a material adverse effect on the
Company's business or financial condition.
(d) None of the Company's filings with the
Securities and Exchange Commission since January 1, 1995
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading. The
Company has since January 1, 1995 timely filed all requisite
forms, reports and exhibits thereto with the Securities and
Exchange Commission.
7. For so long as any Purchaser's Debentures held
by the Purchaser remain outstanding, the Company covenants and
agrees with the Purchaser that:
(a) It will reserve from its authorized but unissued
shares of Common Stock a sufficient number of shares of Common
Stock to permit the conversion in full of the outstanding
Purchaser's Debentures, subject only to the limitation
described in Section 5 of the Debenture certificate.
(b) It will maintain the listing of its Common Stock
on the NASDAQ National Market System or a national securities
exchange, unless de-listed as a result of a merger,
consolidation or similar business combination involving the
Company and a company, whether publicly owned or privately
held, whose principal lines of business include the
development, manufacture, marketing or sale of products or
services in the health care industry and whose annual revenues
for its most recently completed fiscal year exceeded
$100 million (or the equivalent in foreign currency) or any
subsidiary or other affiliate of such a company.
(c) It will cause to be issued to the Purchaser upon
conversion of Purchaser's Debentures in accordance with the
provisions of the Subscription Agreement and the Debentures
unlegended certificates representing the shares of Common Stock
issuable upon such conversion and the Company will cause such
shares to be so issued without stop transfer instructions.
(d) The Company will use its commercially reasonable
efforts to cause its transfer agent to transmit the
certificates representing shares of Common Stock issuable upon
conversion of any Purchaser's Debentures (together with the
-3-
<PAGE>
certificates representing the Purchaser's Debentures not so
converted) to the Purchaser via express courier within three
business days after the date the Company has received the
original Notice of Conversion and Purchaser's Debentures
certificate being so converted.
8. Registration. The Company agrees that (A) upon
demand by the Purchaser as a result of a statutory change or a
regulatory development by the U.S. Securities and Exchange
Commission (including, but not limited to, an amendment or
proposed amendment of Regulation S) which provides a reasonable
basis for concluding that the ability of the Purchaser to sell
the shares of Common Stock issuable upon conversion of the
Purchaser's Debentures (the "Underlying Shares") without
registration under the 1933 Act has been materially impaired or
(B) if upon conversion of Purchaser's Debentures effected by
the Purchaser pursuant to the terms of the Subscription
Agreement and the terms of the Purchaser's Debentures the
Company fails to issue certificates for the Underlying Shares
to the Purchaser bearing no restrictive legend in violation of
the terms of the Subscription Agreement and the Purchaser's
Debentures, then the Company shall be required, at the request
of the Purchaser and at the Company's expense, to effect the
registration of the Underlying Shares issuable upon conversion
of the Purchaser's Debentures under the Securities Act of 1933,
as amended (the "Act"), and relevant Blue Sky laws as promptly
as is reasonably practicable. The Company and the Purchaser
shall cooperate in good faith in connection with the furnishing
of information required for such registration and the taking of
such other actions as may be legally or commercially necessary
in order to effect such registration. The Company shall file a
registration statement within 30 days of Purchaser's demand
therefor and shall use its commercially reasonable efforts to
cause such registration statement to become effective as soon
as reasonably practicable thereafter and in any event within
120 days of the date of the initial filing thereof. Such
efforts shall include, but not be limited to, responding to all
comments received from the staff of the Securities and Exchange
Commission, providing Purchaser's counsel with a
contemporaneous copy of all written communications from and to
the staff of the Securities and Exchange Commission with
respect to such registration statement and promptly preparing
and filing amendments to such registration statement which are
responsive to the comments received from the staff of the
Securities and Exchange Commission. Once declared effective by
the Securities and Exchange Commission, the Company shall cause
such registration statement to remain effective until the
earlier of (i) the sale
-4-
<PAGE>
by the Purchaser of all Underlying Shares registered or (ii)
120 days after the effective date of such registration statement.
In the event that the Company has not effected the registration
of the Underlying Shares issuable upon the conversion of the
Purchaser's Debentures under the Act and relevant Blue Sky Laws
within 150 days after the date of the Purchaser's demand therefor,
the Company shall pay to the Purchaser by wire transfer, as
liquidated damages for such failure and not as a penalty, an
amount in cash equal to $12,500, which amount shall be reduced
pro rata based on the relationship between either (x) the number
of Underlying Shares still held by the Purchaser at the time such
payment becomes due to which clause (A) above applies and the
aggregate number of Underlying Shares which would have been
issuable
to Purchaser if Purchaser had converted the entire aggregate
principal amount of Debentures originally purchased by the
Purchaser on the initial date on which Purchaser first
exercised its conversion rights with respect to such Debentures
or (y) the amount of Debentures still held by the Purchaser at
the time such payment becomes due which the Company has failed
to convert as described in clause (B) above and the aggregate
principal amount of Debentures originally purchased by the
Purchaser, as the case may be. Such payment shall be made to
Purchaser immediately upon expiration of the 150-day period
referenced in the preceding sentence if the registration of the
Underlying Shares is not effected by such date; provided,
however, that the payment of such liquidated damages shall not
relieve the Company from its obligations to register the
Underlying Shares pursuant to this provision.
9. The Company agrees that it will not, for a
period of 100 days following the Closing Date, incur any Senior
Debt during such period unless the Purchaser's Debentures will
rank pari passu in right of payment with such indebtedness for
such period or the Purchaser consents to such incurrence.
10. In addition to the provisions of Section 4(c) of
the Subscription Agreement, each party hereto hereby agrees to
indemnify, defend and hold the other party harmless from and
against any and all loss, liability, damage or expense
(including, but not limited to, reasonable attorneys' fees)
incurred or suffered by the other party as a result of a breach
of any representation, warranty, covenant or agreement made by
the breaching party to the other party as set forth in the
Subscription Agreement, the Debenture or this letter agreement
except to the extent such loss, liability, damage or expense
results from the gross negligence, willful misconduct or bad
-5-
<PAGE>
faith of the party seeking indemnification. In order for a
party (the "indemnified party") to be entitled to any
indemnification provided for hereunder in respect of, arising
out of or involving a claim or demand made by any person, firm,
governmental authority or corporation against the indemnified
party (a "Third Party Claim"), such indemnified party must
notify the indemnifying party in writing, and in reasonable
detail, of the Third Party Claim as promptly as reasonably
possible after receipt by such indemnified party of notice of
the Third Party Claim; provided, however, that failure to give
such notification on a timely basis shall not affect the
indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a
result of such failure. If a Third Party Claim is made against
an indemnified party, the indemnifying party shall be entitled
to participate in the defense thereof and to assume the defense
thereof with counsel selected by the indemnifying party and
reasonably satisfactory to the indemnified party and shall pay
the reasonable fees and expenses of such counsel related
thereto. Should the indemnifying party elect to assume the
defense of a Third Party Claim, the indemnifying party shall
not be liable to the indemnified party for legal fees and
expenses subsequently incurred by the indemnified party in
connection with the defense thereof. If the indemnifying party
assumes such defense, the indemnified party shall have the
right to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed
by the indemnifying party, it being understood, however, that
the indemnifying party shall control such defense. Subject to
the third preceding sentence, the indemnifying party shall be
liable for the reasonable fees and expenses of counsel employed
by the indemnified party for any period during which the
indemnifying party has not assumed the defense thereof. If the
indemnifying party chooses to defend any Third Party Claim, the
parties hereto shall cooperate in the defense or prosecution of
such Third Party Claim. Whether or not the indemnifying party
shall have assumed the defense of a Third Party Claim, the
indemnified party shall not admit any liability with respect
to, or settle, compromise or discharge, such Third Party Claim
without the indemnifying party's prior written consent (which
consent shall not be unreasonably withheld).
11. For purposes of Section 10 of the Subscription
Agreement and Section 4 of the Debenture, the Notice of
Conversion may be delivered to the Company by fax to the
following number: (510) 649-7571.
-6-
<PAGE>
12. This letter agreement and the rights and
obligations of the parties hereunder shall be governed by,
interpreted and construed in accordance with the laws of the
State of New York applicable to contracts made and to be
performed entirely within such State.
13. This letter agreement may be executed in one or
more counterparts, each of which shall be an original but all
of which shall collectively constitute a single instrument.
Very truly yours,
XOMA CORPORATION
By: ______________________________
Name: John L. Castello
Title: Chairman of the Board,
President and Chief
Executive Officer
ACCEPTED AND AGREED:
[PURCHASER]
By: _________________________
Name:
Title:
-7-
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
the
incorporation of our reports included in this Form 10-K into the
Company's
previously filed Registration Statements on Form S-8 (File No.
33-39155), Form
S-3 (File No. 33- 74982) and Form S-3 (File No. 33-59379).
San Francisco, California ARTHUR
ANDERSEN LLP
March 12, 1996
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Dec-31-1995
<CASH> 20,400
<SECURITIES> 6,005
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,480
<PP&E> 28,418
<DEPRECIATION> 22,237
<TOTAL-ASSETS> 40,878
<CURRENT-LIABILITIES> 6,350
<BONDS> 7,692
<COMMON> 14
0
0
<OTHER-SE> 26,822
<TOTAL-LIABILITY-AND-EQUITY> 40,878
<SALES> 1
<TOTAL-REVENUES> 1,165
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 27,469
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119
<INCOME-PRETAX> (22,472)
<INCOME-TAX> 0
<INCOME-CONTINUING> (22,472)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,472)
<EPS-PRIMARY> (0.95)
<EPS-DILUTED> (0.95)
<PAGE>
</TABLE>
