As filed with the Securities and Exchange Commission on June 28, 1996
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-------------------
XOMA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2756657
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2910 Seventh Street
Berkeley, California 94710
(510) 644-1170
(Address, including ZIP code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------
CHRISTOPHER J. MARGOLIN, ESQ.
XOMA CORPORATION
2910 Seventh Street
Berkeley, California 94710
(510) 644-1170
(Name, address, including ZIP code, and telephone number, including
area code, of agent for service)
--------------------
Copy to:
GEOFFREY E. LIEBMANN, ESQ.
CAHILL GORDON & REINDEL
80 Pine Street
New York, New York 10005
(212) 701-3000
--------------------
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. /_/
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. /_/
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. /_/
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /_/
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- - --------------------------------------------------------------------------------
Title of Each Class Proposed Proposed
of Securities Amount Maximum Maximum Amount of
To Be To Be Offering Price Aggregate Registration
Registered Registered per Unit(1) Offering Price(1) Fee
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
par value $.0005
per share...... 1,500,000(2) $6.53 $9,795,000 $3,378
- - ---------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of computing the registration fee
pursuant to Rule 457(c).
(2) Includes a like number of Preferred Stock Purchase Rights (the
"Rights"). Since no separate consideration is paid for the
Rights, the registration fee is included in the fee for the
Common Stock.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
- - -------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 28, 1996
1,500,000 Shares
XOMA CORPORATION
COMMON STOCK
This Prospectus relates to 1,500,000 shares of Common
Stock, par value $.0005 per share (the "Common Stock"), of XOMA
Corporation (the "Company"), which have been registered for sale
from time to time by the selling stockholder named herein (the
"Selling Stockholder"). Any or all of the Common Stock being reg-
istered hereby may be sold from time to time to purchasers
directly by the Selling Stockholder. Alternatively, the Selling
Stockholder may from time to time offer the Common Stock through
underwriters, dealers or agents who may receive compensation in
the form of underwriting discounts, concessions or commissions
from the Selling Stockholder and/or the purchasers of Common Stock
for whom they may act as agent. The Company will receive no pro-
ceeds from the sale by the Selling Stockholder of the Common Stock
offered hereby. The shares of Common Stock to which this Prospec-
tus relates were issued to the Selling Stockholder in the Private
Placement (as defined herein). All Registration Expenses (as
defined herein) incurred in connection with the registration of
the Common Stock to which this Prospectus relates will be borne by
the Company. The Company has agreed to indemnify the Selling
Stockholder against certain liabilities, including certain liabil-
ities under the Securities Act of 1933, as amended (the "Securi-
ties Act"), or to contribute to payments which the Selling Stock-
holder may be required to make in respect thereof. See "Plan of
Distribution."
The Common Stock is traded on the Nasdaq National Market
under the symbol "XOMA." The last reported bid price of the Com-
mon Stock as reported by the Nasdaq National Market on June 27,
1996 was $6.50 per share.
The Common Stock offered hereby involves a high degree
of risk. See "Risk Factors."
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
The date of this Prospectus is , 1996.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE>
-2-
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is
required to file periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC") relating to its business,
financial statements and other matters. Such reports, proxy statements and
other information may be inspected and copied at the public reference facilities
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the SEC located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and at Seven World Trade Center,
13th Floor, New York, New York 10048. Copies of such material can also be
obtained from the SEC at prescribed rates from the Public Reference Section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed a Registration Statement on Form S-3 with the
SEC under the Securities Act with respect to the Common Stock offered hereby.
As permitted by the rules and regulations of the SEC, this Prospectus omits
certain information contained in the Registration Statement. For further
information, reference is made to the Registration Statement, including the
financial schedules and exhibits incorporated therein by reference or filed as a
part thereof. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete,
and, in each instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement or otherwise filed with the SEC. Each
such statement shall be deemed qualified in its entirety by such reference.
----------------------
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents incorporated herein by reference
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should
be directed to Director, Corporate Communications, XOMA Corporation, 2910
Seventh Street, Berkeley, California 94710, (510) 644-1170.
<PAGE>
-3-
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the SEC pursuant to the
Exchange Act are hereby incorporated by reference in this Prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended December 31,
1995 as amended by Amendment No. 1 on Form 10-K/A and Amendment No. 2 on
Form 10-K/A (File No. 0-14710);
(2) Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1996 (File No. 0-14710);
(3) Current Report on Form 8-K dated April 22, 1996 (File No.
0-14710); and
(4) The description of XOMA's Common Stock in the Registration
Statement on Form 8-A dated June 9, 1986 filed on June 11, 1986 under
Section 12 of the Exchange Act, including any amendment or report for the
purpose of updating such description (Registration No. 33-4793).
All documents filed by the Company with the SEC pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Common Stock offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date any such document is filed.
Any statements contained in a document incorporated by reference in
this Prospectus shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained in this Prospectus (or
in any other subsequently filed document which also is incorporated by reference
in this Prospectus) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part of this
Prospectus except as so modified or superseded.
--------------------
No person has been authorized in connection with the offering made
hereby to give any information or make any representation not contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company or any other person. This
Prospectus does not constitute an offer to sell or solicitation of any offer to
buy any of the securities offered hereby in any jurisdiction in which it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any date
subsequent to the date hereof.
<PAGE>
-4-
RISK FACTORS
In addition to the other information included or incorporated by
reference in this Prospectus, the following factors should be considered
carefully in evaluating an investment in the shares of Common Stock offered by
this Prospectus.
No Assurance of Regulatory Approvals or Additional Product Development
XOMA's products are subject to rigorous preclinical and clinical
testing requirements and to approval processes by the U.S. Food and Drug
Administration (the "FDA") and similar 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.
In December 1992, XOMA submitted an investigational new drug
application ("IND") to the FDA to begin Phase I human testing of Neuprex(TM), a
recombinantly-derived fragment of human bactericidal/permeability-increasing
protein ("BPI"). In March 1993, the Company initiated human safety and
pharmacokinetic testing under the IND. In mid-1995, the Company initiated three
clinical efficacy trials testing the Neuprex(TM) products as a treatment for
bacterial endotoxin-related conditions. A fourth trial started in the first
quarter of 1996. No assurance can be given, however, that product approval for
Neuprex(TM) or any other BPI product will be obtained.
In March 1989, XOMA filed a product license application ("PLA") for
approval of E5(R), a monoclonal antibody product, for the treatment of gram-
negative sepsis. XOMA has completed several clinical trials of E5(R), including
two randomized, double-blind, placebo-controlled, multicenter Phase III studies
involving nearly 1,300 patients. In September 1991, an FDA advisory committee
heard E5(R) data presentations but made no recommendations regarding the
safety or efficacy of the product. In June 1992, the FDA informed XOMA that
E5(R) was not approvable without further clinical testing. In June 1993, a
third Phase III clinical trial of the E5(R) product commenced with narrower
entry criteria than the previous trials. The trial is being managed and
co-funded by Pfizer Inc. ("Pfizer"). There can be no assurance that the
continuing
<PAGE>
-5-
trial will yield data that will result in licensure of the product in the United
States. 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.
During December 1991 and January 1992 the manufacturing facilities for
E5(R) were inspected for licensure by the FDA. XOMA believes that there are no
major manufacturing issues outstanding. Such licenses are currently pending and
will not be finalized unless and until E5(R) has been approved for sale.
Additionally, FDA licensure of XOMA's manufacturing facilities for Neuprex(TM)
will be required prior to any commercial use or sale of Neuprex(TM). No
assurance can be given that approval of the manufacturing facilities for E5(R)
or Neuprex(TM) will be obtained.
The antibodies currently used by XOMA in its E5(R) product are derived
from ascites produced in mice by Charles River Laboratories ("CRL"). If the
Company must obtain ascites from other sources, including its own facilities or
a different facility of CRL, regulatory licensure of such other sources will be
required. There can be no assurance that any such licensure will be obtained
without significant delay, expense or additional clinical testing.
The FDA has substantial discretion in both the product approval
process and manufacturing facility approval process and it is not possible to
predict at what point, or whether, the FDA will be satisfied with the Company's
submissions or whether the FDA will raise questions which may be material and
delay or preclude product approval or manufacturing facility approval. As
additional clinical data are accumulated, they will be submitted to the FDA and
may have a material impact on the FDA product approval process.
The Company has accumulated inventories of raw material and
intermediates for E5(R). Because the achievement, timing and terms of
regulatory licensures and subsequent sales of 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 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. See "-- History of Losses and
Accumulated Deficit."
<PAGE>
-6-
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.
Need for Additional Funds
XOMA has expended and expects to continue to expend substantial funds
in connection with research and development relating to its products and
production technologies, the scale-up of its production capabilities, extensive
human clinical trials and the protection of its intellectual property. The
Company's cash position and resulting investment income are sufficient to
finance the Company's currently anticipated needs for operating expenses,
working capital, equipment and current research projects through approximately
the end of 1997. The Company continues to evaluate strategic alliances,
potential partnerships and financing arrangements which would further strengthen
its competitive position and provide additional funding. However, no assurance
can be given that operations will generate meaningful funds, that additional
agreements for product development funding or strategic alliances can be
negotiated or that adequate additional financing will be available for the
Company to finance its own development on acceptable terms, if at all. If
adequate funds are not available, the business of the Company will be materially
adversely affected.
History of Losses and Accumulated Deficit
XOMA has experienced significant losses and, as of
March 31, 1996, had an accumulated deficit of approximately $313.5 million.
For the year ended December 31, 1995 and the quarter ended March 31,
1996, XOMA had net losses of approximately $22.5 million, or $0.95 per share,
and $7.0 million, or $0.25 per share, respectively. The Company expects to
incur additional losses in the future. Its ability to achieve a profitable
level of operations is dependent in large part on obtaining regulatory approval
for its products, entering into agreements for product development and
commercialization, and making a transition to a manufacturing and marketing
company. XOMA's ability to fund its ongoing operations is dependent on the
foregoing factors and on its ability to secure additional funds. There can be
no assurance that the Company will ever achieve a profitable level of operations
or that
<PAGE>
-7-
cash flow from future operations will be sufficient to meet such obligations.
No Assurance of Effective Marketing
As of the date of this Prospectus, the Company has not entered into
any marketing agreements regarding its Neuprex(TM) product. The Company has
engaged an investment banking firm to assist it 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.
The Company has entered into marketing agreements with Pfizer
regarding the E5(R) product, which provide Pfizer with exclusive rights to
E5(R) 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 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. 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, 3 and 6 to the Company's Financial Statements, which are
incorporated herein by reference). No assurance can be given that Pfizer will
be able to market the Company's products successfully. The Company does not
currently have a marketing and sales organization for any of its products, and
no assurance can be given that XOMA will be able to develop the marketing and
sales organization necessary for the successful commercialization of its
products.
Assuming timely regulatory approval, which cannot be assured, the
successful commercialization of XOMA's products will be dependent to a large
extent upon the marketing capabilities of its pharmaceutical partners. The
Company believes that termination of its relationship with Pfizer could have a
material adverse effect on its future revenues and prospects.
No Assurance of Scale-up of Manufacturing Processes
The Company has never commercially introduced any pharmaceutical
products. In addition, there can be no assurance that the Company's, CRL's or
Pfizer's existing manufacturing facilities will receive regulatory approval in a
timely manner. If one or
<PAGE>
-8-
more of the Company's products and the relevant manufacturing facilities were to
receive regulatory approval, no assurance can be given that these existing
manufacturing capabilities would be able to produce sufficient quantities of
such products to meet market demand. Additionally, no assurance can be given
that if additional manufacturing facilities are needed to meet market demand,
such manufacturing facilities will be successfully obtained or that the
requisite regulatory approval for such facilities will be obtained.
No Assurance of Patent Protection/Avoidance of Patent Infringement
Because of the length of time and the expense associated with bringing
new products through development and government approval to the marketplace, the
pharmaceutical industry has traditionally placed considerable importance on
obtaining and maintaining patent and trade secret protection for significant new
technologies, products and processes. The Company and other biotechnology firms
hold and are in the process of applying for a number of patents in the United
States and abroad to protect their products and important processes and also
have obtained or have the right to obtain exclusive licenses to certain patents
and applications filed by others. However, the patent position of biotechnology
companies generally is highly uncertain and no consistent policy regarding the
breadth of allowed claims has emerged from the actions of the U.S. Patent and
Trademark Office (the "Patent Office") with respect to biotechnology patents.
Legal considerations surrounding the validity of biotechnology patents continue
to be in transition, and no assurance can be given that historical legal
standards surrounding questions of validity will continue to be applied or that
current defenses as to issued biotechnology patents will in fact be considered
substantial in the future. Accordingly, no assurance can be given as to the
degree and range of protection any patents will afford against competitors with
similar technologies, that patents will issue, that others will not obtain
patents claiming aspects similar to those covered by the Company's patent
applications or as to the extent to which the Company will be successful in
avoiding any patents granted to others.
During the period from September 1994 to June 1996, the Patent Office
issued ten patents to the Company related to its BPI-based products, including
novel compositions, their manufacturer, formulation, assay and use. In
addition, the Company is the exclusive licensee of three BPI-related patents
owned by NYU. The Company and NYU have also received five more U.S. Notices of
<PAGE>
-9-
Allowance, and the Company has more than twenty pending patent applications for
its BPI-based products.
The Company is aware of an agreement between Genentech, Inc.
("Genentech" or the "Selling Stockholder") 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 under certain circumstances.
Between 1992 and 1994, the Patent Office issued five patents related to BPI to
Incyte (the "Incyte BPI Patents"). While the Company believes, based on the
opinion of its patent counsel, that it does not infringe any valid claims of any
of the Incyte BPI Patents, no assurance can be given that XOMA has not infringed
or will not infringe any valid claims of any of the Incyte BPI Patents.
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.
While the Company pursues patent protection, due to uncertainty as to
the future utility of patent protection for biotechnology products or processes,
the Company also relies upon trade secrets, know-how and continuing
technological advancement to develop and maintain its competitive position. All
Company employees have signed confidentiality agreements under which they have
agreed not to use or disclose any of the Company's proprietary information.
Research and development contracts and relationships between the Company and its
scientific consultants and potential customers provide access to aspects of the
Company's know-how that are protected generally under confidentiality agreements
with the parties involved. There can be no assurance that all confidentiality
agreements will be honored or are enforceable.
No Assurance of Product Efficacy or the Ability To Compete Successfully
The biotechnology and pharmaceutical industries are 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
<PAGE>
-10-
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 in the United States
or that Pfizer will be able to market E5(R) effectively. The Company
believes that research and human testing is being conducted with other
products, some of which are designed to treat a broader population of sepsis
patients, including patients with gram-positive as well as gram-negative
sepsis. E5(R) is intended to treat only patients with severe gram-negative
sepsis. There can be no assurance that 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).
No Assurance of Supply of Monoclonal Antibodies
XOMA obtains the unpurified ascites containing the monoclonal
antibodies used in its E5(R) product from a single supplier, CRL, which has
multiple manufacturing sites. XOMA and CRL entered into a supply agreement in
1989 and renewed the agreement in 1991, committing CRL to supply and the Company
to purchase XOMA's anticipated ascites needs for five years after FDA licensure
of E5(R). Among the requirements for FDA licensure of E5(R)
<PAGE>
-11-
is that the CRL manufacturing facilities be licensed by the FDA. If the Company
must obtain ascites from other sources, including its own facilities or a
different facility of the same supplier, regulatory approval of such other
sources will be required. Although the Company believes that it currently has
sufficient quantities of ascites for product launch and the first few years of
sales, any significant future interruption in supply could materially and
adversely affect the Company's business relating to E5(R).
Potential Impact of Healthcare Reform
The successful commercialization of the Company's products will depend
upon, among other things, the Company's marketing arrangements for its products.
The Company's ability to enter into marketing arrangements on acceptable terms
and/or the terms of its existing arrangements could be materially adversely
affected if legislation were to be enacted or regulations adopted which mandates
or otherwise results in the reduction or containment of the cost of phar-
maceutical products to consumers. In addition, if legislation were to be
enacted or regulations adopted which mandates or otherwise results in the
reduction of pharmaceutical product manufacturer's prices, the Company's
business could be materially adversely affected.
Uncertainties in Attracting and Retaining Qualified Personnel
The Company's success in developing marketable products and achieving
a competitive position will depend, in part, on its ability to attract and
retain qualified scientific and management personnel. Competition for such
personnel is intense, and no assurances can be given that the Company will be
able to attract or retain such personnel. The loss of a significant group of
key personnel would adversely affect the Company's product development efforts.
Risk of Product Liability Claims
The testing and marketing of medical products entails an inherent risk
of allegations of product liability. The Company believes it currently has
adequate levels of insurance for its clinical trials. The Company will seek to
obtain additional insurance, if needed, if and when the Company's products are
commercialized; however, there can be no assurance that adequate insurance
coverage will be available or be available at acceptable costs or that a product
liability claim would not materially
<PAGE>
-12-
adversely affect the business or financial condition of the Company.
Certain Provisions Relating to Changes in Control
The Stockholder Rights Agreement, dated as of October 27, 1993 (the
"Rights Agreement"), between the Company and First Interstate Bank of
California, as Rights Agent, and the Company's Amended and Restated By-Laws
contain provisions that may have the effect of making more difficult an
acquisition of control of the Company that has not been approved by the
Company's Board of Directors. See "Description of Equity Securities -- Certain
Provisions Relating to Changes in Control of the Company."
Volatility of Stock Price
The market prices for securities of biotechnology companies, including
XOMA, have been highly volatile. See "Price Range of Common Stock and Dividend
Information." Announcements regarding the results of regulatory approval
filings, clinical trials or other testing, technological innovations or new
commercial products by XOMA or its competitors, government regulations,
developments concerning proprietary rights or public concern as to safety of
biotechnology have historically had, and are expected to continue to have, a
significant impact on the market price of XOMA's Common Stock.
THE COMPANY
The Company is a biopharmaceutical company 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:
- Neuprex(TM), a recombinantly-derived fragment of BPI and
XOMA's lead BPI product, which is currently in efficacy
clinical trials for four different indications.
- I-PREX(TM), a proprietary topical formulation of BPI for
the treatment of ophthalmic disorders, which is undergo-
ing preclinical testing as a treatment for corneal
ulcerations and transplants.
- Mycoprex(TM), a potent fungicidal peptide compound derived
from BPI that is currently in preclinical product
development.
<PAGE>
-13-
- 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.
The Company's cash position and resulting investment
income are sufficient to finance the Company's currently antici-
pated needs for operating expenses, working capital, equipment and
current research projects through approximately the end of 1997.
The Company continues to evaluate strategic alliances, potential
partnerships, and financing arrangements which would further
strengthen its competitive position and provide additional fund-
ing. 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.
On May 15, 1996, the Company announced the granting of
an exclusive license to Genentech, including a sublicense to IDEC
Pharmaceuticals Corporation, to intellectual property covering the
therapeutic use of chimeric IgG1 antibodies specific for the CD20
antigen on the surface of human B-cells. The Company received an
initial cash payment of $3 million and will receive royalties on
the sale of products employing the anti-CD20 technology that are
sold in the United States and in other countries where the Company
holds relevant patents.
Certain statements contained herein that are not related
to historical facts may contain "forward looking" information, as
that term is defined in the Private Securities Litigation Reform
Act of 1995. Such statements are based on the Company's current
beliefs as to the outcome and timing of future events, and actual
results may differ materially from those projected or implied in
the forward looking statements. Further, certain forward looking
statements are based upon assumptions of future events which may
not prove to be accurate. The forward looking statements involve
risks and uncertainties including, but not limited to, the risks
and uncertainties referred to under "Risk Factors" and elsewhere
herein and in other of the Company's Securities and Exchange Com-
mission filings.
<PAGE>
-14-
PRICE RANGE OF COMMON STOCK AND DIVIDEND INFORMATION
The Company's Common Stock trades on the Nasdaq National
Market under the symbol "XOMA." The following table sets forth
the quarterly range of high and low reported sale prices of the
Company's Common Stock on the Nasdaq National Market for the peri-
ods indicated.
High Low
---- ---
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 ............... 5 3/4 3 3/8
Second Quarter
(through June 27, 1996) ..... 8 1/8 3 7/8
On June 27, 1996 the last reported bid price of the Com-
mon Stock as reported on the Nasdaq National Market was $6.50 per
share. On June 27, 1996, there were approximately 2,700 record
holders of XOMA's Common Stock.
The Company has not paid cash dividends on its Common
Stock. The Company currently intends to retain earnings for use
in the development and expansion of its business and, therefore,
does not anticipate paying cash dividends on its Common Stock in
the foreseeable future.
<PAGE>
-15-
SELLING STOCKHOLDER
The following table sets forth certain information
regarding the beneficial ownership of Common Stock by the Selling
Stockholder as of May 31, 1996, and the number of shares of Com-
mon Stock covered by this Prospectus.
Beneficial Ownership Number of Shares
Name and Address of of Common Stock prior of Common Stock
Selling Stockholder to the Offering Registered Hereby
- - -------------------- --------------------- -----------------
Number of Percent
Shares of Class
--------- --------
Genentech, Inc.
460 Point San Bruno Boulevard
South San Francisco, CA 94080 1,500,000(1) 4.5% 1,500,000
(1) Does not include an indeterminate number of shares of Common
Stock issuable upon conversion of the $5 million aggregate
principal amount of the convertible note outstanding under
the Convertible Subordinated Note Agreement dated as of
April 22, 1996, as amended, between the Company and
Genentech (the "Convertible Note") into shares of the Compa-
ny's Convertible Preferred Stock, Series E ("Series E Pre-
ferred Stock"), at the conversion price of $10,000 per
share, and the further conversion of such shares of Series E
Preferred Stock into shares of Common Stock. See "Descrip-
tion of Equity Securities - Series E Preferred Stock." The
Convertible Note and the 1,500,000 shares of Common Stock
being registered hereby were issued to Genentech in April
1996 in a transaction exempt from registration under the
Securities Act pursuant Section 4(2) thereof (the "Private
Placement"). The collaboration agreement to which the Pri-
vate Placement relates is described in the Company's Current
Report on Form 8-K, dated April 22, 1996, filed with the SEC
and incorporated herein by reference and has been filed with
the SEC as an exhibit to the Registration Statement of which
this Prospectus is a part.
<PAGE>
-16-
DESCRIPTION OF EQUITY SECURITIES
The authorized capital stock of the Company consists
of 70,000,000 shares of Common Stock, $.0005 par value, of
which 33,432,932 shares were outstanding on June 27, 1996, and
1,500,000 shares of preferred stock, $.05 par value, of which
650,000 have been designated Series A Cumulative Preferred
Stock (the "Series A Preferred Stock"), of which none were out-
standing on such date, 5,000 have been designated Non-Voting
Cumulative Convertible Preferred Stock, Series D (the "Series D
Preferred Stock"), of which 4,100 were outstanding on such
date, and 7,500 have been designated Convertible Preferred
Stock, Series E (the "Series E Preferred Stock"), of which none
were outstanding on such date.
Common Stock
Holders of shares of Common Stock are entitled to one
vote per share on all matters to be voted on by stockholders.
The holders of Common Stock are entitled to receive such divi-
dends, if any, as may be declared from time to time by the Com-
pany's Board of Directors out of funds legally available there-
for. Upon liquidation or dissolution of the Company, the hold-
ers of the Common Stock are entitled to share ratably in the
distribution of assets, subject to the rights of the holders of
the Series D Preferred Stock or any other series of preferred
stock that may then be outstanding. There are no redemption or
sinking fund provisions with respect to the Common Stock. All
of the outstanding shares of Common Stock are validly issued,
fully paid and nonassessable.
Preferred Stock Purchase Rights
On October 27, 1993, the Board of Directors of the
Company declared a dividend distribution of one Preferred Stock
Purchase Right (a "Right") for each outstanding share of Common
Stock. Each Right entitles the holder to purchase from the
Company a unit consisting of one one-hundredth of a share (a
"Unit") of Series A Preferred Stock at a cash exercise price of
$30.00 per Unit, subject to adjustment.
The Rights are attached to all outstanding shares of
Common Stock, including the shares of Common Stock offered
hereby. The Rights will separate from the Common Stock and
will be distributed to holders of Common Stock upon the ear-
liest of (i) ten business days after the first public announce-
ment that a person or group of affiliated or associated persons
<PAGE>
-17-
(an "Acquiring Person") has acquired beneficial ownership of
20% or more of the Common Stock then outstanding (the date of
said announcement being referred to as the "Stock Acquisition
Date"), (ii) ten business days following the commencement of a
tender offer or exchange offer that would result in a person or
group of persons becoming an Acquiring Person or (iii) the dec-
laration by the Board of Directors of the Company that any per-
son is an "Adverse Person" (the earliest of such dates, the
"Distribution Date").
The Board of Directors of the Company may generally
declare a person to be an Adverse Person after a declaration
that such person has become the beneficial owner of 10% or more
of the outstanding shares of Common Stock and a determination
that (a) such beneficial ownership by such person is intended
to cause or is reasonably likely to cause the Company to repur-
chase the Common Stock owned by such Person or to cause the
Company to enter into other transactions not in the best
long-term interests of the Company or (b) such beneficial own-
ership is reasonably likely to cause a material adverse impact
on the business or prospects of the Company. The Rights are
not exercisable until the Distribution Date and will expire on
December 31, 2002, unless previously redeemed or exchanged by
the Company.
In the event that a person becomes an Acquiring Per-
son or the Board of Directors determines that a person is an
Adverse Person, each holder of a Right will thereafter have the
right (a "Subscription Right") to receive upon exercise that
number of Units of Series A Preferred Stock having a market
value of two times the exercise price of the Rights. In the
event that, at any time following the Stock Acquisition Date,
(i) the Company consolidates with, or merges with and into, any
person, and the Company is not the surviving corporation;
(ii) any person consolidates with the Company, or merges with
and into the Company and the Company is the continuing or sur-
viving corporation of such merger and, in connection with such
merger, all or part of the shares of Common Stock are changed
into or exchanged for other securities of any other person or
cash or any other property, or (iii) 50% or more of the Compa-
ny's assets are sold or otherwise transferred, each holder of a
Right shall thereafter have the right (a "Merger Right") to
receive, upon exercise, common stock of the acquiring company
having a market value equal to two times the exercise price of
the Rights. Rights that are beneficially owned by an Acquiring
or Adverse Person may, under certain circumstances, become null
and void.
<PAGE>
-18-
At any time after a person becomes an Acquiring Per-
son or the Board of Directors of the Company determines that a
person is an Adverse Person, the Board of Directors of the Com-
pany may exchange all or any part of the then outstanding and
exercisable Rights for shares of Common Stock or Units of
Series A Preferred Stock at an exchange ratio of one share of
Common Stock or one Unit of Series A Preferred Stock per Right.
Notwithstanding the foregoing, the Board of Directors of the
Company generally will not be empowered to effect such exchange
at any time after any person becomes the beneficial owner of
50% or more of the Common Stock then outstanding.
The Rights may be redeemed in whole, but not in part,
at a price of $.001 per Right by the Board of Directors of the
Company at any time prior to the date on which a person is
declared to be an Adverse Person, the tenth business day after
the Stock Acquisition Date, the occurrence of an event giving
rise to the Merger Right or the expiration date of the Rights
Agreement.
The Series A Preferred Stock
There are currently no shares of Series A Preferred
Stock outstanding. Pursuant to the Certificate of Designation
relating to the Series A Preferred Stock, subject to the rights
of holders of any shares of any series of preferred stock rank-
ing prior and superior (such as the Series D Preferred Stock),
the holders of Series A Preferred Stock are entitled to
receive, when, as and if declared by the Board of Directors of
the Company out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of March,
June, September and December in each year (a "Dividend Payment
Date"), commencing on the first Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share equal to the greater of
(a) $1.00 or (b) 100 times the aggregate per share amount of
all cash dividends, plus 100 times the aggregate per share
amount of all non-cash dividends or other distributions, other
than a dividend payable in shares of Common Stock, declared on
the Common Stock since the immediately preceding Dividend Pay-
ment Date, or, with respect to the first Dividend Payment Date,
since the first issuance of Series A Preferred Stock.
In addition to any other voting rights required by
law, holders of Series A Preferred Stock shall have the right
to vote on all matters submitted to a vote of stockholders of
the Company with each share of Series A Preferred Stock
<PAGE>
-19-
entitled to 100 votes. Except as otherwise provided by law,
holders of Series A Preferred Stock and holders of Common Stock
shall vote together as one class on all matters submitted to a
vote of stockholders of the Company.
Unless otherwise provided in a Certificate of Desig-
nation relating to a subsequently designated series of pre-
ferred stock of the Company, the Series A Preferred Stock shall
rank junior to any other series of preferred stock as to the
payment of dividends and distribution of assets on liquidation,
dissolution or winding-up and shall rank senior to the Common
Stock. Upon any liquidation, dissolution or winding-up of the
Company, no distributions shall be made to holders of shares of
stock ranking junior to the Series A Preferred Stock unless,
prior thereto, the holders of Series A Preferred Stock shall
have received an amount equal to accrued and unpaid dividends
and distributions, whether or not declared, to the date of such
payment, plus an amount equal to the greater of (1) $100.00 per
share or (2) an aggregate amount per share equal to 100 times
the aggregate amount to be distributed per share to holders of
Common Stock or to the holders of stock ranking on parity with
the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all other such parity stock
in proportion to the total amount to which the holders of all
such shares are entitled upon such liquidation, dissolution or
winding-up.
If the Company shall enter into any consolidation,
merger, combination or other transaction in which shares of
Common Stock are exchanged for or changed into cash, other
securities and/or any other property, then any shares of
Series A Preferred Stock outstanding shall at the same time be
similarly exchanged or changed in an amount per share equal to
100 times the aggregate amount of cash, securities and/or other
property, as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
The shares of Series A Preferred Stock shall not be
redeemable.
The Series B Preferred Stock
The 18,775 shares of Senior Convertible Preferred
Stock, Series B, issued by the Company in a private placement
consummated in December 1993 in reliance upon the exemption
contained in Section 4(2) of the Securities Act, have been con-
verted into an aggregate of 3,751,454 shares of Common Stock.
<PAGE>
-20-
The Series C Preferred Stock
The 4,799 shares of Convertible Preferred Stock,
Series C, issued by the Company in an offering made to foreign
investors in reliance on Regulation S under the Securities Act
in August 1995, have been converted into an aggregate of
2,728,190 shares of Common Stock.
The Series D Preferred Stock
The 4,100 outstanding shares of Series D Preferred
Stock were issued by the Company to GFL-B in an offering of
Series D Preferred Stock and Common Stock exempt from the reg-
istration requirements of the Securities Act pursuant to Regu-
lation D thereunder in March 1996. Pursuant to the Certificate
of Designations relating to the Series D Preferred Stock, the
holders thereof are entitled to receive, when, as and if
declared by the Board of Directors of the Company, out of funds
legally available therefor, dividends at an annual rate of
$40.00 per share, payable semi-annually in arrears, commencing
June 30, 1996. Dividends are payable, at the option of the
Company, in cash, in Common Stock or any combination of cash
and Common Stock. In addition, the Company may elect not to
declare or make payment of any dividend, in which event the
accrued and unpaid dividends shall be taken into account at the
time of conversion, as described below.
The Series D Preferred Stock ranks senior with
respect to rights on liquidation, winding-up and dissolution of
the Company to all classes of Common Stock. Upon any voluntary
or involuntary liquidation, dissolution or winding-up of the
Company, holders of Series D Preferred Stock will be entitled
to receive $1,000 per share, plus accrued and unpaid dividends,
before any distribution is made on the Common Stock or any pre-
ferred stock of the Company ranking junior as to liquidation
rights to the Series D Preferred Stock, but only after any pay-
ments with respect to liquidation preference of preferred stock
ranking senior as to liquidation rights to the Series D Pre-
ferred Stock are fully met. Except as may be required by law
and except with respect to certain actions which may adversely
affect the holders of Series D Preferred Stock, the holders of
Series D Preferred Stock are not entitled to vote on any matter
submitted to a vote of stockholders of the Company.
The holders of Series D Preferred Stock have the
right to convert shares of Series D Preferred Stock into Common
Stock at a conversion price equal to 80% of the then current
<PAGE>
-21-
market price of the Common Stock on or after the 75th day fol-
lowing the first date of original issuance of any shares of
Series D Preferred Stock; provided that in no event shall GFL-B
or GFL Performance be entitled to convert any shares of Series
D Preferred Stock if the issuance of shares of Common Stock
upon a proposed conversion, when the shares to be so issued are
counted together with other shares of Common Stock beneficially
owned by GFL-B, GFL Performance or any associate or affiliate
of or adviser to GFL-B or GFL Performance (collectively, the
"GFL Persons") (other than shares so owned through ownership of
Series D Preferred Stock), would result in a GFL Person benefi-
cially owning more than 4.9% of the outstanding shares of Com-
mon Stock; and provided, further, that in the event that for
any 15 trading days during a 20 consecutive trading day period
the conversion of all the outstanding shares of Series D Pre-
ferred Stock upon surrender thereof would require the issuance
of more than approximately 4.5 million shares of Common Stock
in the aggregate with respect to all conversions of Series D
Preferred Stock, the Company will have the option to either
redeem the Series D Preferred Stock at a redemption price of
$1,250 per share or, with stockholder approval, convert such
Series D Preferred Stock into shares of Common Stock. In addi-
tion, subject to the proviso of the immediately preceding sen-
tence, the Corporation has the right, so long as it is in mate-
rial compliance with its obligations to the holders of the
Series D Preferred Stock, exercisable at any time on or after
January 15, 1998, to require the holders thereof to convert
their shares of Series D Preferred Stock into Common Stock at a
conversion price equal to 80% of the then current market price
of the Common Stock.
Each share of Series D Preferred Stock may be
redeemed at the option of the Company at any time on or after
October 1, 1996 at a redemption price of $1,250 per share.
The Series E Preferred Stock
There are currently no shares of Series E Preferred
Stock outstanding. The 7,500 shares of Series E Preferred
Stock have been designated by the Company for issuance upon
conversion of the convertible subordinated loans to the Company
made and to be made by Genentech in connection with the funding
of the Company's development costs for anti-CD11a through 1998.
Such loans are and will be convertible into Series E Preferred
Stock upon the occurrence of certain events relating to certain
regulatory approvals, payment defaults, prepayments and other
circumstances. Pursuant to the Certificate of Designation
<PAGE>
-22-
relating to the Series E Preferred Stock, the holders of shares
of Series E Preferred Stock will not be entitled to receive any
dividends on shares of the Series E Preferred Stock.
The Series E Preferred Stock will rank senior with
respect to rights on liquidation, winding-up and dissolution of
the Company to all classes of Common Stock. Upon any voluntary
or involuntary liquidation, dissolution or winding-up of the
Company, holders of Series E Preferred Stock will be entitled
to receive $10,000 per share of Series E Preferred Stock before
any distribution is made on the Common Stock. The holders of
shares of Series E Preferred Stock will have no voting rights,
except as required under the General Corporation Law of the
State of Delaware.
The holders of Series E Preferred Stock will have the
right to convert shares of Series E Preferred Stock into shares
of Common Stock at a conversion price equal to the current mar-
ket price of the Common Stock (determined as provided below).
The current market price will be determined (a) for shares of
Series E Preferred Stock issued in connection with a conversion
of one or more of the convertible subordinated loans upon cer-
tain regulatory approvals, payment defaults or in certain other
circumstances, as of the first date on which such a conversion
occurs, and (b) for shares of Series E Preferred Stock issued
in connection with certain prepayments of one or more of the
convertible subordinated loans or a conversion thereof in cer-
tain other circumstances, as of the date of the issuance of
such shares of Series E Preferred Stock.
The Series E Preferred Stock will be automatically
converted into Common Stock at its then effective conversion
rate immediately upon the transfer by the initial holder to any
third party which is not an affiliate of such holder.
The Company will have the right, at any time and from
time to time, to redeem any or all shares of Series E Preferred
Stock for cash in an amount equal to the conversion price mul-
tiplied by the number of shares of Common Stock into which each
such share of Series E Preferred Stock would then be
convertible.
Certain Provisions Relating to Changes in Control of the
Company
Certain provisions of the Amended and Restated
By-Laws of the Company (the "By-Laws") and the Rights
<PAGE>
-23-
(summarized above) may delay, defer or prevent a change in con-
trol of the Company that a stockholder might consider to be in
his or her best interest, including those applicable to a
change in control of the Company that might result in a premium
over the market price for the shares of Common Stock held by
stockholders.
Special Meeting of Stockholders. The By-Laws provide
that meetings of stockholders of the Company may be called only
by the Chief Executive Officer or the Board of Directors of the
Company. This provision may make it more difficult for stock-
holders to take action opposed by management or the Board of
Directors of the Company.
Advance Notice Requirements for Stockholder Proposals
and Director Nominations. The By-Laws provide that stockhold-
ers seeking to bring business before an annual meeting of
stockholders or to nominate candidates for election as direc-
tors at an annual meeting of stockholders, must provide timely
notice thereof in writing. To be timely, a stockholder's
notice must be received by the Secretary of the Company not
less than sixty nor more than ninety days prior to the first
anniversary of the preceding year's annual meeting, or in the
case of an annual meeting that is called for a date that is
more than thirty days or delayed by more than sixty days from
such anniversary, notice by the stockholder to be timely must
be so received not earlier than the ninetieth day prior to such
annual meeting and not later than the close of business on the
later of (1) the sixtieth day prior to such annual meeting or
(2) the tenth day following the day on which such notice of the
date of the annual meeting was mailed or publicly disclosed.
These provisions may preclude some stockholders from bringing
matters before an annual meeting of stockholders or making nom-
inations for directors at an annual meeting of stockholders.
Preferred Stock Purchase Rights. The provisions of
the Rights and the Series A Preferred Stock may make it more
difficult or more costly for a person or group of persons to
acquire control of the Company in a transaction opposed by the
Board of Directors of the Company. See "-- Preferred Stock
Purchase Rights" and "-- The Series A Preferred Stock."
Transfer Agent and Registrar
First Interstate Bank of California is the transfer
agent and registrar of the Common Stock.
<PAGE>
-24-
PLAN OF DISTRIBUTION
Any or all of the Common Stock being registered
hereby may be sold from time to time to purchasers directly by
the Selling Stockholder. Alternatively, the Selling Stock-
holder may from time to time offer the Common Stock through
underwriters, dealers or agents who may receive compensation in
the form of underwriting discounts, concessions or commissions
from the Selling Stockholder and/or the purchasers of Common
Stock for whom they may act as agent. The Selling Stockholder,
and any such underwriters, dealers or agents that participate
in the distribution of Common Stock, may be deemed to be under-
writers, and any profit on the sale of the Common Stock by them
and any discounts, commissions or concessions received by them
may be deemed to be underwriting discounts and commissions
under the Securities Act. At the time a particular offer of
Common Stock is made, to the extent required, a supplement to
this Prospectus will be distributed which will set forth the
terms of the offering, including the name or names of any
underwriters, dealers or agents, the purchase price paid by any
underwriter for Common Stock purchased from the Selling Stock-
holder and any discounts, commissions and other items consti-
tuting compensation from the Selling Stockholder and any dis-
counts, commissions or concessions allowed or reallowed or paid
to dealers, including the proposed selling price to the public.
The Company will receive no proceeds from the sale by the Sell-
ing Stockholder of the Common Stock offered hereby.
In connection with distributions of the Common Stock,
the Selling Stockholder may enter into hedging transactions
with broker-dealers and the broker-dealers may engage in short
sales of the Common Stock in the course of hedging the posi-
tions they assume with the Selling Stockholder. The Selling
Stockholder also may sell the Common Stock short and deliver
the Common Stock to close out such short positions. The Sell-
ing Stockholder also may enter into option or other transac-
tions with broker-dealers that involve the delivery of the Com-
mon Stock to the broker-dealers, which may then resell or
otherwise transfer such Common Stock. The Selling Stockholder
also may loan or pledge the Common Stock to a broker-dealer and
the broker-dealer may sell the Common Stock so loaned or upon a
default may sell or otherwise transfer the pledged Common
Stock.
The shares of Common Stock covered by this Prospectus
are shares of Common Stock purchased by Genentech in the Pri-
vate Placement.
<PAGE>
-25-
All Registration Expenses incurred in connection with
the registration of the Common Stock to which this Prospectus
relates, estimated to be approximately $110,000, will be borne
by the Company. As and when the Company is required to update
this Prospectus, it may incur additional expenses in excess of
this estimated amount. "Registration Expenses" means all
expenses incurred by the Company in complying with the regis-
tration rights granted to the Selling Stockholder pursuant to
which the Registration Statement to which this Prospectus
relates has been filed.
The Company has agreed to indemnify the Selling
Stockholder against certain liabilities, including certain lia-
bilities under the Securities Act, or to contribute to payments
which the Selling Stockholder may be required to make in
respect thereof.
LEGAL OPINIONS
The validity of the shares of Common Stock to which
this Prospectus relates has been passed upon for the Company by
Cahill Gordon & Reindel, a partnership including a professional
corporation, located in New York, New York. Opinions regarding
certain legal matters with respect to patents and patent law
have been provided to the Company by Marshall, O'Toole,
Gerstein, Murray & Borun, located in Chicago, Illinois.
EXPERTS
The financial statements of XOMA incorporated by ref-
erence in this Prospectus and elsewhere in the Registration
Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance
upon the authority of said firm as experts in giving said
report.
<PAGE>
===================================== ===================================
No dealer, salesman or other per-
son has been authorized to give
any information or to make representa-
tions other than those contained in
this Prospectus, and, if given or 1,500,000 Shares
made, such information or representa-
tions must not be relied upon as having XOMA Corporation
been authorized by the Company or the
Selling Stockholder. Neither the Common Stock
delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create an implication
that the information herein is correct
as of any time subsequent to its date. -------------
This Prospectus does not constitute an
offer or solicitation by anyone in any PROSPECTUS
jurisdiction in which such offer
or solicitation is not authorized or in -------------
which the person making such offer or
solicitation is not qualified to do so
or to anyone to whom it is unlawful to
make such offer or solicitation.
------------------
TABLE OF CONTENTS
Page
Available Information...........
Information Incorporated
by Reference..................
Risk Factors....................
The Company.....................
Price Range of Common Stock
and Dividend Information......
Selling Stockholder.............
Description of Equity
Securities....................
Plan of Distribution............
Legal Opinions..................
Experts.........................
, 1996
===================================== ===================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses in connection with this offer-
ing are as follows:
Amount
to be Paid
SEC registration fee ...................... $ 3,378
Nasdaq fee ................................ 17,500
Legal fees and expenses (including
Blue Sky fees and expenses) ............. 75,000
Accounting fees and expenses .............. 3,000
Miscellaneous ............................. 11,122
--------
Total ..................................... $110,000
--------
Item 15. Indemnification of Directors and Officers
The Delaware General Corporation Law provides for
indemnification of directors, officers, employees and agents,
subject to certain limitations (Del. Code, Title 8 Sec. 145).
Article VII of the Company's Bylaws provides that expenses
incurred by an officer or director of the Company in defending
a civil or criminal action, suit or proceeding shall be paid by
the Company in advance of a final disposition of the action,
suit or proceeding upon receipt by the Company of an undertak-
ing by the officer or director that he or she will repay such
expenses if it is ultimately determined that he or she is not
entitled to indemnification under the Delaware General Corpora-
tion Law.
As permitted by Section 102 of the Delaware General
Corporation Law, the Company's Certificate of Incorporation
contains provisions eliminating a director's personal liability
for monetary damages to the Company and its stockholders aris-
ing from a breach of a director's fiduciary duty except for
liability under Section 174 of the Delaware General Corporation
Law or liability for any breach of the director's duty of loy-
alty to the Company or its stockholders, for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law or for any transaction by which the
director derived an improper personal benefit. The Company has
also entered into indemnification agreements with its directors
II-1
<PAGE>
and officers providing for indemnification and advancements of
expenses to the fullest extent permitted under Delaware law.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
Number
-------
4.1 Restated Certificate of Incorporation(1)
4.2 Certificate of Amendment of Restated Certificate
of Incorporation
4.3 Amended and Restated By-Laws(2)
4.4 Stockholder Rights Agreement dated October 27,
1993 by and between the Company and First Inter-
state Bank of California as Rights Agent(3)
4.5 Certificate of Designations of Non-Voting Cumula-
tive Convertible Preferred Stock, Series D(4)
4.6 Certificate of Designation of Convertible Pre-
ferred Stock, Series E(4)
4.7 Amended Certificate of Designation of Convertible
Preferred Stock, Series E
5.1 Opinion of Cahill Gordon & Reindel
10.1 Collaboration Agreement, dated as of April 22,
1996, between XOMA Corporation and Genentech,
Inc. (with certain confidential information
omitted)
10.2 Common Stock and Convertible Note Purchase Agree-
ment, dated as of April 22, 1996, between XOMA
Corporation and Genentech, Inc. (with certain
confidential information omitted)
10.3 Convertible Subordinated Note Agreement, dated
April 22, 1996, between XOMA Corporation and
Genentech (with certain confidential information
omitted)
II-2
<PAGE>
10.4 Amendment to Convertible Subordinated Note Agree-
ment, dated June 13, 1996, between XOMA Corpora-
tion and Genentech, Inc.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Marshall, O'Toole, Gerstein, Murray &
Borun
II-3
<PAGE>
23.3 Consent of Cahill Gordon & Reindel (included in
Exhibit 5.1)
24.1 Power of Attorney (included on the signature page
hereto)
____________________
(1) Incorporated by reference to the Company's Registration
Statement on Form S-3 (File No. 33-59379).
(2) Incorporated by reference to the Company's Registration
Statement on Form S-3 (File No. 33-74982).
(3) Incorporated by reference to the Company's Current Report
on Form 8-K dated October 27, 1993.
(4) Incorporated by reference to the Company's Registration
Statement on Form S-3 (File No. 333-2493).
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this regis-
tration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, repre-
sent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in
the registration statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii)
do not apply if the registration statement is on Form S-3 or
Form S-8, and the information required to be included in the
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13
II-4
<PAGE>
or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any lia-
bility under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pur-
suant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Com-
mission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the regis-
trant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such direc-
tor, officer or controlling person in connection with the secu-
rities being registered, the registrant will, unless in the
opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to
deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest
annual report to security holders that is incorporated by ref-
erence in the prospectus and furnished pursuant to and meeting
II-5
<PAGE>
the requirements of Rule 14a-3 or Rule 14c-3 under the Securi-
ties Exchange Act of 1934; and, where interim financial infor-
mation required to be presented by Article 3 of Regulation S-X
is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically incor-
porated by reference in the prospectus to provide such interim
financial information.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on
Form S-3 and has duly caused this Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of Berkeley, State of California, on June 28, 1996.
XOMA CORPORATION
By: /s/John L. Castello
------------------------
John L. Castello
Chairman of the Board,
President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person
whose signature appears below constitutes and appoints John L.
Castello and Christopher J. Margolin, and each of them, as his
true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) and supple-
ments to this registration statement, and to file the same,
with the Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or
any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed below by the
following persons on behalf of the registrant and in the capac-
ities and on the dates indicated.
Signature Title Date
- - --------- ----- ----
/s/John L. Castello Chairman of the Board,
- - ------------------- President and Chief
John L. Castello Executive Officer
(Principal Executive
Officer) June 28, 1996
/s/Patrick J. Scannon Chief Scientific and
- - --------------------- Medical Officer and
Patrick J. Scannon Director June 28, 1996
/s/Peter B. Davis Vice President,
- - --------------------- Finance and Chief
Peter B. Davis Financial Officer
(Principal Financial
and Accounting Officer) June 28, 1996
/s/James G. Andress Director June 28, 1996
- - ----------------------
James G. Andress
/s/William K. Bowes, Jr. Director June 28, 1996
- - ----------------------
William K. Bowes, Jr.
/s/Arthur Kornberg Director June 28, 1996
- - ----------------------
Arthur Kornberg
/s/Steven C. Mendell Director June 28, 1996
- - ----------------------
Steven C. Mendell
/s/W. Denman Van Ness Director June 28, 1996
- - -----------------------
W. Denman Van Ness
/s/Gary Wilcox Director June 28, 1996
- - -----------------------
Gary Wilcox
II-8
<PAGE>
EXHIBIT INDEX
Exhibit
Number Page
- - ------- ----
4.1 Restated Certificate of Incorporation(1)
4.2 Certificate of Amendment of Restated
Certificate of Incorporation
4.3 Amended and Restated By-Laws(2)
4.4 Stockholder Rights Agreement dated Octo-
ber 27, 1993 by and between the Company
and First Interstate Bank of California
as Rights Agent(3)
4.5 Certificate of Designations of
Non-Voting Cumulative Convertible Pre-
ferred Stock, Series D (4)
4.6 Certificate of Designation of Convert-
ible Preferred Stock, Series E (4)
4.7 Amended Certificate of Designation of
Convertible Preferred Stock, Series E
5.1 Opinion of Cahill Gordon & Reindel
10.1 Collaboration Agreement, dated as of
April 22, 1996, between XOMA Corporation
and Genentech, Inc. (with certain confi-
dential information omitted)
10.2 Common Stock and Convertible Note Pur-
chase Agreement, dated as of April 22,
1996, between XOMA Corporation and
Genentech, Inc. (with certain confiden-
tial information omitted)
10.3 Convertible Subordinated Note Agreement,
dated April 22, 1996, between XOMA Cor-
poration and Genentech (with certain
confidential information omitted)
10.4 Amendment to Convertible Subordinated
Note Agreement, dated June 13, 1996,
between XOMA Corporation and Genentech,
Inc.
23.1 Consent of Arthur Andersen LLP
<PAGE>
23.2 Consent of Marshall, O'Toole, Gerstein,
Murray & Borun
23.3 Consent of Cahill Gordon & Reindel
(included in Exhibit 5.1)
25.1 Power of Attorney (included on signature
page to Registration Statement)
- - -------------------------
(1) Incorporated by reference to the Company's Registration
Statement on Form S-3 (File No. 33-59379).
(2) Incorporated by reference to the Company's Registration
Statement on Form S-3 (File No. 33-74982).
(3) Incorporated by reference to the Company's Current Report
on Form 8-K dated October 27, 1993.
(4) Incorporated by reference to the Company's Registration
Statement on Form S-3 (File No. 333-2493).
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION OF
XOMA CORPORATION
XOMA Corporation, a corporation organized and
existing under and by virtue of the General Corporation Law of
the State of Delaware (the "Corporation"), does hereby certify:
FIRST: That the Board of Directors of the
Corporation, at a meeting duly held, adopted the following
resolution:
RESOLVED that this Board deems it
advisable to amend, and hereby does amend,
Article IV of the Corporation's Restated
Certificate of Incorporation to read in its
entirety as follows:
"IV
STOCK STRUCTURE
The Corporation shall be authorized to issue
two classes of stock to be designated,
respectively, "preferred stock" and "common
stock"; the total number of shares of both
classes of stock authorized to be issued by
the Corporation shall be Seventy-One Million
Five Hundred Thousand (71,500,000) shares.
Such shares shall have no preemptive or
preferential rights of subscription
concerning further issuance or authorization
of any of the Corporation's shares.
A. Common Stock.
The total number of shares of common stock
authorized to be issued by the Corporation
shall be Seventy Million (70,000,000) shares
<PAGE>
-2-
and each such share of common stock shall
have a par value of $.0005. The common stock
may be issued from time to time in one or
more series.
B. Preferred Stock.
The total number of shares of preferred stock
authorized to be issued by the Corporation
shall be One Million Five Hundred Thousand
(1,500,000) shares and each such share of
preferred stock shall have a par value of
$.05. The number of authorized shares of
preferred stock may be increased or decreased
(but not below the number of shares thereof
then outstanding) by the affirmative vote of
the holders of a majority of the shares of
preferred stock and common stock then
outstanding, voting as a class."
SECOND: That said amendment has been duly adopted by
the stockholders of this Corporation at a meeting duly held in
accordance with the applicable provisions of Sections 222 and
242 of the General Corporation Law of the State of Delaware.
THIRD: That said amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware.
<PAGE>
-3-
IN WITNESS WHEREOF, XOMA Corporation has caused this
Certificate of Amendment to be signed by John L. Castello, its
Chairman of the Board, President and Chief Executive Officer,
and Christopher J. Margolin, its Vice President, General
Counsel and Secretary, on this 13th day of June, 1996.
XOMA CORPORATION
By
-------------------------------
John L. Castello
Chairman of the Board,
President and Chief Executive
Officer
Attest:
- - ---------------------------------
Christopher J. Margolin
Vice President, General Counsel
and Secretary
AMENDED
CERTIFICATE OF DESIGNATION
OF
CONVERTIBLE PREFERRED STOCK, SERIES E
OF
XOMA CORPORATION
(Pursuant to Section 151 of the
Delaware General Corporation Law)
XOMA CORPORATION, a corporation organized and
existing under the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify that (i) no
shares of its Convertible Preferred Stock, Series E, par value
$.05 per share (the "Series E Preferred Stock"), have been
issued and (ii) pursuant to authority conferred upon the Board
of Directors of the Corporation by the Restated Certificate of
Incorporation of the Corporation, as amended, and pursuant to
the provisions of Section 151 of the General Corporation Law of
the State of Delaware, said Board of Directors duly adopted the
following resolution on June 13, 1996, which resolution remains
in full force and effect as of the date hereof:
RESOLVED, that pursuant to the authority granted
to and vested in the Board of Directors of the
Corporation in accordance with the provisions of its
Restated Certificate of Incorporation, as amended,
the Board of Directors hereby amends the certificate
of designation of the Series E Preferred Stock by
<PAGE>
-2-
deleting the first paragraph of subsection (A) of
Section 6 thereof in its entirety and substituting
therefor the following:
(A) Right to Convert. Each share of Series E
Preferred Stock shall be convertible, at the option
of the holder thereof, into that number of shares of
the Common Stock, par value $.0005 per share, of the
Corporation (herein, the "Common Stock") as
determined by dividing $10,000.00 by the Conversion
Price (determined as provided below). The
"Conversion Price" for any shares of Series E
Preferred Stock issued in connection with a
conversion pursuant to clauses (i) through (iii) of
Section 4(a) of the Convertible Subordinated Note
Agreement, dated as of April 22, 1996, between the
Corporation and Genentech, Inc., as amended (the
"Note Agreement"), shall be an amount per share equal
to the Current Market Price (as defined below) of the
Common Stock determined as of the first occurring
Conversion Date (as such term is defined in Section
4(a) of the Note Agreement) (herein, the "Initial
Issue Date"). The "Conversion Price" for any shares
of Series E Preferred Stock issued in connection with
either a conversion pursuant to clause (iv) of
Section 4(a) of the Note Agreement or a prepayment
pursuant to Section 3(d) of the Note Agreement shall
be an amount per share equal to the Current Market
Price of the Common Stock determined as of the date
of the issuance of such shares (herein, the
"Prepayment Issue Date"). The number of shares of
Common Stock into which a share of Series E Preferred
Stock is convertible is hereinafter referred to as
the "Conversion Rate" of such series. The Conversion
Price shall be subject to adjustment from time to
time after the Initial Date or applicable Prepayment
Issue Date, as the case may be, as set forth in this
Section 6.
<PAGE>
-3-
IN WITNESS WHEREOF, the undersigned have executed
this certificate as of June 13, 1996.
---------------------------------
Clarence L. Dellio
Senior Vice President, Operations
---------------------------------
Christopher J. Margolin
Vice President, General Counsel
and Secretary
EXHIBIT 5.1
[LETTERHEAD OF CAHILL GORDON & REINDEL]
June 28, 1996
(212) 701-3000
XOMA Corporation
2910 Seventh Street
Berkeley, California 94710
Ladies and Gentlemen:
As counsel for XOMA Corporation (the "Company"), we
are representing the Company in connection with the registra-
tion statement on Form S-3 (the "Registration Statement") filed
with the Securities and Exchange Commission (the "Commission")
on June 28, 1996 relating to the registration under the Securi-
ties Act of 1933, as amended (the "Act"), of 1,500,000 shares
(the "Shares") of the Company's Common Stock, par value $.0005
per share.
We advise you that in our opinion the Shares were
validly issued and are fully paid and non-assessable.
We hereby consent to the filing of this opinion with
the Commission as an exhibit to the Registration Statement. We
also consent to the reference under the heading "Legal Opin-
ions" in the Registration Statement to our having passed upon
the legal matters referred to above. Our consent to such ref-
erence does not constitute a consent under Section 7 of the
Act, as in consenting to such reference we have not certified
any part of the Registration Statement and do not otherwise
come within the categories of persons whose consent is required
under said Section 7 or under the rules and regulations of the
Commission thereunder.
Very truly yours,
CAHILL GORDON & REINDEL
WHEREVER CONFIDENTIAL INFORMATION
IS OMITTED HEREIN (SUCH
OMISSIONS ARE DENOTED BY AN
ASTERISK), SUCH CONFIDENTIAL
INFORMATION HAS BEEN SUBMITTED
SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT
COLLABORATION AGREEMENT
GENENTECH, INC. AND
XOMA CORPORATION
<PAGE>
COLLABORATION AGREEMENT
THIS COLLABORATION AGREEMENT is made effective as of the 22nd day of April,
1996 (the "Effective Date") by and between Xoma Corporation, a Delaware
corporation having its principal place of business at 2910 7th Street, Berkeley,
California 94710 ("Xoma") and GENENTECH, INC., a Delaware corporation having its
principal place of business at 460 Point San Bruno Boulevard, South San
Francisco, California 94080 ("Genentech"), each on behalf of itself and its
Affiliates. Xoma and Genentech are sometimes referred to herein individually as
a "Party" and collectively as the "Parties," and references to "Xoma" and
"Genentech" shall include their respective Affiliates.
RECITALS
1. Genentech has licensed a monoclonal antibody (known as MHM-24) to the
CD11a cell adhesion molecule on the surface of leucocytes under the terms of an
Evaluation and License Agreement dated July 1, 1991 among Genentech, The
Chancellor Masters and Scholars of the University of Oxford, Andrew J. McMichael
and James E.K. Hildreth (the "Oxford Agreement"). Genentech has humanized such
antibody and begun its preclinical development including the development of a
pilot process for producing the antibody.
2. Genentech and Xoma wish to continue development of and eventually market
such antibody in a collaborative fashion so that the resources and expertise of
each is put to good use.
3. Genentech wishes to grant to Xoma a sublicense under the Oxford
Agreement to permit Xoma to participate in such collaborative effort.
4. Simultaneously with the execution of this Agreement, Genentech will
purchase shares of Common Stock of Xoma for an aggregate purchase price of $ *
according to the terms and conditions of a Common Stock and Convertible Note
Purchase Agreement (the "Stock Purchase Agreement") of even date herewith.
Genentech will also loan Xoma funds in an initial amount of $5,000,000 according
to the terms and conditions of a Convertible Subordinated Note Agreement (the
"Note Purchase Agreement") of even date herewith.
ARTICLE 1.
DEFINITIONS
The following terms shall have the following meanings as used in this
Agreement:
1.1 "Administration Costs" shall have the meaning defined in Exhibit A.
1.2 "Affiliate" means an entity that, directly or indirectly, through one
or more intermediaries, is controlled by Xoma or Genentech. As used herein, the
term "control" will mean the direct or indirect ownership of fifty percent (50%)
or more of the stock having the
<PAGE>
<PAGE>
-2-
right to vote for directors thereof or the ability to otherwise control the
management of the corporation or other business entity.
1.3 "Allocable Overhead" shall have the meaning defined in Exhibit A.
1.4 "Anti-CD11a" means that certain monoclonal antibody, which recognizes
the CD11a cell adhesion molecule on leucocytes, more particularly described on
Exhibit B attached hereto.
1.5 "Control" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
or other arrangement with any Third Party.
1.6 "Combination Product Adjustment" means the following: in the event a
Licensed Product is sold in the form of a combination product containing one or
more active ingredients in addition to a Licensed Product, Royalty-Bearing Sales
or Net Sales for such combination product will be adjusted by multiplying actual
Royalty-Bearing Sales, or Net Sales as applicable, of such combination product
by the fraction A/(A + B) where A is the invoice price of the Licensed Product,
if sold separately, and B is the invoice price of any other active component or
components in the combination, if sold separately. If, on a country-by-country
basis, the other active component or components in the combination are not sold
separately in said country, Royalty-Bearing Sales or Net Sales shall be
calculated by multiplying actual Royalty-Bearing Sales or Net Sales of such
combination product by the fraction A/C where A is the invoice price of the
Product if sold separately, and C is the invoice price of the combination
product. If, on a country-by-country basis, neither the Product nor the other
active component or components of the combination product is sold separately in
said country, Royalty- Bearing Sales or Net Sales shall be determined by the
Parties in good faith.
1.7 "Competing Product" shall mean any monoclonal antibody whose mechanism
of action is initiated by interaction with the CD11a determinant on leucocytes
developed or acquired by either Party.
1.8 "Co-Promote" means to promote jointly Licensed Products through
Genentech, Xoma and their respective sales forces under a single trademark in
the Co-Promotion Territory.
1.9 "Co-Promotion Profits" shall have the same meaning as "Operating
Profits and Losses" as defined in Exhibit A.
1.10 "Co-Promotion Territory" means the * .
1.11 "Cost of Goods Sold" in the Co-Promotion Territory shall have the
meaning defined in Exhibit A.
1.12 "Development Costs" shall have the meaning defined in Exhibit A.
<PAGE>
<PAGE>
-3-
1.13 "Development Plan" means the comprehensive plan for the development of
Anti- CD11a, designed to generate the preclinical, process
development/manufacturing scale-up, clinical and regulatory information required
for filing Drug Approval Applications in the Co- Promotion Territory, and is
attached hereto as Exhibit C but will be modified at least annually by the
Project Core Team. Development shall refer to all activities related to
preclinical testing, toxicology, formulation, process development, manufacturing
scale-up, quality assurance/quality control, clinical studies and regulatory
affairs for a Licensed Product in connection with obtaining Regulatory Approvals
of such Products.
1.14 "Distribution Costs" shall have the meaning defined in Exhibit A.
1.15 "Drug Approval Application" means an application for Regulatory
Approval required for commercial sale or use of a Licensed Product as a drug in
the Field in a regulatory jurisdiction.
1.16 "Field" means * .
1.17 "Genentech Know-how" means Information which (i) Genentech discloses
to Xoma under this Agreement and (ii) is within the Control of Genentech.
1.18 "Genentech Patent" means the rights granted by any governmental
authority under a Patent which covers a method, apparatus, material,
manufacture, use, treatment, process, compound, composition, or
product-by-process necessary to make, use or sell a Licensed Product in the
Field, which Patent is owned or Controlled by Genentech, including its interest
in any Patents owned jointly by the Parties as provided hereunder.
1.19 "Genentech Territory" means * .
1.20 "Gross Sales" shall have the meaning defined in Exhibit A.
1.21 "Information" means techniques and data relating to the Licensed
Products, including, but not limited to, biological materials, inventions,
practices, methods, knowledge, knowhow, skill, experience, test data including
pharmacological, toxicological and clinical test data, analytical and quality
control data, marketing, pricing, distribution, cost, sales, manufacturing,
patent data or descriptions.
1.22 "Initial Indications" means the indications for Licensed Products set
forth in Section 2.1.
1.23 "Licensed Product" means a formulation for use in the Field containing
Anti- CD11a or any molecule derived from Anti-CD11a that is substituted by the
Steering Committee as the subject of this collaboration, except as otherwise set
forth in Section 2.2.
1.24 "Marketing Costs" shall have the meaning defined in Exhibit A.
<PAGE>
<PAGE>
-4-
1.25 "Net Sales" shall have the meaning defined in Exhibit A.
1.26 "Operating Profits or Losses" shall have the meaning defined in
Exhibit A.
1.27 "Patent" means (i) valid and enforceable letters patent, including any
extension, registration, confirmation, reissue, continuation, division,
continuation-in-part, re-examination or renewal thereof and (ii) pending
applications for letters patent.
1.28 "Patent Costs" shall have the meaning defined in Exhibit A.
1.29 "Phase II Clinical Trial" means such studies in humans of the safety,
dose ranging and efficacy of a Licensed Product which have generated sufficient
data to commence Phase III Clinical Trials.
1.30 "Phase III Clinical Trial" means a controlled study in humans of the
efficacy and safety of a Licensed Product which is prospectively designed to
demonstrate statistically whether the Licensed Product is effective for use in a
particular indication in a manner sufficient to obtain regulatory approval to
market that Licensed Product and which the Project Core Team designates as a
Phase III Clinical Trial.
1.31 "Project Core Team" means that body established pursuant to Section
3.2 below.
1.32 "Regulatory Approval" means any approvals (including pricing and
reimbursement approvals), licenses, registrations or authorizations of any
federal, state or local regulatory agency, department, bureau or other
governmental entity, necessary for the manufacture and sale of Products in a
regulatory jurisdiction.
1.33 "Royalty-Bearing Sales" means the gross amount invoiced by Genentech
or its permitted sublicensees for sales to an unrelated Third Party of a
Licensed Product in the Genentech Territory, less (i) trade, cash and quantity
discounts or rebates, (ii) credits or allowances given or made for rejection or
return of, and for uncollectible amounts on, previously sold products or for
retroactive price reductions (including rebates similar to Medicare), (iii)
taxes, duties or other governmental charges levied on or measured by the billing
amount, as adjusted for rebates and refunds, (iv) charges for freight and
insurance directly related to the distribution of Licensed Products (to the
extent not paid by the Third Party customer), and (v) credits or allowances
given or made for wastage replacement, indigent patient and similar programs, to
the extent actually deducted from the gross amount invoiced. Such amount shall
then be adjusted by the Combination Product Adjustment, if applicable.
1.34 "Sales Costs" shall have the meaning defined in Exhibit A.
1.35 "Sales Representative" means an employee of either Party or its
Affiliates (i) who is responsible for contacting customers and others who can
buy or influence the buying decision on the applicable Licensed Product in the
applicable country in the Co-Promotion Territory, and
<PAGE>
<PAGE>
-5-
(ii) whose success at such activities is a significant factor in the
ongoing employment of the individual, and shall exclude an employee of either
Party or an Affiliate engaged in telemarketing, professional education, and
similar indirect activities in support of direct selling.
1.36 "Steering Committee" means that committee established pursuant to
Section 3.1 below.
1.37 "Third Party" means any entity other than Xoma or Genentech.
1.38 "Third Party Royalties" means royalties payable to a Third Party in
connection with Licensed Products.
1.39 "Xoma Know-how" means Information which (i) Xoma discloses to
Genentech under this Agreement and (ii) is within the Control of Xoma.
1.40 "Xoma Patent" means the rights granted by any governmental authority
under a Patent which covers a method, apparatus, material, manufacture, use,
treatment, process, compound, composition or product-by-process necessary to
make, use or sell a Licensed Product in the Field, which Patent is owned or
Controlled by Xoma, including its interest in any Patents owned jointly by the
Parties as provided hereunder.
ARTICLE 2.
SCOPE OF COLLABORATION
2.1 Initial Indications. The Parties will focus their initial efforts on
the development of Licensed Products to treat psoriasis and prevent or decrease
the rejection of organ transplants.
2.2 Option to Include Competing Products. Neither Party shall , alone or
with any Third Party, conduct any human clinical trial of any Competing Product
without first giving the other Party (the "Electing Party") advance written
notice. The Electing Party shall have 120 days from the date the first Party
delivers such notice to elect to include such Competing Product as a Licensed
Product. The terms and conditions governing the development and
commercialization of Competing Products shall be similar to the terms and
conditions set forth in this Agreement for the development and commercialization
of Anti-CD11a, taking into account the relative commercial value of the
Competing Product compared to Anti-CD11a. If the Electing Party does not notify
the first Party of its election to so include a Competing Product within such
120-day period, the first Party shall be free to proceed with the development
and commercialization of such Competing Product without any obligation to the
Electing Party.
2.3 Development Costs.
(a) Xoma shall bear all Development Costs of Anti-CD11a in the Field
in the Co-Promotion Territory through the successful completion of Phase II
Clinical Trials, including but not limited to certain IND-enabling studies and
supplying Anti-CD11a and all costs of
<PAGE>
<PAGE>
-6-
activities set forth in the Development Plan, as amended from time to time
by the Project Core Team.
(b) If Xoma elects the option set forth in Section 5.1(b) below, all
Development Costs incurred by the Parties in the Co-Promotion Territory after
the first Regulatory Approval for Anti-CD11a in the United States shall be
charged against Operating Profits (or Losses).
(c) Genentech shall bear all costs for development of Anti-CD11a in
the Field not incurred in the Co-Promotion Territory.
ARTICLE 3.
MANAGEMENT OF THE COLLABORATION
3.1 Steering Committee.
(a) Within thirty (30) days of the Effective Date, the Parties will
establish a Steering Committee to oversee and manage the collaboration in the
Co-Promotion Territory contemplated by this Agreement. The Steering Committee
will be composed of two representatives appointed and replaced by Xoma and two
representatives appointed and replaced by Genentech. Such representatives will
be senior officers and/or managers of their respective companies. Any member of
the Steering Committee may designate a substitute to attend and perform the
functions of that member at any meeting of the Steering Committee. The Steering
Committee will meet at least once each calendar quarter, or at any frequency
agreed by the Steering Committee, and will operate by consensus.
(b) The Steering Committee shall perform the following functions:
(i) determine the overall strategy for and monitor the
collaboration in the manner contemplated by this Agreement;
(ii) review and approve development and commercialization plans
and annual budgets formulated by the Project Core Team and annual budgets
formulated by the Project Core Team or the Finance Committee.
(iii) settle disputes or disagreements that are unresolved by the
Project Core Team or Finance Committee unless otherwise indicated in this
Agreement; and
(iv) perform such other functions as appropriate to further the
purposes of this Agreement as determined by the Parties.
If the Steering Committee is unable to resolve a dispute regarding any
issue presented to it, such dispute shall be resolved in accordance with Article
17 below.
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3.2 Project Core Team.
(a) Within thirty (30) days of the Effective Date, the Parties will
establish the Project Core Team to oversee and control all development and
commercialization of Anti-CD11a in the Co-Promotion Territory, in the Field,
including pre-clinical research, clinical research, manufacturing, regulatory
filings, and post-approval development studies. If the Parties Co- Promote
Licensed Products, the Product Core Team will also (i) monitor, review and
direct the commercialization of Licensed Products in the Co-Promotion Territory,
including annual marketing and sales budgets, annual forecasts of sales and
production requirements, the annual marketing plan, the appropriate role for
Genentech and Xoma to play in commercialization activities in the Co-Promotion
Territory, broad product positioning and creative campaign strategies, pricing,
managed care contract strategies, Phase IV clinical support (especially
strategic direction), and allocation of Marketing Costs, Sales Costs and
Administration Costs of each company as well as (ii) select trademarks for
Licensed Products. The Project Core Team will be composed of three
representatives appointed by each of Xoma and Genentech. Each representative
will have one vote on all matters within the Project Core Team's purview. Such
representatives will include individuals with expertise and responsibilities in
the areas of preclinical development, clinical development, process sciences,
manufacturing, regulatory affairs or product development and marketing. Either
Party may replace any or all of its representatives at any time upon written
notice to the other Party. Any member of the Project Core Team may designate a
substitute to attend and perform the functions of that member at any meeting of
the Project Core Team. The Project Core Team will meet at least once each
calendar quarter, or more frequently, as agreed by the Project Core Team. The
Project Core Team will operate by consensus. If the Project Core Team is unable
to resolve a dispute regarding any issue presented to it, such dispute shall be
resolved in accordance with Article 17 below.
(b) The Project Core Team shall be responsible for formulating
development and commercialization plans and an annual budget and for
implementing all activities approved by the Steering Committee, except that Xoma
shall formulate the first annual budget and submit it for approval to the
Project Core Team within thirty (30) days of the Effective Date. The Project
Core Team will finalize each subsequent annual budget and modify the Development
Plan at least four months prior to the end of the then-current development year.
(c) If any Genentech European development partner so requests, Xoma
will consider in good faith allowing a representative of such partner to be a
non-voting member of the Project Core Team.
(d) The Project Core Team will cease operations and have no further
function hereunder on the later of (i) the date on which the Parties are no
longer developing any Licensed Product in the Co-Promotion Territory, or (ii)
the date on which the Parties are no longer sharing Operating Profits or Losses
with respect to any Licensed Product in the Co-Promotion Territory.
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3.3 Finance Committee. (a) Within thirty (30) days of the date Xoma elects
the option set forth in Section 5.1(b) below, the Parties will establish the
Finance Committee to be composed of two representatives appointed and replaced
by each of Xoma and Genentech. Such representatives will include individuals
with expertise and responsibilities in the areas of accounting, cost allocation,
budgeting and financial reporting. Any member of the Finance Committee may
designate a substitute to attend and perform the functions of that member at any
meeting of the Finance Committee. The Finance Committee will operate by
consensus. If the Finance Committee is unable to resolve a dispute regarding any
issue presented to it, such dispute shall be resolved in accordance with Article
17.
(b) The Finance Committee shall operate under the direction of the Steering
Committee to provide services to and consult with the Project Core Team in order
to address the financial, budgetary and accounting issues which arise in
connection with the Development Plan and updates thereto as described in Exhibit
A.
(c) The Finance Committee shall have no involvement in the development of
Licensed Products in the Genentech Territory, which shall be the responsibility
of Genentech, subject to the terms and conditions of this Agreement.
(d) The Finance Committee will cease operating and have no further function
hereunder on the date on which the Parties are no longer sharing Operating
Profits or Losses with respect to any Licensed Product in the Co-Promotion
Territory.
3.4
*
ARTICLE 4.
DEVELOPMENT IN THE CO-PROMOTION TERRITORY
4.1 Development Efforts. Xoma and Genentech each agree to collaborate
diligently in the development of Licensed Products in the Field and to use
commercially reasonable and diligent efforts to develop and bring Licensed
Products to market in the Field as soon as practicable. The Parties further
agree to execute and substantially perform the Development Plan and to cooperate
with the other in carrying out the Development Plan. As used in this Agreement,
the term commercially reasonable and diligent efforts will mean those efforts
consistent with the exercise of prudent scientific and business judgment, as
applied to other pharmaceutical products of similar potential and market size by
the Party in question.
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4.2 Genentech Development Responsibilities. Genentech agrees to be
responsible for the following specific activities necessary to complete
development of Anti-CD11a up to completion of Phase II Clinical Trials:
(a) Transfer all preclinical data, assays and associated materials,
protocols, procedures and any other information in Genentech's possession
required to initiate clinical development of Anti-CD11a at no cost to Xoma.
(b) Complete its development of a pilot process to manufacture
Anti-CD11a. Transfer the cell bank for Anti-CD11a production as well as all
associated assays, procedures and other information required for Xoma to supply
Licensed Product for any IND-enabling studies and human clinical trials to the
end of Phase II Clinical Trials. The Project Core Team will determine if any
process improvements or refinements are required and which Party will be
responsible for such improvements or refinements. Xoma will pay all costs
incurred in making such improvements or refinements after Genentech has
transferred the pilot process to Xoma and Xoma has accepted it, such acceptance
not to be unreasonably withheld.
(c) Conduct additional preclinical research as agreed upon by the
Project Core Team and approved by the Steering Committee to develop Anti-CD11a
for indications additional to the Initial Indications at Xoma's expense.
Development Costs shall exclude the costs incurred by Genentech pursuant to (a)
and (b) above.
4.3 Xoma Development Responsibilities. Xoma agrees to be responsible
for the following specific activities necessary to complete development of
Anti-CD11a up to the successful completion of Phase II Clinical Trials:
(a) Use commercially reasonable and diligent efforts to conduct all
IND- enabling studies and human clinical studies for the Initial Indications
through the successful completion of Phase II Clinical Trials and make all
filings with and supporting all communications with the US Food and Drug
Administration ("FDA") necessary to conduct such studies.
(b) Upon transfer of manufacturing technology by Genentech, Xoma will
use Genentech's process at Xoma's manufacturing facilities (upgrading such
facilities if necessary) to supply all requirements of Licensed Product for
preclinical and human clinical trials up to the successful completion of Phase
II Clinical Trials in the Co-Promotion Territory.
4.4 Drug Approval Applications. Consistent with the Development Plan,
Genentech shall use commercially reasonable and diligent efforts to file Drug
Approval Applications and seek Regulatory Approvals for Licensed Products in the
Co-Promotion Territory. Prior to submitting any Drug Approval Application, the
Parties, through the Project Core Team, shall consult, cooperate in preparing
and mutually agree on such Applications and their content and scope. Genentech
shall own all regulatory submissions including all Drug Approval
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Applications for Licensed Products in the Co-Promotion Territory. If the
Parties Co-Promote Licensed Products, the Parties will include on all package
labels and inserts for Licensed Products sold in the Co-Promotion Territory the
names and logos of Xoma and Genentech with equal prominence, to the extent
permitted by the applicable regulatory authorities.
4.5 Development Delays. The Development Plan and the Parties contemplate
that Xoma will successfully complete a Phase II Clinical Trial for one of the
Initial Indications by December 31, 1998, assuming that Genentech provides
necessary materials on a timely basis to Xoma and completes the transfer
described in Section 4.2(a) by June 1, 1996. Any delay in such transfer will
cause the December 31, 1998 date to be extended by the length of time of such
delay. In addition, any material delay by Genentech in performing any of its
obligations under this Agreement that actually causes Xoma not to be able to
meet the timelines set forth in the Development Plan will cause the December 31,
1998 or extended date to be extended by the length of time of the delay by
Genentech.
ARTICLE 5.
COMMERCIALIZATION IN THE CO-PROMOTION TERRITORY
5.1 Xoma Options for Commercialization. If Xoma successfully completes a
Phase II Clinical Trial for one of the Initial Indications by December 31, 1998
(or such other date set pursuant to Section 4.5) as determined by the Steering
Committee, then Xoma may choose either option A or option B as described below
for continuing development and commercialization of Licensed Products:
(a) Under Option A, Xoma will continue to participate in the
development of Anti-CD11a to the extent elected by Genentech under Section
5.2(b) below. Genentech may elect to have Xoma participate in activities leading
to Regulatory Approval in the Co-Promotion Territory. If Xoma incurs any further
Development Costs due to such participation (elected by Genentech) during the
period ending on the date on which Regulatory Approval by the FDA is first
received for a Licensed Product, such costs will be funded by a loan from
Genentech under the mechanism set forth in the Note Agreement. Upon such
Regulatory Approval, all outstanding balances then due and owing to Genentech
under the provisions of the Note Agreement would be accelerated and converted
into the non-voting preferred stock described in the Note Agreement. Under
Option A, Xoma would *
(b) Under Option B, Xoma will continue to participate in the
development of Anti-CD11a to the extent elected by Genentech under Section
5.2(b) below. Xoma will * receive the right to Co-Promote Licensed Products.
Xoma may elect to have * . In such event, * , all amounts previously loaned to
Xoma by Genentech will become immediately due and payable in cash, or, at Xoma's
option, will be convertible into equity based on the fair market value of Xoma
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Common Stock on such date. Upon receipt of Regulatory Approval from
the FDA, all outstanding balances due and owing to Genentech would be
accelerated as described in (a) above. Under Option B, Xoma would receive
*
Xoma will notify Genentech whether it elects Option A or Option B
above within thirty (30) days after the successful completion of a Phase II
Clinical Trial for one of the Initial Indications.
5.2 Genentech Options for Commercialization. (a) If Xoma elects the
option set forth in Section 5.1(a) above, Genentech may choose to either (1) *
or (2) * . Genentech shall notify Xoma of its election of option (1)
or option (2) within thirty (30) days of receipt of notice from Xoma of its
election under Section 5.1. If Genentech selects option (1), * .
(b) Within fifteen days of receipt of Xoma's notice pursuant to
Section 5.1 above, Genentech shall notify Xoma whether Genentech elects to
assume all or some part of the responsibility (subject to * for the development
of Licensed Products under either of the options selected by Xoma under Section
5.1 above, including scale-up of the commercial manufacturing process, conduct
of Phase III Clinical Trials and activities associated with making the Drug
Approval Application in the Co-Promotion Territory. Such election shall be at
Genentech's sole discretion. All other development responsibilities will be
determined by the Project Core Team.
(c) In the event that Xoma does not successfully complete a Phase II
Clinical Trial for one of the Initial Indications by December 31, 1998 (or such
other date set under Section 4.5), Genentech may select from one of the
following two options: (1) extend the period for successful completion of a
Phase II Clinical Trial for one of the Initial Indications past December 31,
1998 to any date it wishes, thereby also extending the right of Xoma to select
an option under Section 5.1 above, or (2) select the option set forth in Section
5.1(a) above.
5.3 Commercialization Efforts. If Xoma elects the option set forth in
Section 5.1(b) above, Xoma and Genentech each agree to (i) collaborate
diligently in the commercialization of the Licensed Products and (ii) use
commercially reasonable and diligent efforts to commercialize the Licensed
Products promptly and in such a manner as to maximize Operating Profits. The
Parties agree that Genentech will play the primary role and Xoma the secondary
role in all sales, marketing and product launch activities and tactical
execution of marketing and sales promotional programs in the Co-Promotion
Territory. The Parties shall be guided by a standard of reasonableness in
economic terms and of fairness to each of the Parties, striving to balance as
best they can the legitimate interests and concerns of the Parties and to
realize the economic
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potential of the Licensed Products. The Project Core Team (subject to
approval by the Steering Committee) shall develop a plan for commercialization
of Licensed Product at such time as the members of the Project Core Team decide
it is useful to do so. Such plan shall, among other things, determine the
responsibilities for sales of and distributing Licensed Products, development of
marketing and promotional materials and conduct of training programs for Sales
Representatives of both Parties. Unless otherwise agreed, Genentech shall have
the sole responsibility with respect to the following:
(a) Booking sales for and distributing the Licensed Products.
(b) Handling all returns of the Licensed Products.
(c) Handling all recalls of the Licensed Products.
(d) Handling all aspects of order processing, invoicing and
collection, Licensed Product distribution, warehousing, inventory and
receivables, and collection of data of sales to hospitals and other end users
(e.g., DDD data).
(e) Handling all other customer service related functions.
5.4 Sales Efforts in the Co-Promotion Territory.
(a) Although Genentech has the primary marketing role, Xoma shall be
permitted to deploy Sales Representatives in the Co-Promotion Territory to the
extent that such deployment will enhance the Parties' ability to maximize
Operating Profits, but in no event may Xoma * in the Co-Promotion Territory. The
Parties agree to allocate markets and accounts in an unbiased manner based on
objective, quantifiable information and market research data with the objectives
of allocating to each Party markets and accounts from which each such Party will
have the opportunity to maximize Operating Profits.
(b) The Parties shall recover their Sales Costs in accordance with
Exhibit A.
ARTICLE 6.
DEVELOPMENT AND COMMERCIALIZATION IN GENENTECH TERRITORY
6.1 Development Costs, Marketing Costs and Cost of Goods Sold. Genentech
shall bear all costs related to the development and commercialization of the
Licensed Products in the Genentech Territory. Genentech shall have the sole
responsibility for, and right to make all decisions regarding, all development
and marketing activities in the Genentech Territory.
6.2 Cooperation on Development Efforts. To facilitate cooperation between
the Parties on the worldwide development and marketing of Licensed Products,
Genentech shall keep Xoma informed of all substantive development activities in
the Genentech Territory. Genentech
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shall consider in good faith any comments made by Xoma. Both Parties agree
that they will do nothing during Licensed Product development activities to
imperil Regulatory Approvals in any country in any territory.
ARTICLE 7.
EQUITY AND DEBT PURCHASES, MILESTONES, PROFIT SHARING, AND ROYALTIES
7.1 Payments upon Execution. On the Effective Date, Genentech shall make
the following payments to Xoma:
(a) $ * to purchase shares of Xoma Common Stock as set forth in the
Stock Purchase Agreement.
(b) $5,000,000 as an interest-bearing loan under the terms and
conditions of the Note Agreement one of the terms of which is convertibility to
the non-voting Preferred Stock of Xoma upon the earlier of (i) the date of
receipt of any Regulatory Approval in the United States or (ii) the date that is
ten days after the date the loan is due and payable, assuming the loan is not
paid in full before such date. The purpose of Genentech's making such $5,000,000
loan is to provide Xoma the necessary funds to permit it to fulfill its initial
development obligations under this Agreement, and, accordingly, one condition
contained in the Note Purchase Agreement is a condition that any loans made
under the Note Purchase Agreement are to be used solely for the development of
Licensed Product as set forth in the Development Plan. The Parties believe that
the $5,000,000 loan will be sufficient to support development for the first
year, but Genentech will make up any shortfall between the $5,000,000 and the
actual budget for the first year by increasing the loan by that amount when the
next year's budget and modifications to the Development Plan are approved by the
Steering Committee. Similarly, any amount of the $5,000,000 that is over the
first year's budget will be carried forward to fund the next year's budget.
7.2 Other Note Purchases. Genentech will increase the amount loaned to Xoma
under the terms and conditions of the Note Purchase Agreement for the purposes
of developing Licensed Products at the beginning of each year to cover the
budget formulated by the Project Core Team for that year until the earlier of
(1) December 31, 1998 (or any later date selected by Genentech under Section
5.2(c)(1)) and (2) the completion of a Phase II Clinical Trial for an Initial
Indication. In addition, if Xoma selects the option set forth in Section 5.1 (a)
or Genentech selects such option for Xoma under Section 5.2(c)(2), Genentech
will loan Xoma the amount necessary to fund its development obligations under
the Development Plan based on the annual budget in a similar fashion each year
until the receipt of Regulatory Approval (unless Genentech earlier terminates
this Agreement) under the terms and conditions of the Note Purchase Agreement.
7.3 Milestone Payment. Genentech shall make a milestone payment to Xoma of
$ * within thirty (30) days after the successful completion of a Phase II
Clinical Trial for one of the Initial Indications, as recommended by the Project
Core Team and approved by the
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Steering Committee, but such milestone payment will be made if and only if
such successful completion occurs on or before December 31, 1998 (as may be
extended pursuant to Section 4.5).
7.4 Share of Operating Profits or Losses. If Xoma selects the option set
forth in Section 5.1(b), Xoma and Genentech shall share in Operating Profits or
Losses from sales of Licensed Products in the Co-Promotion Territory as provided
in Exhibit A. The Parties shall share Operating Profits or Losses hereunder in
the Co-Promotion Territory until the earlier of the date the Parties mutually
agree to terminate the collaboration in the Co-Promotion Territory or * after
the first commercial sale of Licensed Product in the Co-Promotion Territory. At
the end of such period, Xoma's rights to Co-Promote shall cease. Genentech may
continue to market Licensed Products and will pay Xoma a royalty of * of
Royalty- Bearing sales worldwide in any year.
7.5 Royalties.
(a) Genentech shall pay Xoma a royalty on Royalty-Bearing Sales of
Licensed Products in the Genentech Territory as follows:
*
(b) Genentech shall pay any Third Party royalties owed on account of
sales of Licensed Product in the Genentech Territory, including royalties owed
due to the manufacture of Licensed Products by Genentech. Genentech shall
receive a credit of * % of the royalties it pays on account of the manufacture,
use or sale of Licensed Products against royalties due to Xoma * provided,
however, that in no event shall royalties due to Xoma be reduced to *
7.6 Royalty Payment Reports. Royalty payments under this Agreement shall be
made to Xoma or its designee quarterly within ninety (90) days following the end
of each calendar quarter for which royalties are due. Each royalty payment shall
be accompanied by a report summarizing the Royalty-Bearing Sales during the
relevant three-month period.
7.7 Term of Royalty Obligations.
(a) Genentech shall pay royalties hereunder with respect to each
Licensed Product in each country in the Genentech Territory for * from the date
of first commercial sale in such country.
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(b) Upon expiration of the royalty term for a Licensed Product in a
country as described above, Genentech shall thereafter have an exclusive,
paid-up irrevocable license to make, use, sell, offer for sale, have sold and
import that Licensed Product in that country.
7.8 Taxes. Xoma shall pay any and all taxes levied on account of, or
measured exclusively by, any payment including royalties it receives under this
Agreement. If laws or regulations require that taxes be withheld, Genentech will
(i) deduct those taxes from the remittable royalty, (ii) timely pay the taxes to
the proper taxing authority, and (iii) send proof of payment to Xoma within
sixty (60) days following that payment.
7.9 Blocked Currency. In each country where the local currency is blocked
and cannot be removed from the country, royalties shall continue to be accrued
in such country and Royalty-Bearing Sales in such country shall continue to be
reported, but such royalties will not be paid until they may be removed from the
country. At such time as Genentech is able to remove currency from such country
it shall also remove and pay the royalties accrued on Xoma's behalf.
7.10 Foreign Exchange. For the purpose of computing Royalty-Bearing Sales
for Licensed Products sold in a currency other than United States Dollars, such
currency shall be converted into United States Dollars in accordance with
Genentech's customary and usual translation procedures consistently applied.
7.11 Payments to or Reports by Affiliates. Any payment required under any
provision of this Agreement to be made to either Party or any report required to
be made by any Party shall be made to or by an Affiliate of that Party if
designated by that Party as the appropriate recipient or reporting entity.
7.12 Sales By Sublicensees. In the event Genentech grants licenses or
sublicenses to others to make or sell Licensed Products in the Genentech
Territory and such licenses or sublicenses are granted to an unrelated Third
Party (understanding that Roche (as defined in Section 6(b) of the Stock
Purchase Agreement) is not an unrelated Third Party), then Genentech *
. Any licenses or sublicenses granted by Genentech shall include an
obligation for the licensee or sublicensee to account for and report its
Royalty-Bearing Sales of such Products on the same basis as if such sales were
Royalty-Bearing Sales by Genentech, and Genentech shall pay royalties to Xoma as
if the Royalty-Bearing Sales of the sublicensee were Royalty-Bearing Sales of
Genentech. Genentech shall provide Xoma with copies of any licenses or
sublicenses it grants, with any financial or other confidential terms redacted.
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ARTICLE 8.
MANUFACTURE AND SUPPLY
8.1 Transfer of Materials and Knowhow.
No later than April 23, 1996, Genentech will transfer to Xoma the
pre-master cell bank cells and associated media necessary for Xoma to undertake
the manufacture of Licensed Products for preclinical development and provide
know-how and expertise to help Xoma with such manufacture in a timely fashion
provided that Xoma only uses such biological materials, know-how, reagents and
expertise to manufacture Licensed Products. If Xoma is unable to use the
pre-bank cells and must instead use cells from the master cell bank to be
developed on or about May 1, 1996, the Project Core Team (with the approval of
the Steering Committee) will discuss in good faith whether the delay in
obtaining a cell line has caused a delay in the project timeline of the kind
described in Section 4.5. All transfers of materials and information to Xoma
shall be free of charge to Xoma; provided, however, that Genentech's obligation
to train Xoma personnel in the use of such materials or information shall be
limited to a reasonable number of hours.
8.2 Manufacture of Licensed Products for Clinical Trials.
(a) Xoma will supply all quantities of Anti-CD11a for pre-clinical
studies and clinical trials in the Co-Promotion Territory directed toward the
successful completion of a Phase II Clinical Trial for the Initial Indications.
(b) Xoma shall supply to Genentech, at Xoma's actual Cost of Goods
Sold, all quantities of Licensed Products for preclinical studies and clinical
trials in the Genentech Territory or for expanded needs recommended by the
Project Core Team and approved by the Steering Committee (and budgeted) beyond
the successful completion of a Phase II Clinical Trial for one of the Initial
Indications subject to the election of Genentech under 5.2(b) on providing
Licensed Products.
8.3 Termination of Participation. If Genentech elects to assume
responsibility for manufacturing under Section 5.2(b), Xoma shall immediately
provide to Genentech at Genentech's request all process and manufacturing
technology, material and data and, provide access to regulatory filings
sufficient to enable Genentech concurrently to produce and supply Licensed
Product. Xoma shall provide reasonable assistance to Genentech with respect to
such transfer so as to permit Genentech to begin manufacturing and supplying its
requirements as soon as possible to minimize any disruption in the continuity of
supply.
ARTICLE 9.
LICENSES
9.1 Licenses To Xoma Within The Field. Genentech grants to Xoma a
co-exclusive royalty-free license under the Genentech Patents and Genentech
Know-how in the Field to
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develop, make, use, sell, and offer for sale Licensed Products in the
Co-Promotion Territory. Xoma covenants and agrees not to develop, make, have
made, use, sell, offer for sale, have sold or import any product using the
Genentech Patents or Know-how outside of the Field. Xoma's rights to sell
Licensed Products are subject to its having made the election to Co-Promote
under Section 5.1(b).
9.2 License To Genentech Within the Field. Xoma grants to Genentech a
worldwide royalty-free license under the Xoma Patents and Xoma Know-how in the
Field to develop, make, use, sell, offer for sale, have sold and import Licensed
Products. Such license shall be co-exclusive with Xoma in the Co-Promotion
Territory and exclusive even as to Xoma in the Genentech Territory. Genentech
covenants and agrees not to develop, make, have made, use, sell, offer for sale,
have sold or import any product using the Xoma Patents or Know-how outside of
the Field.
9.3 Sublicensing. Genentech may grant sublicenses *
Unless otherwise agreed, each sublicensee shall be subject to all of the
obligations of Genentech hereunder applicable to that part of the territory
being licensed.
ARTICLE 10.
TRADEMARKS
10.1 Product Trademarks. All Licensed Products shall be sold in the
Co-Promotion Territory under trademarks selected by the Project Core Team and
owned by Genentech. Genentech hereby grants Xoma a fully-paid up co-exclusive
license to use its trademarks in the Co-Promotion Territory for the Co-Promotion
activities provided for in this Agreement.
10.2 Infringement of Trademarks. Xoma shall notify the Project Core Team
promptly upon learning of any actual, alleged or threatened infringement of a
trademark applicable to a Licensed Product (the "Trademark") in the Co-Promotion
Territory or of any unfair trade practices, trade dress imitation, passing off
of counterfeit goods, or like offenses in the Co-Promotion Territory. The
Project Core Team shall confer with Genentech regarding the defense of such
Trademark. The decision whether and how to defend such a Trademark will rest
with Genentech; provided, however that if Genentech fails to bring an action or
proceeding in the Co-Promotion Territory within a period of sixty (60) days of
notice by Xoma to Genentech requesting action, Xoma will have the right, at its
own expense, to bring and control any such action or proceeding in the
Co-Promotion Territory by counsel of its own choice.
10.3 Costs of Defense for Solely Owned Trademarks. All of the costs,
expenses and legal fees in bringing, maintaining and prosecuting any action to
maintain, protect or defend a Trademark shall be borne solely by the Party
bringing the action and any recovery shall be solely for that Party's account.
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ARTICLE 11.
CONFIDENTIALITY
11.1 Confidentiality; Exceptions. Except to the extent expressly authorized
by this Agreement or otherwise agreed in writing, the Parties agree that, for
the term of this Agreement and for * thereafter, the receiving Party shall keep
confidential and shall not publish or otherwise disclose or use for any purpose
other than as provided for in this Agreement any Information and other
information and materials furnished to it by the other Party pursuant to this
Agreement (collectively, "Confidential Information"), except to the extent that
it can be established by the receiving Party that such Confidential Information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of this Agreement;
(d) was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others; or.
(e) was subsequently developed by the receiving Party without use of
the Confidential Information as demonstrated by competent written records.
11.2 Authorized Disclosure. Each Party may disclose Confidential
Information hereunder to the extent such disclosure is reasonably necessary in
filing or prosecuting patent applications, prosecuting or defending litigation,
complying with applicable governmental regulations or conducting preclinical or
clinical trials, provided that if a Party is required by law or regulation to
make any such disclosure of the other Party's Confidential Information it will,
except where impracticable for necessary disclosures, for example in the event
of medical emergency, give reasonable advance notice to the other Party of such
disclosure requirement and, except to the extent inappropriate in the case of
patent applications, will use its reasonable efforts to secure confidential
treatment of such Confidential Information required to be disclosed. In
addition, each Party shall be entitled to disclose, under a binder of
confidentiality containing provisions as protective as those of this Article 11,
Confidential Information to consultants, potential sublicensees and other Third
Parties only for any purpose provided for in this Agreement. Nothing in this
Article 11 shall restrict any Party from using for any purpose any Information
developed by it during the course of the collaboration hereunder.
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11.3 Survival. This Article 11 shall survive the termination or expiration
of this Agreement for a period of * .
11.4 Termination of Prior Agreement. This Agreement supersedes the
Confidentiality Agreements between the Parties dated October 11, 1995, one of
which was last signed on October 20, 1995 and one of which was last signed on
January 11, 1996 and both of which were amended on April 11, 1996, except that
the Research Scientists, as defined in the Oxford Agreement, shall continue to
be third party beneficiaries under this Agreement to the extent such previous
Confidentiality Agreement is superseded. All Information exchanged between the
Parties under that Agreement shall be deemed Confidential Information and shall
be subject to the terms of this Article 11.
11.5 Publications. Prior to the launch of any Licensed Product in the
Co-Promotion Territory, the Project Core Team will determine the overall
strategy for publication in support of such Licensed Products in the
Co-Promotion Territory. Except as required by law, each Party agrees that it
shall not publish or present the results of studies carried out as part of the
collaboration without the opportunity for prior review by the other Party. Each
Party shall provide to the other the opportunity to review any proposed
abstracts, manuscripts or presentations (including information to be presented
verbally) which relate to the Field at least forty-five (45) days prior to their
intended submission for publication and such submitting Party agrees, upon
written request from the other Party, not to submit such abstract or manuscript
for publication or to make such presentation until the other Party is given a
reasonable period of time to seek patent protection for any material in such
publication or presentation which it believes is patentable.
ARTICLE 12.
OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS
12.1 Ownership of Intellectual Property. Xoma shall own all inventions made
under this Agreement solely by its employees. Genentech shall own all inventions
made under this Agreement solely by its employees. All inventions made under
this Agreement jointly by employees of Xoma and Genentech will be owned jointly
by Xoma and Genentech and each Party shall retain full ownership under any
Patents resulting therefrom, with full ownership rights in any field and the
right to sublicense without the consent of the other Party, without accounting.
The laws of the United States with respect to joint ownership of inventions
shall apply in all jurisdictions giving force and effect to this Agreement.
12.2 Disclosure of Patentable Inventions. In addition to the disclosures
required under Article 14, each Party shall provide to the other any invention
disclosure submitted in the normal course and disclosing an invention useful in
the Field and relating to a Licensed Product. Such invention disclosures shall
be provided to the other Party within thirty (30) days after the Party
determines that an invention has been made.
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12.3 Patent Filings. Each Party, at its sole discretion and responsibility
shall file, prosecute and maintain Patents to cover its own discoveries and
inventions relating to any Product in the Field and use reasonable efforts to
file initially all applications in the United States. The determination of the
countries in the Genentech Territory in which to file shall be made by
Genentech, which shall have the right to direct and control all material actions
relating to the prosecution or maintenance of patents in the Genentech Territory
that are being presented by Xoma, including patent interferences,
reexaminations, reissuances, oppositions and revocation proceedings. Genentech
shall file, prosecute and maintain Patents to cover any joint discoveries and
inventions relating to the Field in the United States. Genentech will also file,
prosecute and maintain Patents to cover any joint discoveries and inventions
relating to the Field in such countries in the Genentech Territory as it may
determine. If Genentech elects not to file a joint Patent, it shall so inform
Xoma. Xoma may then file, prosecute and maintain any such joint Patents. The
Party which is responsible for filing such a joint Patent will be termed the
"filing Party." The filing Party shall keep the other Party apprised of the
status of each Patent and shall seek the advice of the other Party with respect
to Patent strategy and draft applications and shall give reasonable
consideration to any suggestions or recommendations of the other party
concerning the preparation, filing, prosecution, maintenance and defense
thereof. The Parties shall cooperate reasonably in the prosecution of all
Patents covering joint inventions and covering Licensed Products and shall share
all material information relating thereto promptly after receipt of such
information. If, during the term of this Agreement, the filing Party intends to
allow any Patent covering a Licensed Product to lapse or become abandoned
without having first filed a substitute, the filing Party shall make reasonable
efforts to notify the other Party of such intention at least sixty (60) days
prior to the date upon which such Patent shall lapse or become abandoned, and
the other Party shall thereupon have the right, but not the obligation, to
assume responsibility for the prosecution, maintenance and defense thereof. Each
Party agrees to bring to the attention of the other Party any patent or patent
application it discovers, or has discovered, and which relates to the subject
matter of this Agreement.
12.4 Initial Filings If Made Outside of the United States. The Parties
agree to use reasonable efforts to ensure that any Patent filed outside of the
United States prior to a U.S. filing will be in a form sufficient to establish
the date of original filing as a priority date for the purposes of a subsequent
U.S. filing.
12.5 Patent Costs.
(a) Patent Costs arising in the Co-Promotion Territory after the
election of Xoma under Section 5.1(b) shall be chargeable to the collaboration
as Other Operating Income/Expense.
(b) Patent Costs arising in the Genentech Territory after the
Effective Date shall be borne by the Party responsible for filing, as will all
Patent Costs arising in the Co- Promotion Territory unless and until the
election of Xoma under Section 5.1(b).
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12.6 Enforcement Rights.
(a) Notification of Infringement. If either Party learns of any
infringement or threatened infringement by a Third Party of the Xoma Patents or
Genentech Patents, such Party shall promptly notify the other Party and shall
provide such other Party with available evidence of such infringement.
(b) Enforcement. Genentech shall have the right, but not the
obligation, to institute, prosecute and control at its own expense any action or
proceeding with respect to infringement of any of the Genentech Patents, by
counsel of its own choice. Xoma shall have the right, at its own expense, to be
represented in any action by counsel of its own choice. Xoma shall have the
right, but not the obligation, to institute, prosecute and control at its own
expense any action or proceeding with respect to infringement of any of the Xoma
Patents, by counsel of its own choice. Genentech shall have the right, at its
own expense, to be represented in any action by counsel of its own choice. In
the event of an infringement of a Joint Patent, the Steering Committee shall
decide the best way for the Parties to proceed. If one Party brings any such
action or proceeding, the other Party agrees to be joined as a party plaintiff
if necessary to prosecute the action or proceeding and to give the first Party
reasonable assistance and authority to file and prosecute the suit. Any damages
or other monetary awards recovered pursuant to this Section 12.6(b) shall be
allocated first to the costs and expenses of the Party bringing suit, then to
the costs and expenses, if any, of the other Party. Any amounts remaining shall
be allocated three-quarters (3/4) to the Party bringing suit and one-quarter
(1/4) to the other Party.
(c) Settlement with a Third Party. The Party that controls the
prosecution of a given claim with respect to a Licensed Product shall also have
the right to control settlement of such claim; provided, however, that if one
Party controls, no settlement shall be entered into without the written consent
of the other Party if such settlement would materially and adversely affect the
interests of such other Party. If there is no agreement between the Parties,
then the dispute will be resolved pursuant to Section 17. If the dispute is not
resolved pursuant to Section 17, then the case may not be settled.
12.7 Infringement Defense.
If a Third Party asserts that a patent or other right owned by it is
infringed by any Licensed Product, Genentech will be solely responsible for
deciding how and whether to defend against any such assertions at its cost and
expense. Xoma shall have the right, at its own expense, to be represented in any
such action by counsel of its choice. If Genentech is required to pay royalties
to such Third Party as a result of such action, it will be entitled to credit
such royalties against royalties owing to Xoma as described in Section 7.5(b).
No settlement of such an action shall be entered into by Genentech without
Xoma's written consent if such settlement would materially and adversely affect
Xoma's interests.
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ARTICLE 13.
REPRESENTATIONS AND WARRANTIES
13.1 Representations and Warranties. Each of the Parties hereby represents
and warrants as follows:
(a) This Agreement is a legal and valid obligation binding upon such
Party and enforceable in accordance with its terms. The execution, delivery and
performance of the Agreement by such Party does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a Party or by which
it is bound, nor violate any law or regulation of any court, governmental body
or administrative or other agency having jurisdiction over it.
(b) Such Party has not, and during the term of the Agreement will not,
grant any right to any Third Party relating to its respective Patents and
Know-how in the Field which would conflict with the rights granted to the other
Party hereunder.
(c) In addition, Genentech represents and warrants that it has the
right to grant the licenses granted herein.
13.2 Performance by Affiliates. The Parties recognize that each may perform
some or all of its obligations under this Agreement through Affiliates,
provided, however, that each Party shall remain responsible and be guarantor of
the performance by its Affiliates and shall cause its Affiliates to comply with
the provisions of this Agreement in connection with such performance.
ARTICLE 14.
INFORMATION AND REPORTS
14.1 Information. Genentech and Xoma will disclose and make available to
each other all preclinical, clinical, regulatory, commercial and other
information, including without limitation all information relevant to the joint
promotion of Licensed Products, known by Genentech or Xoma concerning Licensed
Products at any time during co-development of Licensed Products by the Parties
and during Co-Promotion if Xoma elects the option set forth in Section 5.1(b).
Xoma will disclose any such information to Genentech at any time during the term
of this Agreement. Each Party will use commercially reasonable and diligent
efforts to disclose to the other Party all significant information promptly
after it is learned or its significance is appreciated. Each Party shall own and
maintain its own database of clinical trial data accumulated from all clinical
trials of Licensed Products for which it was responsible and of adverse drug
event information for all Licensed Products. At the option of the requesting
Party, such data shall be provided in a computer readable format by the
providing Party, to the extent available, which shall also assist in the
transfer and validation of such data to the receiving Party.
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14.2 Complaints. Xoma shall maintain a record of all complaints it receives
with respect to any Licensed Product. Xoma shall notify Genentech of any
complaint received by Xoma in sufficient detail and within five (5) business
days after the event, and in any event in sufficient time to allow Genentech to
comply with any and all regulatory requirements imposed upon it in any country.
Genentech shall notify Xoma of any complaint received by Genentech in the
Co-Promotion Territory within forty-five (45) business days after the event.
14.3 Adverse Drug Events. The Parties recognize that the holder of a Drug
Approval Application may be required to submit information and file reports to
various governmental agencies on compounds under clinical investigation,
compounds proposed for marketing, or marketed drugs. Information must be
submitted at the time of initial filing for investigational use in humans and at
the time of a request for market approval of a new drug. In addition,
supplemental information must be provided on compounds at periodic intervals and
adverse drug experiences must be reported at more frequent intervals depending
on the severity of the experience. Consequently, each Party agrees to:
(a) provide to the other for initial and/or periodic submission to
government agencies significant information on the drug from preclinical
laboratory, animal toxicology and pharmacology studies, as well as adverse drug
experience reports from clinical trials and commercial experiences with the
compound;
(b) in connection with investigational drugs, report to the other
within three (3) days of the initial receipt of a report of any unexpected or
serious experience with the drug, or sooner if required for either Party to
comply with regulatory requirements; and
(c) in connection with marketed drugs, report to the other within five
(5) business days of the initial receipt of a report of any adverse experience
with the drug that is serious and unexpected or sooner if required for either
Party to comply with regulatory requirements. Serious adverse experiences mean
any experience that suggests a significant hazard, contraindication, side effect
or precaution, or any experience that is fatal or life threatening, is
permanently disabling, requires or prolongs inpatient hospitalization, or is a
congenital anomaly, cancer, or overdose. An unexpected adverse experience is one
not identified in nature, specificity, severity or frequency in the current
investigator brochure or the U.S. labeling for the drug. Each Party also agrees
that if it contracts with a Third Party for research to be performed by such
Third Party on the drug, that Party agrees to require such Third Party to report
to contracting Party the information set forth in subparagraph (i), (ii), and
(iii) above.
14.4 Records of Net Sales and Costs. Each Party will maintain complete and
accurate records which are relevant to costs, expenses, sales and payments under
this Agreement and such records shall be open during reasonable business hours
for a period of five (5) years from creation of individual records for
examination at the other Party's expense and not more often than once each year
by an independent public accountant selected by the other Party as described in
A.6 of Exhibit A. Any records or accounting information received from the other
Party shall
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be Confidential Information for purposes of Article 11. Results of any such
audit shall be provided to both Parties, subject to Article 11.
14.5 Contribution of Information. It is the intention of the Parties that
each will bring to the collaboration such information in its possession that is
useful to the development and commercialization of Licensed Products.
14.6 Publicity Review. The Parties agree that the public announcement of
the execution of this Agreement shall be in the form of a press release to be
agreed upon on or before the Effective Date and thereafter each Party shall be
entitled to make or publish any public statement consistent with the contents
thereof. Thereafter, Xoma and Genentech will jointly discuss and agree, based on
the principles of this Section 14.6, on any statement to the public regarding
this Agreement or any aspect of this Agreement subject in each case to
disclosure otherwise required by law or regulation as determined in good faith
by each Party. The principles to be observed by Xoma and Genentech in such
public disclosures will be: accuracy, the requirements for confidentiality under
Article 10, the advantage a competitor of Xoma or Genentech may gain from any
public statements under this Section 14.6, and the standards and customs in the
biotechnology and pharmaceutical industries for such disclosures by companies
comparable to Xoma and Genentech. The terms of this Agreement may also be
disclosed to (i) government agencies where required by law, including filings
required to be made by law with the Securities and Exchange Commission, the New
York Stock Exchange, or any national exchange, or (ii) Third Parties with the
prior written consent of the other Party, which consent shall not be
unreasonably withheld, so long as such disclosure is made under a binder of
confidentiality (in the case of Third Parties), so long as highly sensitive
terms and conditions such as financial terms are extracted from the Agreement or
not disclosed upon the request of the other Party and the disclosing Party gives
reasonable advance notice of the disclosure under the circumstances requiring
the disclosure.
ARTICLE 15.
TERM AND TERMINATION
15.1 Term. This Agreement shall commence as of the Effective Date. The
Parties have specifically provided elsewhere in this Agreement the term during
which certain rights and obligations hereunder shall apply. Unless sooner
terminated as provided herein and except as provided in Section 15.4 below, (a)
the remaining provisions of this Agreement relating to activities in the
Co-Promotion Territory shall continue in effect until the date on which the
Parties are no longer entitled to receive a share of Operating Profits or Losses
on any Licensed Product and (b) the remaining provisions of this Agreement
relating to activities in the Genentech Territory shall continue in effect until
the date on which Genentech is no longer paying a royalty on Royalty-Bearing
Sales in the Genentech Territory. Those provisions shall govern the term of the
rights and obligations specifically covered thereby. Upon the expiration of the
term of this Agreement, all licenses granted to Genentech hereunder shall become
fully paid up and irrevocable.
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15.2 Termination by either Party.
(a) Either Party shall have the right to terminate this Agreement
after December 31, 1998 (or such other date determined pursuant to Section 4.5),
and the rights and obligations of the Parties shall be as follows:
(i) if either Party terminates this Agreement after the
successful completion of a Phase II Clinical Trial for one of the
Initial Indications as determined by the Steering Committee, and Xoma
had previously selected Option A under Section 5.1, then the
non-terminating Party may elect, on the date of termination,
*
(ii) if Xoma terminates this Agreement after the successful
completion of a Phase II Clinical Trial for one of the Initial
Indications as determined by the Steering Committee, and Xoma had
previously selected Option B under Section 5.1, then Genentech may
elect, on the date of termination,
*
(iii) if Genentech terminates this Agreement after the successful
completion of a Phase II Clinical Trial for one of the Initial
Indications as determined by the Steering Committee, and Xoma had
previously selected Option B under Section 5.1, then Xoma may elect,
on the date of termination,
*
(iv) if Xoma terminates this Agreement and it has not yet
successfully completed a Phase II Clinical Trial as determined by the
Steering Committee, then Genentech may elect, on the date of
termination,
*
(v) if Genentech terminates this Agreement and Xoma has not yet
successfully completed a Phase II Clinical Trial as determined by the
Steering Committee, then Xoma may elect, on the date of termination,
*
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Under any of (i) through (v) above, the provisions of the Note Agreement
shall remain in full force and effect. Any such termination shall be effective
six months after written notice thereof. The terminating Party shall reimburse
the other Party for any costs the other Party incurs due to non-cancelable
commitments made under this Agreement so long as the other Party does not make
any such commitments after receiving notice of termination.
(b) In the event of termination by Xoma pursuant to Section 15.2 or by
Genentech pursuant to Section 15.2(a)(v) or Section 15.3 due to Xoma's material
breach, Xoma shall (i) remain responsible for (A) its share of Development Costs
in the Co-Promotion Territory and (B) for its supply obligations hereunder;
until, in the case of both (A) and (B), Xoma has fully transferred, and enabled
Genentech to perform, all of Xoma's responsibilities under this Agreement,
including but not limited to supplying Genentech's requirements for Anti- CD11a
for a reasonable period of time to allow Genentech to find an alternate source
of supply; and (ii) make its personnel and other resources reasonably available
to Genentech as necessary to effect an orderly transition of development and/or
commercialization responsibilities, with the cost of such personnel and
resources to be borne by Genentech after the effective date of termination.
(c) In the event of termination by Xoma pursuant to Section 15.3 due
to Genentech's material breach, Genentech will make its personnel and other
resources reasonably available to Xoma as necessary to effect an orderly
transition of development and/or commercialization responsibilities, with the
cost of such personnel and resources to be borne by Xoma after the effective
date of termination.
(d) Upon any termination under this Section 15.2, the Parties shall
have no further rights or obligations under this Agreement except as set forth
in Sections 15.4 and 15.5.
15.3 Termination for Breach. If either Party materially breaches this
Agreement at any time, which breach is not cured within sixty (60) days of
written notice thereof from the non-breaching Party (or if such breach is not
susceptible of cure within such period, the breaching Party is not making
diligent good faith efforts to cure such breach), the non-breaching Party shall
have the right to terminate this Agreement. Upon such termination, the Parties
shall have no further rights or obligations under this Agreement except as set
forth herein or in Section 15.5. The Parties acknowledge and agree that failure
to exercise any right or option with respect to any Licensed Product or to take
any action expressly within the discretion of a Party shall not be deemed to be
material breach hereunder.
15.4 Surviving Rights. Except as modified above in Sections 15.2 and 15.3,
the obligations and rights of the Parties under Articles 1, 11, 12, 16, 17 and
18 and Sections 14.4, 15.2 and 15.3 of this Agreement will survive termination
or expiration (in the case of Article 11 and Section 14.4 for the periods set
forth therein). If Genentech must continue to pay a royalty to Xoma after
termination, the provisions of Sections 7.5(b) through and including 7.12 shall
survive such termination.
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15.5 Accrued Rights, Surviving Obligations. Termination, relinquishment or
expiration of the Agreement for any reason shall be without prejudice to any
rights which shall have accrued to the benefit of either party prior to such
termination (including paid up irrevocable licenses), relinquishment or
expiration, including damages arising from any breach hereunder. Such
termination, relinquishment or expiration shall not relieve either Party from
obligations which are expressly indicated to survive termination or expiration
of the Agreement.
ARTICLE 16.
INDEMNIFICATION
16.1 Indemnification in the Genentech Territory.
(a) Genentech hereby agrees to save, defend and hold Xoma and its
agents and employees harmless from and against any and all suits, claims,
actions, demands, liabilities, expenses and/or loss, including reasonable legal
expense and attorneys' fees ("Losses") resulting directly from the manufacture,
use, handling, storage, sale or other disposition of chemical agents or Licensed
Products sold or used in the Genentech Territory by Genentech, its Affiliates,
agents or sublicensees except to the extent such Losses result from the
negligence or willful misconduct of Xoma, and from any Losses resulting directly
from Xoma's use of technology supplied to Xoma by Genentech except to the extent
any such Losses result from modifications by Xoma (without Genentech's written
consent) or a Third Party of such technology.
(b) In the event that Xoma is seeking indemnification under Section
16.1(a), it shall inform Genentech of a claim as soon as reasonably practicable
after it receives notice of the claim, shall permit Genentech to assume
direction and control of the defense of the claim (including the right to settle
the claim solely for monetary consideration), and shall cooperate as requested
(at the expense of Genentech) in the defense of the claim.
(c) Xoma hereby agrees to save, defend and hold Genentech and its
agents and employees harmless from and against any and all suits, claims,
actions, demands, liabilities, expenses and/or loss, including reasonable legal
expense and attorneys' fees ("Losses") resulting directly from the manufacture
by Xoma of Licensed Products sold or used in the Genentech Territory by
Genentech, its Affiliates, agents or sublicensees or otherwise from the
negligence or willful misconduct of Xoma and from any Losses resulting directly
from Genentech's use of any technology supplied to Genentech by Xoma except to
the extent any such Losses result from modifications by Genentech (without
Xoma's written consent) or a Third Party of such technology.
(d) In the event Genentech is seeking indemnification under Section
16.1(c), it shall inform Xoma of a claim as soon as reasonably practicable after
it receives notice of the claim, shall permit Xoma to assume direction and
control of the defense of the claim (including the right to settle the claim
solely for monetary consideration), and shall cooperate as requested (at the
expense of Xoma) in the defense of the claim.
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16.2 Indemnification in the Co-Promotion Territory.
(a) If the Parties Co-Promote Licensed Product, then each Party agrees
to save, defend and hold the other Party and its agents and employees harmless
from and against any and all losses resulting directly or indirectly from the
manufacture, use, handling, storage, sale or other disposition of chemical
agents or Licensed Products sold or used in the Co- Promotion Territory by the
indemnifying Party, its Affiliates, agents or sublicensees, but only to the
extent such losses result from the negligence or willful misconduct of the
indemnifying Party or its employees and agents and do not also result from the
negligence or willful misconduct of the Party seeking indemnification. Any other
losses resulting directly or indirectly from the manufacture, use, handling,
storage, sale or other disposition of chemical agents or Licensed Products in
the Co-Promotion Territory shall be charged to the collaboration as an Other
Operating Income/Expense at the time such claim is finally determined, whether
by judgment, award, decree or settlement.
(b) In the event that either Party receives notice of a claim with
respect to a Licensed Product in the Co-Promotion Territory, such Party shall
inform the other Party as soon as reasonably practicable. The Parties shall
confer how to respond to the claim and how to handle the claim in an efficient
manner.
ARTICLE 17.
DISPUTE RESOLUTION
17.1 Disputes. The Parties recognize that disputes as to certain matters
may from time to time arise during the term of this Agreement which relate to
either Party's rights and/or obligations hereunder. It is the objective of the
Parties to establish procedures to facilitate the resolution of disputes arising
under this Agreement in an expedient manner by mutual cooperation and without
resort to litigation. To accomplish this objective, the Parties agree to follow
the procedures set forth in this Article 17 if and when a dispute arises under
this Agreement.
Unless otherwise specifically recited in this Agreement, disputes among
members of the Project Core Team or the Finance Committee will be resolved as
recited in this Article 17. Any disputes relating to the collaboration shall be
first referred to the Steering Committee by either Party at any time after such
dispute has arisen and such Party believes that there has been sufficient
discussion of the matter at the Project Core Team level. If the Steering
Committee is unable to resolve such a dispute within ninety (90) days of being
requested by a Party to resolve the dispute or the Steering Committee is unable
to resolve a dispute among its members, any Party may, by written notice to the
other, invoke the provisions of Section 17.2 hereinafter.
17.2 Mediation. The Parties agree that any dispute, controversy or claim
(except as to any issue relating to intellectual property owned in whole or in
part by Xoma or Genentech or any equitable claim) arising out of or relating to
this Agreement, or the breach, termination, or invalidity thereof, shall be
resolved through negotiation and mediation. If a dispute arises
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between the parties, and if said dispute cannot be resolved pursuant to
Section 17.1, the Parties agree to try in good faith to resolve such dispute by
mediation administered by the American Arbitration Association in accordance
with its Commercial Mediation Rules. The mediation proceeding shall be conducted
at the location of the party not originally requesting the resolution of the
dispute. The parties agree that they shall share equally the cost of the
mediation filing and hearing fees, and the cost of the mediator. Each party must
bear its own attorney's fees and associated costs and expenses.
17.3 Jurisdiction. For the purposes of this Article 17, the Parties agree
to accept the jurisdiction of the federal courts located in the Northern
District of California for the purposes of enforcing the agreements reflected in
this Article.
17.4 Determination of Patents and Other Intellectual Property. Any dispute
relating to the determination of validity of a Party's Patents or other issues
relating solely to a Party's intellectual property shall be submitted
exclusively to the federal courts located in San Francisco County, California,
and the Parties hereby consent to the jurisdiction and venue of such court.
ARTICLE 18.
MISCELLANEOUS
18.1 Assignment.
(a) Either Party may assign any of its rights under this Agreement in
any country to any Affiliates and, with the prior written consent of the other
Party, may delegate its obligations under this Agreement in any country to any
Affiliates; provided, however, that any such assignment shall not relieve the
assigning Party of its responsibilities for performance of its obligations under
this Agreement.
(b) Either Party may assign all of its rights and obligations under
this Agreement in connection with a merger or similar reorganization or the sale
of all or substantially all of its assets, or otherwise with the prior written
consent of the other Party; provided, however, that Xoma may not so assign its
rights and obligations if it is not the surviving company and the acquiror of
Xoma is a direct competitor of Genentech. This Agreement shall survive any such
merger or reorganization of either Party with or into, or such sale of assets
to, another party and no consent (except as otherwise set forth above) for such
merger, reorganization or sale shall be required hereunder.
(c) This Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns of the Parties. Any assignment not in
accordance with this Agreement shall be void.
18.2 Non-Solicitation. The Parties recognize that each Party has a
substantial interest in preserving and maintaining confidential its Confidential
Information hereunder. Each Party recognizes that certain of the other Party's
employees, including those engaged in development,
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marketing and sale of any Licensed Product, may have access to such
Confidential Information of the other Party. The Parties therefore agree not to
solicit or otherwise induce or attempt to induce for purposes of employment, any
employees from the other Party involved in the development, marketing or sales
of any Licensed Product during the period in which any Party is developing or
commercializing a Licensed Product in the Co-Promotion Territory hereunder and
for a period of two years thereafter.
18.3 Consents Not Unreasonably Withheld. Whenever provision is made in this
Agreement for either Party to secure the consent or approval of the other, that
consent or approval shall not unreasonably be withheld, and whenever in this
Agreement provision is made for one Party to object to or disapprove a matter,
such objection or disapproval shall not unreasonably be exercised.
18.4 Retained Rights. Nothing in this Agreement shall limit in any respect
the right of either Party to conduct research and development with respect to
and market products outside the Field using such Party's technology.
18.5 Force Majeure. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other cause beyond the control of the defaulting Party, provided that the
Party claiming force majeure has exerted all reasonable efforts to avoid or
remedy such force majeure; provided, however, that in no event shall a Party be
required to settle any labor dispute or disturbance.
18.6 Further Actions. Each Party agrees to execute, acknowledge and deliver
such further instruments, and to do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
18.7 No Right to Use Names. Except as otherwise provided herein, no right,
express or implied, is granted by the Agreement to use in any manner the name
"Xoma," "Genentech" or any other trade name or trademark of the other Party or
its Affiliates in connection with the performance of the Agreement.
18.8 Notices. All notices hereunder shall be in writing and shall be deemed
given if delivered personally or by facsimile transmission (receipt verified),
telexed, mailed by registered or certified mail (return receipt requested),
postage prepaid, or sent by express courier service, to the Parties at the
following addresses (or at such other address for a party as shall be specified
by like notice; provided, that notices of a change of address shall be effective
only upon receipt thereof).
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If to XOMA,
addressed to: XOMA CORPORATION
2910 7th Street, Berkeley
California 94710
Attention: Corporate Secretary
Telephone: (510) 644-1170
Telecopy: (510) 649-7571
with a copy to: C.L. Dellio
If to Genentech,
addressed to: GENENTECH, INC.
460 Point San Bruno Boulevard
South San Francisco, CA 94080
Attention: Corporate Secretary
Telephone: (415) 225-1000
Telecopy: (415) 952-9881
18.9 Waiver. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.
18.10 Severability. If any term, covenant or condition of this Agreement or
the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then (i) the remainder of this Agreement,
or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.
18.11 Ambiguities. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authorized the ambiguous provision.
18.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18.13 Entire Agreement. This Agreement, including all Exhibits attached
hereto which are hereby incorporated herein by reference, sets forth all the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto and
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supersedes and terminates all prior agreements and understandings between
the Parties. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding
upon the Parties hereto unless reduced to writing and signed by the respective
authorized officers of the Parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the date and year first above written.
XOMA CORPORATION GENENTECH, INC.
By:---------------------------------- By:---------------------------
Clarence L. Dellio John P. McLaughlin
Senior Vice President, Operation Executive Vice President
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EXHIBIT A
FINANCIAL PLANNING, ACCOUNTING AND REPORTING
FOR THE XOMA/GENENTECH COLLABORATION AGREEMENT
This Exhibit A to the Collaboration Agreement (the "Agreement") dated as of
April 22, 1996, between Xoma Corporation ("Xoma") and Genentech, Inc.
("Genentech") addresses the financial planning, accounting policies and
procedures to be followed in determining Operating Profits or Losses and related
sharing of revenue and expenses in the Co-Promotion Territory if Xoma elects the
option set forth in Section 5.1(b) of the Agreement. Terms not defined in this
Exhibit shall have the meanings set forth in the Agreement.
This Exhibit sets forth the principles for reporting actual results and
budgeted plans of the combined operations in the Co-Promotion Territory, the
frequency of reporting, and the methods of determining payments to the parties
and auditing of accounts.
For purposes of this Exhibit only, the consolidated accounting of
operations for the collaboration in the Co-Promotion Territory shall be referred
to as GenXoma. GenXoma is not a legal entity and has been defined for
identification purposes only.
A.1. Principles of Reporting
The results of operations of GenXoma will be presented in the following
format, with the categories as defined in Section A.4 below:
Xoma Genentech Total
Gross Sales
less Sales Returns and Allowances
= Net Sales
less Cost of Sales
= Gross Profits
less Marketing Costs
less Sales Costs
less Development Costs chargeable to GenXoma
less Other Operating Income/Expense
= Contribution
less Distribution Costs
less Administration Costs
= Operating Profit (Loss)
It is the intention of the Parties that the interpretation of these
definitions will be consistent with generally accepted accounting principles in
the United States.
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A.2. Frequency of Reporting
The fiscal year of GenXoma will be a calendar year.
Reporting by each Party for GenXoma revenues and expenses will be
performed as follows:
Reporting Event Frequency Timing of Submission
Actuals Quarterly Q1-Q3: +30 days
Q4: +45 days
Forecasts Quarterly Mid Quarter
(rest of year - by quarter)
Budgets Annually October 15th
(one year - by month)
Long Range Plan Annually May 1st
(current year plus 5 years)
Genentech will be responsible for the preparation of consolidated
reporting, calculation of the profit/loss sharing and determination of the cash
settlement. Genentech will provide the Finance Committee within five working
days of the submission date shown above, a statement showing the consolidated
results and calculations of the profit/loss sharing and cash settlement required
in a format agreed to by the Parties.
Reports of actual results compared to budget will be made to the Project
Core Team on a quarterly basis. After approval by the Finance Committee as to
amounts, the Finance Committee will forward the report to the Steering Committee
for its approval. Line item variances from budgets judged to be significant by
the Finance Commitee will only be included in calculation of Operating Profit
and Loss when approved by the Project Core Team and the Steering Committee.
On a monthly basis Genentech will supply Xoma with Gross Sales in units of
each month's sales according to Genentech's sales reporting system, which shall
be consistent with the definitions in Section A.4.
The Finance Committee will meet as appropriate but at least quarterly to
review and approve the following:
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- Actual Results
- Forecasts
- Budget
- Inventory Levels
- Sales Returns and Allowances
- Other financial matters, including each
Party's methodologies for charging costs and
allocating Sales Representatives to GenXoma
for actuals, forecasts, budgets and long
range plans and the results of applying such
methodologies.
A.3. Budget and Long Range Plan
Responsibility for the Budget and Long Range Plan will rest with the
Project Core Team, who will develop budgets for development and
commercialization in coordination with the Finance Committee, subject to final
approval by the Steering Committee.
Budgets will be prepared annually. In addition, headcount chargeable to
GenXoma will be agreed to annually.
Budgets will be supplemented with detailed business plans for clinical
trials, registration applications, and detailed plans for product introduction,
sales efforts and promotion as determined by the Project Core Team. Budgets,
once approved by the Steering Committee, can only be changed with the approval
of the Steering Committee.
A five-year Long Range Plan for GenXoma will be established on a yearly
basis under the direction of the Steering Committee and submitted to Genentech
and Xoma by May 1st.
A.4. Definitions
A.4.1 "Administration Costs" means costs chargeable to GenXoma equal to * %
of the sum of each party's own Marketing Costs and Sales Costs (both only to the
extent chargeable to GenXoma).
A.4.2 "Allocable Overhead" means costs incurred by a Party or for its
account which are attributable to a Party's supervisory, services, occupancy
costs, corporate bonus (to the extent not charged directly to department), and
its payroll, information systems, human relations or purchasing functions and
which are allocated to company departments based on space occupied or headcount
or other activity-based method. Allocable Overhead shall not include any costs
attributable to general corporate activities including, by way of example,
executive management, investor relations, business development, legal affairs
and finance.
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A.4.3. "Cost of Goods Sold" means the fully burdened cost of the Licensed
Product in final therapeutic form. The fully burdened cost of the Licensed
Product will be determined in accordance with generally accepted accounting
principles in the United States as applied by the Party performing or
contracting for each stage of the manufacturing process and will include direct
labor, material, product testing costs and Allocable Overhead.
A.4.4. "Cost of Sales" means Cost of Goods Sold, Third Party Royalties *
(i.e., any allocable intellectual property acquisition and licensing costs) and
outbound freight on sales if borne by the seller.
A.4.5. "Development Costs" means costs, including Allocable Overhead,
incurred in any phase of the activities required to obtain the authorization
and/or ability to manufacture, formulate, fill, ship and/or sell a Licensed
Product in the Field in commercial quantities in the Co-Promotion Territory.
Development Costs shall include but are not limited to the cost of studies on
the toxicological, pharmacokinetic, metabolic or clinical aspects of a Licensed
Product conducted internally or by individual investigators, or consultants
necessary for the purpose of obtaining and/or maintaining approval of a Licensed
Product in the Field by a government organization in a country of the
Co-Promotion Territory, and costs for preparing, submitting, reviewing or
developing data or information for the purpose of submission to a governmental
authority to obtain and/or maintain approval of a Licensed Product in the Field
in a country of the Co-Promotion Territory as well as costs of process
development scale-up and recovery (including allocable depreciation and plant
operating costs). In addition, Development Costs in the Co-Promotion Territory
shall include the cost of post-launch clinical studies in support of a Licensed
Product in the Field in the Co- Promotion Territory. Development Costs in the
Co-Promotion Territory shall include expenses for compensation, benefits and
travel and other employee-related expenses, as well as data management,
statistical designs and studies, document preparation, and other expenses
associated with the clinical testing program.
A.4.6. "Distribution Costs" means the costs, including Allocable Overhead,
specifically identifiable to the distribution of a Licensed Product including
customer services, collection of data of sales to hospitals and other end users
(e.g. DDD sales data), order entry, billing, credit and collection and other
activities described in Section 5.3 of the Agreement. For the purpose of this
Agreement, only Genentech will charge GenXoma for Distribution Costs an amount
of * % of Net Sales in a lump sum.
A.4.7. "Gross Sales" means the gross amount invoiced by either Party or
their Affiliates or permitted sublicensees for sales of a Licensed Product to
Third Parties in the Co- Promotion Territory.
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A.4.8. "Marketing Costs" means the costs, excluding Allocable Overhead, of
marketing, promotion, advertising, professional education, product related
public relations, relationships with opinion leaders and professional societies,
market research, healthcare economics studies and other similar activities
directly related to the Licensed Products and approved by the Joint
Commercialization Committee. Such costs will include both internal costs (e.g.,
salaries, benefits, supplies and materials, etc.) as well as outside services
and expenses (e.g., consultants, agency fees, meeting costs, etc.). Marketing
Costs shall also include activities related to obtaining reimbursement from
payers and costs of sales and marketing data. Marketing Costs will specifically
exclude the costs of activities which promote either Party's business as a whole
without being product specific (such as corporate image advertising).
A.4.9. "Net Sales" means Gross Sales less the sum of (a), (b) and (c) where
(a) is a provision, determined under generally accepted accounting principles in
the United States, for (i) trade, cash and quantity discounts or rebates (other
than price discounts granted at the time of invoicing and which are included in
the determination of Gross Sales), (ii) credits or allowances given or made for
rejection or return of, and for uncollectible amounts on, previously sold
products or for retroactive price reductions (including Medicare and similar
types of rebates), (iii) taxes, duties or other governmental charges levied on
or measured by the billing amount, as adjusted for rebates and refunds, (iv)
charges for freight and insurance directly related to the distribution of
Products, and (v) credits or allowances given or made for wastage replacement,
indigent patient and any other sales programs agreed to by the Parties, (b) is a
periodic adjustment of the provision determined in (a) to reflect amounts
actually incurred for (i), (ii), (iii), (iv) and (v), and (c) is the Combination
Product Adjustment as defined in the Agreement, if any. Provisions allowed in
(a) and adjustments made in (b) and (c) will be reviewed by the Finance
Committee.
A.4.10. "Operating Profit or Loss" means GenXoma's Net Sales less the
following items: Cost of Sales, Marketing Costs, Sales Costs, Development Costs,
(to the extent chargeable to GenXoma), Other Operating Income/Expense,
Distribution Costs and Administrative Costs, for a given period.
A.4.11. "Other Operating Income/Expense" means other operating income or
expense from or to third parties which is not part of the primary business
activity of GenXoma, but is considered and approved by the Finance Committee as
income or expense generated from GenXoma operations, and limited to the
following:
- Inventory Write-Offs
- Patent Costs (as limited byArticle 12 of the Agreement)
- Product liability insurance to the extent the Parties obtain a
joint policy
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- Indemnification costs (as defined in Article 16 of the Agreement)
- Other (To be approved by Steering Committee)
A.4.12. "Patent Costs" means the fees and expenses paid to outside legal
counsel and experts, and filing and maintenance expenses, incurred after the
Effective Date in connection with the establishment and maintenance of rights
under Patents covering any Licensed Product, including costs of patent
interference, reexamination, reissue, opposition and revocation proceedings.
A.4.13. "Sales Costs" means costs, including Allocable Overhead, approved
by the Project Core Team and the annual budget and specifically identifiable to
the sales of Licensed Products to all markets in the Co-Promotion Territory
including the managed care market. Sales Costs shall include costs associated
with Sales Representatives, including compensation, benefits and travel,
supervision and training of the Sales Representatives, sales meetings, and other
sales expenses. Sales Costs will not include the start-up costs associated with
either Party's sales force, including recruiting, relocation and other similar
costs.
A.4.14. "Sales Returns and Allowances" means Gross Sales less Net Sales.
A.5. Audits and Interim Reviews
Either Party shall have the right to request that the other Party's
independent accounting firm perform an audit or interim review of the other
Party's books in order to express an opinion regarding said Party's compliance
with generally accepted accounting principles. Such audits or review will be
conducted at the expense of the requesting Party.
Either Party shall have the right to request that its independent
accounting firm perform an audit of the other Party's books of accounts for the
sole purpose of verifying compliance with the Agreement. Such audits will be
conducted at the expense of the requesting Party; provided, however, that if the
audit results in an adjustment of greater that * % of Operating Losses or
Profits in any period, the cost of the audit will be borne by the Party audited.
Audit results will be shared with both Parties.
A.6. Payments between the Parties
Balancing payments between the Parties will be approved by the Steering
Committee based on Operating Profit or Loss. Payments will be made quarterly
based on actual results within 90 days after the end of each quarter, adjusted
for reimbursement of the net expenses or income incurred or received by each
Party.
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A.7. Accounting for Development Costs, Marketing Costs and Sales Costs
All Development Costs, Marketing Costs and Sales Costs will be based on the
appropriate costs definition stated in Section A.4 of this Exhibit.
Each party shall report Development Costs in a manner consistent with its
Project Cost System. In general, these project cost systems report actual time
spent on specific projects, apply the actual labor costs, capture actual costs
of specific projects and allocate other expenses to projects. For Marketing
Costs, the Parties will report costs based on spending in Marketing departments.
The Parties acknowledge that the methodologies used will be based on systems in
place and consistent with Section A.10 of this Exhibit.
For the purpose of determining actual and budgeted Sales Costs, the
Parties, through the Project Core Team and the Finance Committee shall determine
the number of Sales Representatives selling Licensed Products during the period
and develop a method consistent with Section A.4 and A.10 of this Exhibit to
allocate Sales Costs to those Sales Representatives.
A.8. Sharing of Operating Profits and Losses
The Parties agree to share the Operating Profit or loss resulting from the
collaborative arrangement in the Co-Promotion Territory according to the
following manner:
For each calendar year, Xoma shall receive * % of the Operating Profits. To
the extent there is an Operating Loss on sales of Licensed Product in the
Co-Promotion Territory in any calendar year, Xoma shall absorb * % of such loss.
A.9. Start of Operations
Operation of GenXoma will be deemed to commence on the date that Xoma
selects the option set forth in Section 5.1(b) of the Agreement. Costs incurred
prior to that date are not chargeable to GenXoma.
A.10. Guidelines for Charging Costs
The following guidelines shall be used in determining amounts chargeable to
GenXoma.
10.1 If an expense is specifically and exclusively (i.e., for no other
product) used for the development or commercialization of a
Licensed Product in
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the Field in the Co-Promotion Territory, then 100% of the expense
will be charged to GenXoma.
10.2 If an expense is specifically and exclusively (i.e., for no other
product) used for the development or commercialization of a
Licensed Product in the Field in both the Co-Promotion Territory
and the Genentech Territory, then the following shall apply:
(a) If the portion of that expense used for the development or
commercialization of a Licensed Product in the Field in the
Genentech Territory can be objectively determined through
specific means (e.g., man hours of effort, amounts consumed,
etc.), then the amount so used will be charged to Genentech and
the remaining portion will be charged to GenXoma.
(b) If the portion of that expense used for the development or
commercialization of a Licensed Product in the Field in the
Genentech Territory cannot be objectively determined through
specific means, then only the direct and incremental costs
related to the Licensed Product in the Field in the Genentech
Territory will be charged to Genentech and the remaining portion
will be charged to GenXoma.
10.3 If an expense within the Co-Promotion Territory is not
specifically and exclusively (i.e., for other products in
addition to a Licensed Product) used for the development or
commercialization of a Licensed Product in the Field in the
Co-Promotion Territory, then the following shall apply:
(a) If the portion of that expense used for the development or
commercialization of a Licensed Product in the Field in the Co-
Promotion Territory can be objectively determined through
specific means (e.g., man hours of effort, amounts consumed,
etc.), then the amount so used will be charged to GenXoma.
(b) If the portion of that expense used for the development or
commercialization of a Licensed Product in the Field in the Co-
Promotion Territory cannot be objectively determined through
specific means, then only the direct and incremental costs
related to the Licensed Product in the Field shall be charged to
GenXoma.
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EXHIBIT B
*
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EXHIBIT C
*
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*
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*
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*
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WHEREVER CONFIDENTIAL INFORMATION
IS OMITTED HEREIN (SUCH OMISSIONS
ARE DENOTED BY AN ASTERISK), SUCH
CONFIDENTIAL INFORMATION HAS BEEN
SUBMITTED SEPARATELY TO THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT
COMMON STOCK AND CONVERTIBLE NOTE PURCHASE AGREEMENT
THIS COMMON STOCK AND CONVERTIBLE NOTE PURCHASE AGREEMENT ("Agreement"),
dated as of April 22, 1996, by and between XOMA CORPORATION, a Delaware
corporation having its principal executive office at 2910 7th Street, Berkeley,
California 94710 (the "Company"), and GENENTECH, INC., a Delaware corporation
having its principal executive office at 460 Point San Bruno Boulevard, South
San Francisco, California 94080 (the "Purchaser").
RECITALS
A. The parties are entering into a Collaboration Agreement, dated as of
April 22, 1996 (the "Collaboration Agreement"), relating to the development and
marketing of a monoclonal antibody.
B. In connection with the Collaboration Agreement, the parties desire that
the Purchaser (i) make an investment in the Company through the purchase of
Common Stock, $.0005 par value per share, of the Company (the "Common Stock")
and (ii) fund the Company's development obligations under the Collaboration
Agreement by making certain interest bearing loans to the Company which are to
be evidenced by a Convertible Subordinated Note Agreement in the form attached
hereto as Exhibit A (the "Convertible Note").
C. Upon the happening of certain events, the Convertible Note shall
automatically convert into shares of a nonvoting convertible preferred stock of
the Company which, in turn, shall be convertible into Common Stock. Such
preferred stock (the "Preferred Stock") shall have the rights, preferences and
privileges as provided in the Certificate of Designation of Convertible
Preferred Stock, Series E, substantially in the form attached as Schedule A to
the form of Convertible Note attached hereto as Exhibit A (the "Certificate of
Designation").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and promises set forth in this Agreement, the parties agree as follows:
1. Sale and Purchase of Common Stock. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties contained herein,
the Company will issue and sell to the Purchaser at the Closing, and the
Purchaser will purchase from the Company at the Closing, 1,500,000 shares of
Common Stock (the "Shares") for an aggregate purchase price of $ * hereinafter
referred to as the "Stock Purchase Price."
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2. Sale and Purchase of Convertible Note; Loans. Subject to the terms and
conditions hereof and in reliance upon the representations and warranties
contained herein, the Purchaser will lend at the Closing the $5,000,000
contemplated to be loaned pursuant to Section 7.1 of the Collaboration Agreement
as the initial loan under the Collaboration Agreement (the "Initial Loan"), and
the Purchaser and the Company will execute and deliver to the Purchaser the
Convertible Note (with the initial $5,000,000 loan recorded on Schedule B
thereto and designated as "Tranche A" thereunder) to evidence such initial loan.
Subsequent to the Closing, the Purchaser will from time to time make such
additional loans as are contemplated by Section 7.2 of the Collaboration
Agreement and such loans will be evidenced by recording the date, amount and
designation (i.e., "Tranche B," "Tranche C," etc.) thereof on Schedule B to the
Convertible Note as contemplated by the provisions of the Convertible Note, it
being understood and agreed by the parties that in the event the Collaboration
Agreement shall be terminated in accordance with its terms the Purchaser shall
have no further obligation to make any such additional loans from and after the
date of notice of any such termination.
3. The Closing. The Closing of the purchase and sale of the Shares
hereunder and the making of the Initial Loan and delivery of the Convertible
Note to evidence such loan (the "Closing") shall take place at the offices of
the Purchaser, 460 Point San Bruno Boulevard, South San Francisco, California,
on April 22, 1996 at 8 a.m., local time, or on such other date at such other
time as is mutually agreed upon by the parties (the day on which the Closing
occurs is referenced to herein as the "Closing Date"). At the Closing, the
Company shall deliver to the Purchaser (i) a certificate representing the Shares
and (ii) the Convertible Note, dated as of the Closing Date, against receipt of
the Stock Purchase Price and the Initial Loan by wire transfer of immediately
available funds to the order of the Company.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
(a) Corporate Power. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business as a foreign corporation in each
jurisdiction where failure to qualify would have a material adverse effect
on the business or properties of the Company. The Company has full
corporate power and authority to own its property, to carry on its business
as presently conducted and to carry out the transactions contemplated
hereby.
(b) Authorization. The Company has full corporate power to execute,
deliver and perform this Agreement, the Collaboration Agreement and the
Convertible Note, and each such agreement has been duly executed and
delivered by the Company and is the legal, valid and, assuming due
execution by the Purchaser, binding obligation of the Company, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting creditors' rights
generally, and to general equitable principles. The execution, delivery and
performance by the Company of this Agreement, the Collaboration Agreement
and the Convertible Note, including the borrowing of amounts under the
loans contemplated by Section 2 hereof and the issuance, sale and delivery
of the Shares, the Convertible Note, the Preferred Stock and the Conversion
Shares (as defined in Section 4(c) below) have been duly and validly
authorized by all necessary corporate action of the Company.
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(c) Valid Issuance of Common Stock, Convertible Note and Preferred
Stock. The Shares, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly
authorized, validly issued, fully paid and non-assessable, and, based in
part upon the representations of the Purchaser in this Agreement, will be
issued in compliance with all applicable federal and state securities laws.
The Convertible Note, when issued, sold and delivered in accordance with
the terms hereof for the consideration expressed herein, will be duly
authorized and validly issued, and, based in part upon the representations
of the Purchaser in this Agreement, will be issued in compliance with all
applicable federal and state securities laws. The Preferred Stock, after
giving effect to the filing of the Certificate of Designation with the
Secretary of State of the State of Delaware as contemplated by Section 8,
and any shares of Common Stock issued upon conversion of such Preferred
Stock in accordance with the terms thereof (the "Conversion Shares"), will
be duly authorized, validly issued, fully paid and non-assessable and,
based in part upon the representations of the Purchaser in this Agreement,
will be issued in compliance with all applicable federal and state
securities laws.
(d) Governmental Approvals. Based in part on the representations made
by the Purchaser in Sections 5 and 6, no authorization, consent, approval,
license, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, under any applicable laws, rules or
regulations presently in effect, is or will be necessary to be made or
obtained by the Company for, or in connection with, the execution and
delivery of this Agreement, the Collaboration Agreement or the Convertible
Note or consummation of the transactions contemplated hereby or thereby or
performance by the Purchaser of its obligations hereunder or thereunder,
except for (i) the filing of the Certificate of Designation as contemplated
by Section 8, (ii) such other filings under applicable securities laws
which will be made by the Company within the prescribed periods, including
the filing by the Company of a notice under Section 25102(f) of the
California Codes, as amended, and the payment of any fee relating thereto,
(iii) any of the foregoing required or contemplated to be made in
accordance with Section 9 and (iv) any of the foregoing required in
connection with the conversion of the Preferred Stock.
(e) Litigation. Except as disclosed in the SEC Reports (as defined in
Section 4(j) below), there is no litigation or governmental proceeding or
investigation pending or, to the knowledge of the Company, threatened
against the Company which would materially and adversely affect (i) the
execution and delivery of this Agreement, the Collaboration Agreement or
the Convertible Note, or (ii) the performance by the Company of its
obligations hereunder or thereunder.
(f) Subsidiaries. The Company has no active subsidiaries and does not
otherwise directly or indirectly control any other business entity. The
Company has furnished the Purchaser with true, correct and complete copies
of its Amended and Restated Certificate of Incorporation and Bylaws,
together with any amendments thereto as of the date hereof.
(g) Absence of Certain Developments. Since the date of its most recent
report filed with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities and Exchange Act of 1934, as amended from time
to time (such act, together with the rules and regulations promulgated
thereunder, the "Exchange Act"), except as disclosed therein, there has
been no (i) material adverse change in the condition, financial or
otherwise,
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of the Company or its assets, liabilities, properties, business,
operations or prospects generally, (ii) declaration, setting aside or
payment of any dividend or other distribution with respect to the capital
stock of the Company, or (iii) loss, destruction or damage to any property
of the Company, whether or not insured, which has or may have a material
adverse effect on the Company.
(h) Absence of Undisclosed Liabilities. Except as and to the extent
reflected or stated in the SEC Reports and except for the issuance of the
Company's Non-Voting Cumulative Convertible Preferred Stock, Series D, the
Company has no material accrued or contingent liability of a type required
to be reflected on a balance sheet in accordance with generally accepted
accounting principles or described in the footnotes thereto, other than
liabilities arising in the ordinary course of its business since the SEC
Reports, arising out of any transaction or state of facts existing prior to
the date hereof.
(i) Non-Contravention. The execution, delivery and performance by the
Company of this Agreement, the Collaboration Agreement and the Convertible
Note (i) do not and will not contravene or conflict with the Amended and
Restated Certificate of Incorporation or Bylaws of the Company and (ii) do
not contravene or conflict with or, based in part on the representations
made by the Purchaser in Sections 5 and 6 and assuming satisfaction of the
requirements referenced in Section 4(d), constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to the Company, or result in a breach of or
constitute a default under any material agreement of the Company (whether
upon notice or passage of time), in any manner which would materially and
adversely affect the Purchaser's rights or its ability to realize the
intended benefits to it under this Agreement, the Collaboration Agreement
or the Convertible Note.
(j) Filings. The Company has filed in a timely manner, and has
delivered to the Purchaser copies of, the following reports required to be
filed with the Commission under the Exchange Act: (i) the Company's annual
report on Form 10-K for the fiscal year ended December 31, 1995, as amended
by Amendment No. 1 on Form 10-K/A, and (ii) all of its other reports
(including without limitation reports on Form 8-K), statements, schedules
and registration statements filed with the Commission since December 31,
1995. As of its filing date, no such report or statement filed pursuant to
the Exchange Act contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. The Company has also delivered to the Purchaser
a copy of the Company's preliminary Proxy Statement (filed with the
Commission on April 12, 1996) prepared in connection with its 1996 annual
meeting of stockholders (such preliminary Proxy Statement and the Company's
annual report on Form 10-K for the year ended December 31, 1995, as
amended, are referred to herein as the "SEC Reports").
(k) No Brokers. The Company has not directly or indirectly employed
any broker, finder or other person (including any employee) that might be
entitled to a fee, commission or other compensation upon the execution of
this Agreement, the Collaboration Agreement or the Convertible Note or the
consummation of the transactions contemplated by this Agreement, the
Collaboration Agreement or the Convertible Note for which the Purchaser or
the Company is or may be liable.
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(l) Registration Rights. The Company is not, and will not become
during the term of this Agreement, a party to any contract, agreement or
understanding providing for the registration of its securities under
federal or state securities laws that restricts, limits, prohibits or
conflicts or would restrict, limit, prohibit or conflict with the
registration rights granted to the Purchaser pursuant to Section 10 hereof.
5. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows:
(a) Corporate Power. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. The Purchaser has full corporate power and authority to carry on
its business as presently conducted and to carry out the transactions
contemplated hereby.
(b) Authorization. The Purchaser has full corporate power to execute,
deliver and perform this Agreement, the Collaboration Agreement and the
Convertible Note, and each such agreement has been duly executed and
delivered by the Purchaser and is the legal, valid and, assuming due
execution by the Company, binding obligation of the Purchaser, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting creditors' rights
generally, and to general equitable principles. The execution, delivery and
performance by the Purchaser of this Agreement, the Collaboration Agreement
and the Convertible Note, including the purchase of the Shares and the
loans contemplated by Section 2 hereof pursuant to the Convertible Note,
have been duly and validly authorized by all necessary corporate action of
the Purchaser.
(c) Litigation. There is no litigation or governmental proceeding or
investigation pending or, to the knowledge of the Purchaser, threatened
against the Purchaser which would materially and adversely affect (i) the
execution and delivery by the Purchaser of this Agreement, the
Collaboration Agreement or the Convertible Note, or (ii) the performance by
the Purchaser of its obligations hereunder or thereunder.
(d) No Brokers. The Purchaser has not directly or indirectly employed
any broker, finder or other person (including any employee) that might be
entitled to a fee, commission or other compensation upon the execution of
this Agreement, the Collaboration Agreement or the Convertible Note or the
consummation of the transactions contemplated by this Agreement, the
Collaboration Agreement or the Convertible Note for which the Purchaser or
the Company is or may be liable.
6. Compliance with Securities Laws and Restrictions on Transfer of
Securities.
(a) The Purchaser hereby represents and warrants to, and agrees with,
the Company as follows:
(i) The Purchaser (A) is purchasing the Shares and the
Convertible Note (including the making of the Initial Loan and each
subsequent loan pursuant to Section 7.2 of the Collaboration
Agreement), (B) will acquire the Preferred Stock upon conversion of
the Convertible Note (in the event of any such conversion), and (C)
will
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acquire the Conversion Shares upon conversion of the Preferred
Stock (in the event of any such conversion) (the Shares, Convertible
Note, Preferred Stock and Conversion Shares are referred to herein,
collectively, as the "Securities") for its own account for investment
only and not with a view to any resale or distribution thereof, except
pursuant to an effective registration statement under the Securities
Act of 1933, as amended from time to time (such act, together with the
rules and regulations promulgated thereunder, the "Securities Act"),
covering the sale, assignment or transfer or an opinion of counsel in
form and substance satisfactory to the Company that such registration
is not required.
(ii) The Purchaser has received and carefully reviewed the SEC
Reports, and has had the opportunity to obtain and receive such other
information as it deems necessary to understand the business and
financial condition of the Company and to make the investment decision
to purchase the Securities.
(iii) As an investor in companies in the biopharmaceutical
industry and a participant in such industry, the Purchaser has such
knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the investment
represented by the Securities, and it is able to bear the economic
risk of such investment.
(iv) The Purchaser understands that the Securities are being, or
will be, sold or issued in a transaction which is exempt from the
registration requirements of the Securities Act by reason of the
provisions of Section 4(2) of the Securities Act (or Section 3(a)(9)
of the Securities Act in the case of the issuance of the Preferred
Stock and the Conversion Shares upon conversion of the Convertible
Note and the Preferred Stock, respectively), and that such Securities
will be subject to transfer restrictions and must be held indefinitely
unless subsequently registered under the Securities Act or an
exemption from such registration is available.
The certificates representing the Securities will be affixed with
a legend reading as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT COVERING
THE TRANSFER OR AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
Except as set forth in Section 14 hereof, the restrictions on
sale, assignment and transfer of the Shares, the Preferred Stock and
the Conversion Shares contained in this Section 6(a)(iv) shall
terminate at such time as there shall be delivered to the Company and
the Purchaser an opinion of counsel to the Purchaser, in form and
substance satisfactory to the Company, to the effect that, due to the
lapse of time or otherwise, no registration of such securities is
required under the Securities Act in connection with any distribution
of such securities to the public in the United States.
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In addition, at any time after (A) the delivery of such opinion;
(B) such securities are sold pursuant to and in accordance with an
effective registration statement under the Securities Act covering
such sale; or (C) the Purchaser shall have delivered to the Company a
written undertaking, executed by the Purchaser and any institution
currently executing or proposing to execute sales of such securities,
to the effect that such sales shall be made only in compliance with
all applicable provisions of Rule 144 under the Securities Act (or any
applicable similar rule which may be promulgated from time to time),
the Purchaser shall be entitled to exchange its certificate
representing such securities (or any portion thereof as to which (A),
(B) or (C) above applies) for new certificates not bearing the legend
set forth in Section 6(a)(iv).
(b) The Purchaser may only sell, assign or transfer all or a portion
of the Convertible Note to a wholly-owned subsidiary or to F.
Hoffmann-LaRoche Ltd or any of its Affiliates (as defined in Section 7(b))
(the "Roche Affiliates") which are directly or indirectly controlled by it
(collectively, with such Roche Affiliates, "Roche") (so long as Roche owns
at least a majority of the outstanding Voting Stock (as such term is
defined in Section 7(a)) of the Purchaser, provided that (i), in the case
of a wholly-owned subsidiary, such subsidiary agrees with the Purchaser and
the Company in writing to rescind such transaction in the event it ceases
to be a wholly-owned subsidiary of the Purchaser and agrees in writing with
the Company to comply with all the provisions of this Agreement applicable
to the Purchaser and, in the case of the Convertible Note, to be bound by
the obligations of the "Lender" thereunder (including the corresponding
obligations under the Collaboration Agreement), and (ii), in the case of
Roche, Roche agrees with the Purchaser and the Company in writing to
rescind such transaction in the event it ceases to be the owner of at least
a majority of the outstanding Voting Stock of the Purchaser and agrees in
writing with the Company to comply with all of the provisions of this
Agreement applicable to the Purchaser and, in the case of the Convertible
Note, to be bound by the obligations of the "Lender" thereunder (including
the corresponding obligations under the Collaboration Agreement).
Notwithstanding any such sale, assignment or transfer, the Purchaser shall
not be relieved of its obligations hereunder or under the Convertible Note
or the Collaboration Agreement. The Purchaser agrees that the Preferred
Stock shall not be sold, assigned or transferred (either in whole or in
part) to a third party who is not an Affiliate (as such term is defined in
Section 7(b) hereof) and is not Roche, except if as a condition of such
sale, assignment or transfer the Preferred Stock shall automatically be
converted into Conversion Shares.
(c) Notwithstanding any provision of this Agreement to the contrary,
other than as permitted by, and in accordance with, the provisions of
Section 6(b), without the prior written consent of the Company, the
Purchaser may not sell, assign, convey, pledge, hypothecate or otherwise
dispose of the Convertible Note (representing any and all loans outstanding
as contemplated by Section 2) or any interest therein. Accordingly, the
Convertible Note will be affixed with a legend reading as follows:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS ON
SALE, ASSIGNMENT OR TRANSFER PURSUANT TO THAT CERTAIN COMMON STOCK AND
CONVERTIBLE NOTE PURCHASE AGREEMENT, DATED AS OF APRIL 22, 1996,
BETWEEN THE COMPANY AND GENENTECH, INC., AND MAY NOT (NOR MAY ANY
INTEREST THEREIN) BE SOLD, ASSIGNED, CONVEYED,
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PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OTHER THAN IN
ACCORDANCE WITH THE PROVISIONS THEREOF."
(d) The Purchaser understands that notations restricting the transfer
of the Securities will be made on the transfer records of the Company and
that a stop transfer order will be entered with the Company's transfer
agent.
(e) None of the Securities (nor any interest therein) shall be sold,
assigned or offered except in accordance with the provisions of this
Section 6.
7. Additional Covenants of Purchaser Regarding Securities.
(a) Effectiveness and Termination. The provisions of Sections 7(b)
through 7(d) shall become effective at such time (if any), and from time to
time, as the Purchaser and its Affiliates, taken together, own Voting Stock
of the Company (which includes the Common Stock) representing ten percent
(10%) or more of the total outstanding Voting Stock of the Company, and
shall continue in effect until the earlier of (i) the fifteenth anniversary
of the date of this Agreement or (ii) such time as the Purchaser and its
Affiliates, taken together, own less than ten percent (10%) of the total
outstanding Voting Stock of the Company, provided that such Sections shall
again become effective if, and at such time, and from time to time, as the
Purchaser and its Affiliates, taken together, own such percentage of Voting
Stock of the Company within the fifteen year period commencing on the date
hereof. For purposes of this Agreement, the term "Voting Stock" means the
equity securities (as such term is used in the Exchange Act) having the
ordinary power to vote in the election of directors of the issuer thereof
(other than securities having such power only upon the happening of a
contingency). For purposes of this Section 7, owned Voting Stock shall
include Voting Stock, securities directly or indirectly convertible into or
exchangeable for Voting Stock (whether or not subject to a contingency),
and rights to acquire any of the foregoing. The provisions of Sections 7(b)
through 7(d) shall have no effect unless and until they become effective,
and only so long as they are effective, pursuant to this Section 7(a),
other than for purposes of defining certain terms used elsewhere in this
Agreement. Notwithstanding any provision hereof to the contrary, this
Section 7 shall not apply to any Preferred Stock, Shares or Conversion
Shares assigned, sold or transferred in accordance with Section 6(a)(iv),
and the legend required to be affixed to the certificates representing such
shares pursuant to Section 7(d) shall be removed upon any such assignment,
sale or transfer of such shares.
(b) Additional Stock Purchases by Purchaser. The Purchaser hereby
agrees that neither the Purchaser nor any of its Affiliates nor anyone
acting on its or their behalf will acquire any equity securities (as such
term is used in the Exchange Act) of the Company without the Company's
prior written approval, except as contemplated by this Agreement or
pursuant to the Convertible Note or the Preferred Stock. For purposes of
this Agreement, the term "Affiliate" means, when used with respect to any
specified person, any other person directly or indirectly controlled by
such specified person. For the purposes of this definition, "control," when
used with respect to any person, means the power to direct the management
and policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"affiliated" and "controlled" have meanings correlative to the foregoing.
The obligations of this Section 7(b) shall terminate if another person or
group has acquired Voting Stock of the Company (or rights to acquire Voting
Stock
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of the Company) which results in such person or group owning or having
the right to acquire Voting Stock of the Company with aggregate voting
power of more than 50% of the total voting power of the Company then in
effect.
(c) Solicitation of Proxies; Participation in Control Contests.
Without the Company's prior written consent, (i) the Purchaser shall not
solicit proxies with respect to any Voting Stock of the Company, nor shall
it become a "participant" in any "election contest" (as such terms are used
under Regulation 14A of the Exchange Act) relating to the election of
directors of the Company; and (ii) the Purchaser shall not, and shall cause
its Affiliates not to (and the Purchaser and such Affiliates shall not
together or in conjunction with third parties who are not Affiliates form a
"group" (as used under Regulation 13D/G of the Exchange Act), act in
concert, or encourage other persons to), directly or indirectly, acquire or
offer to acquire, seek, propose or agree to acquire, whether by means of a
purchase, agreement, business combination or any other manner, beneficial
ownership of any securities or assets of the Company (including options to
acquire such ownership) seeking or proposing to influence, advise, change
or control the management, Board of Directors, governing instruments or
policies or affairs of the Company. Subject only to this Section 7(c), the
Purchaser shall be entitled to vote its shares of Voting Stock of the
Company in its discretion.
(d) Restrictive Legends. In addition to any restrictive legends
required by Section 6, subject to the penultimate and last sentences of
Section 7(a), the certificates representing the Securities will be affixed
with a legend reading as follows:
"THE SECURITIES REPRESENTED HEREBY (AND, IF APPLICABLE, ANY
SECURITIES ISSUED UPON CONVERSION THEREOF) MAY BE SUBJECT TO THE
RESTRICTIONS SET FORTH IN THAT CERTAIN COMMON STOCK AND CONVERTIBLE
NOTE PURCHASE AGREEMENT, DATED AS OF APRIL 22, 1996, BETWEEN THE
COMPANY AND GENENTECH, INC."
8. Additional Covenants of the Company.
(a) Filing of Certificate of Designation. The Company shall file with
the Secretary of State of the State of Delaware the Certificate of
Designation not later than the Closing Date.
(b) Stockholders' Rights Plan. The Company agrees that, as long as the
Purchaser is substantially in compliance with the terms of this Agreement,
the Collaboration Agreement and the Securities, (i) the Purchaser will not
be declared an Adverse Person for purposes of the Stockholder Rights
Agreement dated as of October 27, 1993 between the Company and First
Interstate Bank of California, as rights agent (the "Rights Agreement"),
and (ii) the Company will take all commercially reasonable efforts to
redeem the preferred stock purchase rights which may be distributed under
the Rights Agreement if the Purchaser becomes an Acquiring Person (as
defined in the Rights Agreement) and the Stock Acquisition Date (as defined
in the Rights Agreement) has occurred.
9. Conditions to Closing.
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(a) Conditions to Purchaser's Obligations at the Closing. The
Purchaser's obligation to purchase and pay for the Shares and make the
Initial Loan at the Closing is subject to the fulfillment on or prior to
the Closing of the following conditions, any one or more of which may be
waived in whole or in part by the Purchaser:
(i) Compliance with Laws. At the Closing, the purchase of the
Shares hereunder and the loans to be made by the Purchaser pursuant to
the Convertible Note shall be legally permitted by all laws and
regulations to which the Purchaser or the Company is subject.
(ii) Representations and Warranties. Each of the representations
and warranties of the Company set forth in Section 4 shall be true and
correct as if made on the Closing Date.
(iii) Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on
or before the Closing Date, including delivery of the Shares.
(iv) Compliance Certificate. The Senior Vice President,
Operations of the Company shall deliver to the Purchaser on the
Closing Date a certificate certifying that the conditions set forth in
clauses (ii) and (iii) of this Section 9(a) have been fulfilled.
(v) Other Agreements. The Company shall have executed and
delivered to the Purchaser the Collaboration Agreement and the
Convertible Note.
(vi) Consents. The Company and the Purchaser shall have obtained
all consents (including all governmental and regulatory consents,
approvals, or authorizations required in connection with the valid
execution and delivery of this Agreement, the Collaboration Agreement
and the Convertible Note), permits and waivers necessary or required
to be obtained on or prior to the Closing Date for consummation of the
transactions contemplated hereby.
(vii) Opinion of Counsel to the Company. The Purchaser shall have
received from Cahill Gordon & Reindel, special counsel for the
Company, an opinion dated as of the Closing Date, substantially in the
form set forth in Exhibit B attached hereto.
(viii) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated in
connection with the purchase of the Shares and the Initial Loan and
all documents incident thereto (including the issuance of the
Preferred Stock and the Conversion Shares) shall be reasonably
satisfactory in form and substance to the Purchaser and the
Purchaser's counsel, and they shall have received all such counterpart
original and certified or other copies of such documents as they may
reasonably request.
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(b) Conditions to Company's Obligations at the Closing. The Company's
obligation to sell and issue the Shares and execute and deliver the
Convertible Note at the Closing is subject to the fulfillment on or prior
to the Closing of the following conditions, any one or more of which may be
waived in whole or in part by the Company:
(i) Compliance with Laws. At the Closing, the purchase of the
Shares hereunder and the loans to be made by the Purchaser shall be
legally permitted by all laws and regulations to which the Purchaser
or the Company is subject.
(ii) Representations and Warranties. Each of the representations
and warranties of the Purchaser set forth in Sections 5 and 6 shall be
true and correct as if made on the Closing Date.
(iii) Payment of Purchase Price. The Purchaser shall have
delivered to the Company payment of the Stock Purchase Price and the
Initial Loan in accordance with Section 3 hereof.
(iv) Performance. The Purchaser shall have performed and complied
with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with on or
before the Closing Date.
(v) Other Agreements. The Purchaser shall have executed and
delivered to the Company the Collaboration Agreement and the
Convertible Note.
(vi) Consents. The Company and the Purchaser shall have obtained
all consents (including all governmental and regulatory consents,
approvals, or authorizations required in connection with the valid
execution and delivery of this Agreement, the Collaboration Agreement
and the Convertible Note), permits and waivers necessary or required
to be obtained on or prior to the Closing Date for consummation of the
transactions contemplated hereby.
(vii) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated in
connection with the purchase of the Shares and the Initial Loan and
all documents incident thereto (including the issuance of the
Preferred Stock and the Conversion Shares) shall be reasonably
satisfactory in form and substance to the Company and the Company's
counsel, and they shall have received all such counterpart original
and certified or other copies of such documents as they may reasonably
request.
10. Registration Rights.
(a) Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Holder" shall mean the Purchaser or transferee of the Purchaser which
is a holder of Registrable Securities and acquired such shares in
accordance with Section 6(b).
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"Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated pursuant to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to any such prospectus, including post-effective amendments, and all
materials incorporated by reference or deemed to be incorporated by reference,
if any, in such prospectus.
"Registrable Securities" shall mean (i) the Shares issued to the Purchaser
at the Closing, (ii) the Conversion Shares of the Company issued upon conversion
of the Preferred Stock issued upon conversion of the Convertible Note and (iii)
any Common Stock of the Company issued in respect of such shares as a result of
any stock split, stock dividend or recapitalization.
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with Sections 10(b) through (d), including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
"Registration Statement" shall mean any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such registration statement.
(b) Shelf Registration Statements.
(i) The Company agrees to file with the Commission, promptly
following the Closing, but in no event later than 45 days after the
Closing, a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
Registration Statement") covering all of the Shares and any
Registrable Securities issued in respect of such Shares. Such Shelf
Registration Statement shall be on Form S-3 under the Securities Act
or another appropriate form permitting registration of such Shares and
any Registrable Securities issued in respect of such Shares for resale
by the Holder in the manner or manners reasonably designated by the
Holder. The Company shall use its commercially reasonable efforts to
cause such Shelf Registration Statement to be declared effective
pursuant to the Securities Act as promptly as practicable following
the filing thereof and to keep it continuously effective under the
Securities Act until termination of such obligation pursuant to
Section 10(f)(i).
(ii) The Company agrees to file with the Commission, promptly
following the Conversion Date (as such term is defined in the
Convertible Note Agreement) first
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occurring, but in no event later than 45 days after the
Conversion Date, a Shelf Registration Statement covering all of the
Conversion Shares and any Registrable Securities issued in respect of
such Conversion Shares. Such Shelf Registration Statement shall be on
Form S-3 under the Securities Act or another appropriate form
permitting registration of such Conversion Shares and any Registrable
Securities issued in respect of such Conversion Shares for resale by
the Holder in the manner or manners reasonably designated by the
Holder. The Company shall use its commercially reasonable efforts to
cause such Shelf Registration Statement to be declared effective
pursuant to the Securities Act as promptly as practicable following
the filing thereof and to keep it continuously effective under the
Securities Act until termination of such obligation pursuant to
Section 10(f)(ii).
(c) Certain Notices; Suspension of Sales. The Holder agrees that, upon
receipt of any notice from the Company of the happening of any event of the
kind described in any of clauses (w) through (z) of Section 10(d)(iii)
(with, if requested by the Holder, a description in reasonable detail
thereof), the such Holder will forthwith discontinue disposition of the
Registrable Securities covered by such Registration Statement or Prospectus
until the Holder's receipt of copies of the supplemented or amended
Prospectus contemplated by Section 10(d)(v), or until it is advised in
writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus.
(d) Registration Procedures. In connection with the Company's
registration obligations under Section 10(b), the Company shall with
respect to each Shelf Registration Statement:
(i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement as
may be necessary to keep such Registration Statement continuously
effective for the applicable time period set forth in, and subject to,
Section 10(b); cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under
the Securities Act and the Exchange Act with respect to the
disposition of all securities covered by such Registration Statement
during such period in accordance with the intended methods of
disposition by the Holder set forth in such Registration Statement as
so amended or in such Prospectus as so supplemented, provided such
Holder complies with the information requirements of Section 10(h).
(ii) Deliver to the Holder, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and
each amendment or supplement thereto it reasonably requests; and,
subject to Section 10(c), the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by the Holder
in connection with the offering and sale of the covered Shares,
Conversion Shares or Registrable Securities, as the case may be,
covered by such Prospectus and any amendment or supplement thereto,
provided that no Holder shall be entitled to use the Prospectus unless
and until such Holder shall have furnished to the Company any required
information pursuant to Section 10(h).
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(iii) Notify the Holder (v) when a Prospectus or any Prospectus
supplement or post-effective amendment is proposed to be filed, and,
with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (w) of any request of
the Commission or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or related
Prospectus or for additional information related thereto, (x) of the
issuance by the Commission, any state securities commission, any other
governmental agency or any court of any stop order, order or
injunction suspending or enjoining the use or the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (y) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Shares, Conversion Shares or Registrable
Securities, as the case may be, for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, and (z)
of the existence of any fact and the happening of any event that makes
any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect, or that requires
the making of any changes in such Registration Statement, Prospectus
or document so that in the case of the Registration Statement, it will
not 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 statements therein not misleading and that, in the case of the
Prospectus, such Prospectus will not 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 statements therein, in light of the
circumstances under which they were made, not misleading.
(iv) Use its commercially reasonable efforts (which shall include
appropriate responses to any requests of the type described in clause
(w) of Section 10(d)(iii)) to avoid the issuance of, or, if issued,
obtain the withdrawal of any order enjoining or suspending the use or
effectiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from qualification) of
any of the covered Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(v) Upon the occurrence of any event contemplated by clause (z)
of Section 10(d)(iii), as promptly as practicable but in no event
later than 60 days thereafter, prepare a supplement or amendment,
including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or
any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Notwithstanding anything herein to the contrary, nothing herein shall
require the Company to prepare and file any such supplement or
amendment if the Company shall determine in its reasonable judgment
that compliance with the requirements hereof would require the
disclosure of non-public material corporate developments, the
disclosure of which in the reasonable judgment of the Company would be
adverse to the interests of the Company, and the obligations of the
Company to prepare and file
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any such supplements or amendments shall be suspended until such
time as such non-public developments otherwise become publicly known
or announced or would not be required to be so disclosed in connection
therewith, provided that if as a consequence of any delay in the
filing of any supplement or amendment, the Holder is prevented from
effecting sales under the Registration Statement for more than thirty
(30) consecutive days, if requested by the Holder, the Company's
determination shall have been confirmed by a determination by the
Board of Directors of the Company.
(vi) Use its commercially reasonable efforts to register or
qualify, or cooperate with the Holder in connection with the
registration or qualification (or exemption from such registration or
qualification), of the Shares, Conversion Shares or Registrable
Securities, as the case may be, for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United
States as the Holder reasonably requests in writing, keep each such
registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept
effective and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the
Shares, Conversion Shares or Registrable Securities, as the case may
be, covered by the applicable Registration Statement; provided,
however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified
or take any action that would subject it to general service of process
in any such jurisdiction where it is not then so subject or subject
the Company to any tax in any such jurisdiction where it is not then
so subject.
(vii) Comply with applicable rules and regulations of the
Commission and make generally available to its security holders
earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act), no later than 60 days after the
end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year), commencing on the first day
of the first fiscal quarter after the effective date of a Registration
Statement, which statement shall cover said period, consistent with
the requirements of Rule 158.
(viii) List all Shares, Conversion Shares and Registrable
Securities covered by such Registration Statement on any securities
exchange on which the Common Stock is then listed or authorize for
quotation on the National Association of Securities Dealers Automated
Quotation System ("Nasdaq") or the Nasdaq National Market all Shares,
Conversion Shares and Registrable Securities covered by such
Registration Statement if the Common Stock is then so authorized for
quotation.
(e) Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance by the
Company pursuant to Sections 10(b), (c) or (d) of this Agreement shall be
borne by the Company.
(f) Termination of Registration Rights.
(i) The registration obligations of the Company pursuant to
Sections 10(b) through (d) of this Agreement shall terminate with
respect to the Shelf Registration
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Statement contemplated by Section 10(b)(i) at the time at which
all of the Shares, Conversion Shares and Registrable Securities
required to be covered by such Registration Statement can be sold
within a given three-month period without compliance with the
registration requirements of the Securities Act pursuant to Rule 144
or other applicable exemption supported by a written opinion of legal
counsel for the Company which shall be reasonably satisfactory in form
and substance to legal counsel for Holder.
(ii) The registration obligations of the Company pursuant to
Sections 10(b) through (d) of this Agreement shall terminate with
respect to the Shelf Registration Statement contemplated by Section
10(b)(ii) at the time at which all of the Registrable Securities
required to be covered by such Registration Statement may be sold
within a given three-month period without compliance with the
registration requirements of the Securities Act pursuant to Rule 144
or other applicable exemption supported by a written opinion of legal
counsel for the Company which shall be reasonably satisfactory in form
and substance to legal counsel for Holder.
(g) Indemnification.
(i) The Company agrees to indemnify and hold harmless (A) the
Holder, (B) each person, if any, who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act)
the Holder (any of the persons referred to in this clause (B) being
hereinafter referred to as a "controlling person"), and (C) the
respective officers, directors, partners, employees, representatives
and agents of the Holder, or any controlling person (any person
referred to in clause (A), (B) or (C) may hereinafter be referred to
as an "Indemnified Person"), from and against any and all losses,
claims, damages, liabilities, expenses and judgments caused by any
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of
Prospectus or in any amendment or supplement thereto or in any
preliminary Prospectus, or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of any
Prospectus or form of Prospectus or supplement thereto, in light of
the circumstances under which they were made) not misleading, except
insofar as such losses, claims, damages, liabilities, expenses or
judgments are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating
to any Indemnified Person furnished in writing to the Company by or on
behalf of such Indemnified Person expressly for use therein; provided
that the foregoing indemnity with respect to any Prospectus shall not
inure to the benefit of any Indemnified Person from whom the person
asserting such losses, claims, damages, liabilities, expenses and
judgments purchased securities if such untrue statement or omission or
alleged untrue statement or omission made in such Prospectus is
eliminated or remedied by an amendment or supplement thereto and a
copy of such amended or supplemented Prospectus shall not have been
furnished to such person in a timely manner due to the wrongful action
or wrongful inaction of such Indemnified Person, whether as a result
of negligence or otherwise.
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(ii) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus
or any amendment or supplement thereto and with respect to which
indemnity may be sought against the Company, such Indemnified Person
shall promptly notify the Company in writing and the Company shall
assume the defense thereof, including the employment of counsel
reasonably satisfactory to such Indemnified Person and payment of all
reasonable fees and expenses. Any Indemnified Person shall have the
right to employ separate counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such Indemnified
Person, unless (A) the employment of such counsel shall have been
specifically authorized in writing by the Company, (B) the Company
shall have failed to assume the defense and employ counsel or (C) such
Indemnified Person or Persons shall have been advised by counsel that
there may be a conflict between the positions of the indemnifying
party or parties and of the indemnified party or parties in conducting
the defense of such action or proceeding or that there may be legal
defenses available to such Indemnified Person or Persons different
from or in addition to those available to the indemnifying party or
parties (in which case the Company shall not have the right to assume
the defense of such action on behalf of such Indemnified Person), it
being understood, however, that the Company shall not, in connection
with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all such Indemnified Persons, which
firm shall be designated in writing by such Indemnified Persons. The
Company shall not be liable for any settlement of any such action
effected without its written consent, but if settled with the written
consent of the Company, the Company agrees to indemnify and hold
harmless any Indemnified Person from and against any loss or liability
by reason of such settlement. No indemnifying party shall, without the
prior written consent of the Indemnified Person, effect any settlement
of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional release of such Indemnified
Person from all liability on claims that are the subject matter of
such proceeding.
(iii) In connection with any Registration Statement in which the
Holder is participating, the Holder agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors, its
officers and any person controlling the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, to
the same extent as the foregoing indemnity from the Company to each
Indemnified Person but only with reference to information relating to
such Indemnified Person furnished in writing by or on behalf of such
Indemnified Person expressly for use in such Registration Statement.
In case any action shall be brought against the Company, any of its
directors, any such officer or any person controlling the Company
based on such Registration Statement and in respect of which indemnity
may be sought against any Indemnified Person, the Indemnified Person
shall have the rights and duties given to the Company (except that if
the Company shall have assumed the defense thereof, such Indemnified
Person shall not be required to do so, but may employ separate counsel
therein but the fees and expenses of such counsel
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shall be at the expense of such Indemnified Person), and the
Company, its directors, any such officers and any person controlling
the Company shall have the rights and duties given to the Indemnified
Person by Section 10(g)(ii).
(iv) If the indemnification provided for in this Section 10(g) is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities, expenses or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such Indemnified
Person, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages,
liabilities, expenses and judgments in such proportion as is
appropriate to reflect the relative fault of the Company and each such
Indemnified Person in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities, expenses
or judgments, as well as any other relevant equitable considerations.
The relative fault of the Company and each such Indemnified Person
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the
Company or such Indemnified Person and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Holder agree that it would not be just and
equitable if contribution pursuant to this Section 10(g)(iv) were
determined by pro rata allocation (even if the Indemnified Person were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or
payable by an Indemnified Person as a result of the losses, claims,
damages, liabilities, expenses or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(h) Information by Holder. The Holder shall furnish to the Company
such information regarding such Holder and any distribution proposed by the
Holder as the Company may request in writing or as shall be required in
connection with any registration, qualification or compliance referred to
in this Agreement.
(i) Rule 144 Reporting. With a view to making available to the Holder
the benefits of certain rules and regulations of the Commission which may
permit the sale of the Shares, Conversion Shares and the Registrable
Securities to the public without registration, the Company agrees to use
commercially reasonable efforts to (a) make and keep public information
available, as those terms are understood and defined in the Commission's
Rule 144, at all times, and (b) file with the Commission in a timely manner
all reports and other documents required of the Company under the Exchange
Act.
11. Notices. All notices and other communication required or appropriate to
be given hereunder shall be in writing and shall be delivered by hand or mailed
by certified mail, return
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receipt requested, or sent by telex or facsimile (in which case a
confirming copy shall also be sent by certified mail or courier), to the
following respective addresses or to such other addresses as may be specified in
any notice delivered or mailed as above provided:
(a) If to the Purchaser, to:
Genentech, Inc.
460 Point San Bruno Boulevard
South San Francisco, CA 94080
Telephone: (415) 225-1000
Facsimile: (415) 952-9881
Attention: Corporate Secretary
(b) If to the Company to:
Xoma Corporation
2910 7th Street
Berkeley, CA 94080
Telephone: (510) 644-1170
Facsimile: (510) 649-7571
Attention: General Counsel
Any notice or other communication delivered by hand or mailed shall be
deemed to have been delivered on the date on which such notice or communication
is delivered by hand, or in the case of certified mail deposited with the
appropriate postal authorities on the date when such notice or communication is
actually received, and in any other case shall be deemed to have been delivered
on the date on which such notice or communication is actually received.
12. Governing Law. The parties have agreed that this Agreement will be
governed by and construed in accordance with the laws of the State of Delaware.
13. Amendments. No provision of this Agreement may be waived, changed or
modified, or the discharge thereof acknowledged orally, but only by an agreement
in writing signed by the party against which the enforcement of any waiver,
change, modification or discharge is sought.
14. Assignment.
(a) Except as set forth in this Section 14, none of the rights or
obligations of either party hereto may be assigned or transferred without
the prior written consent of the other party hereto, provided that the
rights of the Purchaser and the obligations of the Company under Section 10
hereof may be transferred to an Affiliate, to Roche or to any bona fide
purchaser for value of at least 500,000 shares of Registrable Securities,
which transfer shall otherwise be in compliance with this Agreement,
without the prior written consent of the Company.
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(b) Neither party may assign any of its rights and obligations under
this Agreement in connection with a merger or similar reorganization or the
sale of all or substantially all of its assets; provided, however, that the
Purchaser may assign such rights and obligations under this Agreement to
Roche (so long as Roche continues to own at least a majority of the
outstanding Voting Stock of the Purchaser).
(c) This Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties. Any assignment not in
accordance with this Agreement shall be void.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
16. Entire Agreement. This Agreement, the Collaboration Agreement and the
Convertible Note, together with the Exhibits, Schedules and other documents
attached thereto, constitute the entire contract between the parties with
respect to the subject matter hereof and thereof, and no party will be liable or
bound to the other in any manner by any representations, warranties or covenants
except as specifically set forth herein and therein.
17. Term and Termination. This Agreement is effective as of the date first
written above and, except as otherwise expressly provided herein, will continue
in effect until the later of the date neither the Purchaser nor any of its
Affiliates owns any of the Securities and termination of the Collaboration
Agreement, unless earlier terminated by mutual written consent of both parties.
18. Titles. The titles of the Sections of this Agreement are inserted for
reference only, and are not to be considered as part of this Agreement in
construing this Agreement.
19. Disputes. Any disputes under this Agreement will be governed by the
provisions of Article 17 of the Collaboration Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
"COMPANY" XOMA CORPORATION
By:-----------------------------------
Clarence L. Dellio
Senior Vice President, Operations
"PURCHASER" GENENTECH, INC.
By:-----------------------------------
John P. McLaughlin
Executive Vice President
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WHEREVER CONFIDENTIAL INFORMATION IS
OMITTED HEREIN (SUCH OMISSIONS ARE
DENOTED BY AN ASTERISK), SUCH
CONFIDENTIAL INFORMATION HAS BEEN
SUBMITTED SEPARATELY TO THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO
A REQUEST FOR CONFIDENTIAL TREATMENT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED,
ASSIGNED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT COVERING THE TRANSFER OR AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS ON SALE,
ASSIGNMENT OR TRANSFER PURSUANT TO THAT CERTAIN COMMON STOCK AND CONVERTIBLE
NOTE PURCHASE AGREEMENT, DATED AS OF APRIL 22, 1996, BETWEEN THE COMPANY AND
GENENTECH, INC., AND MAY NOT (NOR MAY ANY INTEREST THEREIN) BE SOLD, ASSIGNED,
CONVEYED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OTHER THAN IN
ACCORDANCE WITH THE PROVISIONS THEREOF.
THE SECURITIES REPRESENTED HEREBY (AND, IF APPLICABLE, ANY SECURITIES ISSUED
UPON CONVERSION THEREOF) MAY BE SUBJECT TO THE RESTRICTIONS SET FORTH IN THAT
CERTAIN COMMON STOCK AND CONVERTIBLE NOTE PURCHASE AGREEMENT, DATED AS OF APRIL
22, 1996, BETWEEN THE COMPANY AND GENENTECH, INC.
Berkeley, California
April 22, 1996
XOMA CORPORATION
CONVERTIBLE SUBORDINATED NOTE AGREEMENT
WHEREAS, XOMA CORPORATION, a Delaware corporation having its principal
executive office at 2910 7th Street, Berkeley California 94710 (the "Company"),
and GENENTECH, INC., a Delaware corporation having its principal executive
office at 460 Point San Bruno Boulevard, South San Francisco, California 94080
(the "Lender"), desire to further their corporate collaboration arrangements as
embodied in that certain Common Stock and Convertible Note Purchase Agreement
(the "Purchase Agreement") and that certain Collaboration Agreement (the
"Collaboration Agreement"), each dated as of April 22, 1996; and
WHEREAS, Lender has agreed from time to time to make loans to the Company
pursuant to Sections 7.1 and 7.2 of the Collaboration Agreement, such loans to
be evidenced by this Convertible Subordinated Note Agreement (the "Note
Agreement" or "Note"); and
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WHEREAS, the Company has agreed to repay any such loans in accordance with
terms of this Note Agreement; and
WHEREAS, the parties contemplate that, unless previously repaid by the
Company, the aggregate principal amount of and accrued interest on such loans
shall be automatically converted upon the occurrence of certain events into
Convertible Preferred Stock, Series E, of the Company (the "Series E Preferred
Stock"), having the preferences and rights (including conversion into the
Company's Common Stock, par value $.0005 per share (the "Common Stock"))
substantially as set forth in the Certificate of Designation of Convertible
Preferred Stock, Series E, attached hereto as Schedule A (the "Certificate of
Designation");
NOW, THEREFORE, FOR VALUE RECEIVED, the Lender promises to from time to
time make loans to the Company in the amounts contemplated by Sections 7.1 and
7.2 of the Collaboration Agreement and the Company promises to pay to the order
of the Lender the amounts borrowed thereunder, plus accrued interest, all as set
forth below.
1. Principal.
(a) General. The amount and date of any borrowing by the Company under
Section 7.1 or 7.2 of the Collaboration Agreement shall be recorded by the
Lender and endorsed by the Lender and the Company on Schedule B attached hereto,
which is hereby made a part of this Note. Each such loan shall be treated as a
separate loan hereunder, and, as such, shall be treated as, and designated, a
separate "Tranche" hereunder. The first loan, being made concurrently with the
execution and delivery of this Note Agreement as contemplated by Section 1(b) is
hereby designated "Tranche A" and recorded as such on Schedule B attached
hereto. Each subsequent loan made hereunder as contemplated by Section 1(c)
shall be similarly designated with consecutive letter designations, such as
"Tranche B," "Tranche C," etc., and the applicable designation shall be recorded
by the Lender and endorsed by the Lender and the Company on Schedule B attached
hereto at the time any such loan is made. The loans made from time to time
hereunder are hereinafter collectively referred to as "Tranches", and each such
loan is individually referred to as a "Tranche."
(b) Initial Loan. Under Section 7.1 of the Collaboration Agreement, an
initial loan in an aggregate principal amount of $5,000,000 is required to be
made by the Lender to the Company. Such loan is being made concurrently with the
execution and delivery of this Note Agreement, and, accordingly, is recorded and
endorsed on Schedule B attached hereto and designated as Tranche A thereon.
(c) Additional Loans. Under Section 7.2 of the Collaboration
Agreement, the Company also may, at its election, borrow from the Lender, and
require the Lender to lend to the Company, additional amounts as set forth
therein or as determined as provided therein, which amounts shall be in
accordance with the applicable budgets as contemplated by Section 7.2 of the
Collaboration Agreement. The Lender's obligation to lend any additional amounts
to the Company pursuant to Section 7.2 of the Collaboration Agreement is subject
to the fulfillment on or prior to the date such additional loans are to be made
of the conditions set forth in paragraphs (i) through (vi) and (viii) of Section
9(a) of the Purchase Agreement (as if such date were the "Closing Date" referred
to therein and it being understood that any of the President, the Senior Vice
President or any Vice President of the Company shall be permitted to execute the
compliance certificate required by paragraph (iv) thereof), any one or more of
which may be waived, in whole or part, by the Lender.
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(d) Borrowing and Funding Procedures. The procedure for borrowing any
such additional amounts shall be as set forth in this Section 1(d). Upon
approval by the Steering Committee (as such term is defined in the Collaboration
Agreement) of any annual budget (an "Approved Budget") formulated by the Project
Core Team (as such term is defined in the Collaboration Agreement) all in
accordance with Article 3 of the Collaboration Agreement and satisfaction or
waiver of the conditions referred to in Section 1(c), the Lender shall pay the
dollar amount of any such Approved Budget to the Company at an account
designated by the Company by wire transfer of immediately available funds
denominated in the currency of the United States of America on the first
business day of the month immediately succeeding such approval and the
satisfaction or waiver of all such conditions. Upon receipt thereof, the Lender
shall record such loan as of such date on Schedule B attached hereto as required
by this Section 1 and the Lender and the Company shall endorse such entry.
(e) Maturity Date. Any unpaid principal amount of any Tranche owed by
the Company to the Lender as a result of the Company's borrowings under Sections
7.1 and 7.2 of the Collaboration Agreement shall be due and payable in full on
April 22, 2005, provided that no unpaid principal amount of any Tranche shall be
due and payable sooner than the second anniversary from the date funds
represented by such Tranche were advanced to the Company.
(f) Use of Proceeds. The proceeds of the loans shall be used by the
Company only in connection with the development of the Licensed Products (as
such term is defined in the Collaboration Agreement). Notwithstanding the
foregoing, in the event the Collaboration Agreement is terminated, any remaining
proceeds shall be applied by the Company to repayment of principal amounts
outstanding hereunder and accrued interest thereon.
(g)
*
2. Interest.
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(a) Interest on the unpaid balance of the principal amount of each
Tranche hereunder and on any unpaid interest thereon from time to time
outstanding shall accrue and compound on the last day of each Interest Period at
a rate of interest equal to the LIBOR Rate plus one percent (1%) (calculated on
the basis of a year of 360 days and actual days elapsed). Any unpaid interest
with respect to any Tranche shall be due and payable in full on April 22, 2005,
provided that no interest accrued on any Tranche shall be due and payable sooner
than the second anniversary from the date funds represented by the applicable
Tranche were advanced to the Company.
(b) "LIBOR Rate" shall mean, for each Interest Period, a rate of
interest equal to the London Interbank Offered Rate (LIBOR) for loans with a
maturity most closely approximating the duration of such Interest Period as
published in Bloomberg or The Wall Street Journal on the applicable LIBOR Rate
Determination Date. The Lender shall determine the applicable interest rate for
each Interest Period on each LIBOR Rate Determination Date in accordance with
Section 2(a) and shall notify the Company promptly thereafter. If LIBOR rates
cease to be available as contemplated hereby, the parties agree to discuss in
good faith a comparable interest rate on each Tranche.
(c) "Interest Period" shall mean, with respect to a particular
Tranche, each six month (or shorter) period beginning on each January 1 or July
1 and ending on June 30 or December 31 (or sooner in the event such Tranche
matures prior to such date), respectively, during which such Tranche is
outstanding; provided that, for any Tranche funded on a date other than January
1 or July 1, the first Interest Period with respect to such Tranche shall begin
on the date of such funding and shall end on the immediately succeeding June 30
or December 31.
(d) "LIBOR Rate Determination Date" shall mean each date for
calculating the LIBOR Rate for purposes of determining the interest rate
applicable to any Tranche. The LIBOR Rate Determination Date shall be the first
business day following the first day of the related Interest Period.
3. Payment.
(a) Form of Payment. The principal amount of and accrued interest on
each Tranche hereunder (which shall be reduced by the amount thereof, if any,
converted to Series E Preferred Stock pursuant to Section 4) when due or
otherwise paid hereunder shall be payable, at the option of the Company, by any
of the following means or any combination thereof: (i) in cash denominated in
the currency of the United States of America; or (ii) by set off against amounts
representing profit sharing or royalty payments otherwise payable to the Company
by the Lender pursuant to Sections 7.3, 7.4, 7.5 or 7.12 of the Collaboration
Agreement.
(b) Method; Application. Payments of principal and accrued interest
shall be made at the address of the Lender set forth in the Collaboration
Agreement, or at such other place as the Lender shall have notified the Company
in writing at least five business days before such payment is due. All payments
in respect of any Tranche under this Note shall be applied first to accrued and
unpaid interest thereon, and thereafter to the unpaid principal amount thereof.
(c) Recordation. All payments of interest and principal in respect of
each Tranche hereunder shall be recorded by Lender and endorsed by the Lender
and the Company on Schedule B attached hereto, which is hereby made a part of
this Note. Upon payment in full of all
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principal of and interest on this Note and each Tranche hereunder,
Lender shall return this Note to the Company for cancellation.
(d) Prepayments. (i) This Note and any Tranche hereunder may be
prepaid by the Company at any time without penalty, in whole or in part, by any
of the means described above. This Note and any Tranche hereunder may also be
prepaid by the Company, in whole or in part, through the issuance of Series E
Preferred Stock at a rate of one share of Series E Preferred Stock for each
$10,000 aggregate unpaid principal amount and accrued unpaid interest under the
Tranche proposed by the Company to be prepaid. The Company may not issue Series
E Preferred Stock to prepay all or a portion of this Note or any Tranche
hereunder (A) unless at the time of such prepayment a Registration Statement (as
such term is defined in the Purchase Agreement) covering the shares of Common
Stock issuable upon conversion of the shares of Series E Preferred Stock to be
issued in connection with such prepayment (such shares of Common Stock, the
"Prepayment Shares") is effective and (B) at any time that the Company has
provided the Lender with a notice pursuant to Section 10(d)(iii)(z) of the
Purchase Agreement (a "Section 10(d)(iii)(z) Notice"). In addition, the Company
agrees that it will not invoke the provisions of Section 10(d)(iii)(z) and
10(d)(v) of the Purchase Agreement during the twenty (20) business day period
immediately following the issuance of shares of Series E Preferred Stock in
connection with any such prepayment unless either (i) the Company agrees in the
relevant Section 10(d)(iii)(z) Notice to repurchase the Prepayment Shares, at
the option of the Purchaser, for cash at a price per share equal to the
aggregate amount of the Note or Tranche so prepaid through the issuance of
Series E Preferred Stock divided by the number of Prepayment Shares or (ii) the
event or fact the existence or happening of which is referred to in the relevant
Section 10(d)(iii)(z) Notice is the result of a Force Majeure. Force Majeure
means a cause beyond the control of the Company, including, without limitation,
acts of God, acts, regulations or laws of any government, war, civil commotion,
damage to facilities or materials by fire, earthquake or storm, labor disputes,
epidemic and failure of public utilities or common carriers.
(ii) In the event of any prepayment of less than all of the amounts
outstanding under this Note, the Company may designate the Tranche or Tranches
to which such payment shall apply.
4. Conversion.
(a) Automatic Conversion. The entire unpaid principal amount of the
Note and each Tranche under this Note and all unpaid accrued interest thereon
shall be automatically converted into shares of Series E Preferred Stock upon
the earliest of (i) the date of receipt of Regulatory Approval (as such term is
defined in the Collaboration Agreement) in the United States, (ii) * (iii) with
respect to any Tranche (but only that Tranche), the date that is ten days after
the date that the unpaid principal of and unpaid accrued interest on such
Tranche becomes due and payable (such date, the "Conversion Date"). The number
of shares of Series E Preferred Stock into which this Note or the applicable
Tranche, as the case may be, shall be converted (the "Conversion Shares") shall
be determined by dividing the sum of the aggregate unpaid principal amount of
this Note or the applicable Tranche, as the case may be, and the unpaid accrued
interest on this Note or the applicable Tranche, as the case may be, by the
Conversion Price (as defined below) and rounding the result to the nearest whole
integer. The "Conversion Price" shall be equal to $10,000.00.
(b) Conversion Procedure. If this Note or any Tranche hereunder is
automatically converted, written notice shall be delivered by the Company to
Lender at the address
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<PAGE>
last shown on the records of the Company for Lender or given by Lender
to the Company for the purpose of notice or, if no such address appears or is
given, at the place where the principal executive office of the Company is
located, notifying Lender of the conversion, specifying the Conversion Price,
the unpaid principal amount of and unpaid accrued interest on the Note or
Tranche converted, as the case may be, the date on which such conversion
occurred and, if such conversion is of the Note in full, calling upon such
Lender to surrender to the Company, in the manner and at the place designated,
the Note. Upon any such conversion of this Note in full, Lender shall surrender
this Note, duly endorsed, at the principal executive office of the Company. At
its expense, the Company shall, as soon as practicable thereafter, issue and
deliver to the Lender at such principal office a certificate or certificates for
the number of Conversion Shares to which Lender shall be entitled upon such
conversion (bearing such legends as are required by the Purchase Agreement). Any
conversion of this Note or any Tranche hereunder pursuant to Section 4(a) shall
be deemed to have been made at the close of business, California time, on the
applicable Conversion Date, and at and after such time the persons entitled to
receive the Conversion Shares issuable upon such conversion shall be treated for
all purposes as the record holder of such Conversion Shares and shall be bound
by the applicable terms of the Purchase Agreement.
(c) Effect of Conversion. Upon conversion of this Note in full, the
Company shall be forever released from all its obligations and liabilities under
this Note. Upon any conversion of this Note in part, the conversion of the
aggregate principal amount of the applicable Tranche and accrued interest with
respect thereto shall be recorded by Lender and endorsed by the Lender and the
Company on Schedule B attached hereto, and the Company shall be forever released
from all obligations and liabilities under this Note with respect to the
principal amount of such Tranche and accrued interest with respect thereto.
(d) Reservation of Stock Issuable Upon Conversion. From and after the
date that the Company files the Certificate of Designation in accordance with
Section 8 of the Purchase Agreement, the Company shall at all times reserve and
keep available out of its authorized but not outstanding shares of Series E
Preferred Stock, solely for the purpose of effecting the conversion of this
Note, such number of its shares of Series E Preferred Stock (and shares of its
Common Stock issuable upon conversion of such Series E Preferred Stock) as shall
from time to time be sufficient to effect the conversion of the Note (and the
conversion of such shares of Series E Preferred Stock); and if at any time the
number of authorized but not outstanding shares of Series E Preferred Stock (and
shares of its Common Stock issuable on conversion of such Series E Preferred
Stock) shall not be sufficient to effect the conversion of the entire
outstanding principal amount of and accrued interest on this Note (and the
conversion of the shares of Series E Preferred Stock issuable upon such
conversion), without limitation of such other remedies as shall be available to
the Lender, the Company will use its commercially reasonable efforts to take
such corporate action as may, in the opinion of counsel, be necessary to
increase its authorized but not outstanding shares of Series E Preferred Stock
(and shares of its Common Stock issuable on conversion of such Series E
Preferred Stock) to such number of shares as shall be sufficient for such
purposes.
5. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full in cash of all Senior
Indebtedness (as defined in Section 5(i) below) of the Company.
(a) Insolvency Proceedings. If there shall occur any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy (voluntary or
involuntary), reorganization, or
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<PAGE>
<PAGE>
arrangements with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets (other than in
the form of a merger not resulting in insolvency), dissolution, liquidation, or
any other marshaling of the assets and liabilities of the Company, (i) the
holder(s) of Senior Indebtedness shall be entitled to receive payment in full in
cash of all Senior Indebtedness then outstanding before Lender shall be entitled
to receive any payment or distribution, whether in cash, securities or other
property, in respect of the principal of, interest on or other amounts due with
respect to this Note at the time outstanding, and (ii) any payment or
distribution, whether in cash, securities or other property (other than
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is subordinated, at least
to the extent provided in this Section 5, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment) which would
otherwise (but for this Section 5) be payable or deliverable in respect of the
amounts due under this Note shall be paid or delivered directly to the holder(s)
of the Senior Indebtedness (ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held by each) or to a trustee or
other representative for holder(s) of Senior Indebtedness.
(b) Permitted Payments; Default on Senior Indebtedness. Subject to
Section 5(a), so long as there shall not have occurred and be continuing an
event of default which has been declared in writing, or is automatically
effective in the case of bankruptcy or insolvency events, with respect to any
Senior Indebtedness (as such event of default is defined therein or in the
instrument under which it is outstanding), which event of default permits the
holder or its representative to accelerate the maturity thereof (a "Senior
Default"), the Company shall be permitted to make, and Lender to accept and
receive, payments of principal and accrued interest under this Note.
Notwithstanding anything to the contrary contained in this Section 5, the
Company shall not make and Lender shall not receive any payment of any kind of
amounts payable under this Note after delivery by a holder of Senior
Indebtedness to the Company and Lender of written notice that a Senior Default
has occurred; provided, however, that such payments may thereafter be made if
such holder of Senior Indebtedness consents to such payments in writing or
agrees in writing that such Senior Default has been cured or waived.
(c) Acceleration; Enforcement Rights. Except for any acceleration
pursuant to Section 1(g) hereunder, prior to the payment in full in cash of the
Senior Indebtedness, Lender shall have no right to accelerate the maturity of
the amounts due under this Note or otherwise demand payment thereof, enforce any
claim with respect to the amounts due under this Note, institute or attempt to
institute any bankruptcy or insolvency proceedings against the Company or
otherwise to take any action against the Company or the Company's property
without the prior written consent of each holder of Senior Indebtedness.
(d) Turnover of Payments. Except for payments permitted under Section
5(a) or 5(b), should any payment or distribution, whether in cash, securities or
other property, be received by Lender upon or with respect to the amounts
payable under this Note by any means, including, without limitation, set off,
prior to the payment in full in cash of the Senior Indebtedness, Lender shall
receive and hold the same in trust, as trustee, for the benefit of the holder(s)
of the Senior Indebtedness, and shall forthwith deliver the same to the
holder(s) of the Senior Indebtedness (ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held by each) or to a
trustee or other representative for holder(s) of Senior Indebtedness in
precisely the form received for application to the Senior Indebtedness (whether
or not it is then due).
-7-
<PAGE>
<PAGE>
(e) Subrogation. Subject to the payment in full in cash of all Senior
Indebtedness and the termination of any commitments to lend under the agreements
or instruments governing such Senior Indebtedness, Lender shall be subrogated to
the rights of the holder(s) of such Senior Indebtedness (to the extent of the
payments or distributions made to the holder(s) of such Senior Indebtedness
pursuant to the provisions of this Section 5) to receive payments and
distributions of assets of the Company applicable to the Senior Indebtedness. No
such payments or distributions applicable to the Senior Indebtedness shall, as
between the Company and its creditors, other than the holder(s) of Senior
Indebtedness and Lender, be deemed to be a payment by the Company to or on
account of this Note; and for purposes of such subrogation, no payments or
distributions to the holder(s) of Senior Indebtedness to which Lender would be
entitled except for the provisions of this Section 5 shall, as between the
Company and its creditors, other than the holder(s) of Senior Indebtedness and
Lender, be deemed to be a payment by the Company to or on account of the Senior
Indebtedness.
(f) Continuing Subordination. The subordination effected by these
provisions is a continuing subordination and may not be modified or terminated
by Lender until payment in full in cash of the Senior Indebtedness. At any time
and from time to time, without consent of or notice to Lender and without
impairing or affecting the obligations of Lender hereunder: (i) the time for the
Company's performance of, or compliance with any agreement relating to Senior
Indebtedness may be modified or extended or such performance may be waived; (ii)
a holder of Senior Indebtedness may exercise or refrain from exercising any
rights under any agreement relating to the Senior Indebtedness; (iii) any
agreement relating to the Senior Indebtedness may be revised, amended or
otherwise modified for the purpose of adding or changing any provision thereof
or changing in any manner the rights of the Company, any holder of Senior
Indebtedness or any guarantor thereunder; (iv) payment of Senior Indebtedness or
any portion thereof may be accelerated or extended or refunded or any
instruments evidencing the Senior Indebtedness may be renewed in whole or in
part; (v) any person liable in any manner for payment of the Senior Indebtedness
may be released by a holder of Senior Indebtedness; (vi) a holder of Senior
Indebtedness may make loans or otherwise extend credit to the Company whether or
not any default or event of default exists with respect to such Senior
Indebtedness; and (vii) a holder of Senior Indebtedness may take and/or release
any lien at any time on any collateral now or hereafter securing the Senior
Indebtedness and take or fail to take any action to perfect any lien at any time
granted therefor, and take or fail to take any action to enforce such liens.
Notwithstanding the occurrence of any of the foregoing, these subordination
provisions shall remain in full force and effect with respect to the Senior
Indebtedness.
(g) Lender's Waivers. Lender hereby expressly waives for the benefit
of the holder(s) of Senior Indebtedness (i) all notices not specifically
required pursuant to the terms of this Note (other than notices of the
incurrence of Senior Indebtedness, which shall be provided to the Lender
substantially concurrently with the incurrence of such Senior Indebtedness);
(ii) any claim which Lender may now or hereafter have against a holder of Senior
Indebtedness arising out of any and all actions which a holder of Senior
Indebtedness in good faith, takes or omits to take with respect to the Senior
Indebtedness (including, without limitation, (A) actions with respect to the
creation, perfection or continuation of liens in or on any collateral security
for the Senior Indebtedness, (B) actions with respect to the occurrence of an
event of default under any Senior Indebtedness, (C) actions with respect to the
foreclosure upon, sale, release, or depreciation of, or failure to realize upon,
any of the collateral security for the Senior Indebtedness and (D) actions with
respect to the collection of any claim for all or any part of the Senior
Indebtedness or the valuation,
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<PAGE>
<PAGE>
use, protection or release of any collateral security for the Senior
Indebtedness); and (iii) any right to require holders of Senior Indebtedness to
exhaust any collateral or marshal any assets.
(h) Reliance of Holder(s) of Senior Indebtedness. Lender, by its
acceptance hereof, shall be deemed to acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement to and a
consideration of each holder of Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the creation of the
indebtedness evidenced by this Note, and each such holder of Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and holding, or in continuing to hold, such Senior Indebtedness.
(i) Definition of Senior Indebtedness. For purposes of this Section 5,
"Senior Indebtedness" means the principal of, premium, if any, interest and rent
and royalties payable on or in connection with, and all fees, costs, expenses
and other amounts accrued or due on or in connection with, Indebtedness (as
defined below) of the Company, whether outstanding on the date hereof or
hereafter created, incurred, assumed, guaranteed or in effect guaranteed by the
Company (including all deferrals, renewals, extensions or refundings of, or
amendments, modifications or supplements to, the foregoing), unless in the case
of any particular Indebtedness the instrument creating or evidencing the same or
the assumption or guarantee thereof expressly provides that such Indebtedness
shall not be senior in right of payment to the Note or expressly provides that
such Indebtedness is "pari passu" or "junior" to the Note. The term
"Indebtedness" means, with respect to any person, and without duplication, (a)
all indebtedness, obligations and other liabilities (contingent or otherwise) of
such person for borrowed money (including obligations in respect of overdrafts
and any loans or advances, whether or not evidenced by notes or similar
instruments) or evidenced by bonds, debentures, notes or similar instruments
(whether or not the recourse of the lender is to the whole of the assets of such
person or to only a portion thereof) (other than (i) any account payable
incurred in the ordinary course of business in connection with the obtaining of
materials or services, (ii) any loans or advances from unaffiliated third
parties or biopharmaceutical companies in connection with product or research
and development collaborations or (iii) any personal loans or advances from
affiliated third parties who are individuals), (b) all reimbursement obligations
and other liabilities (contingent or otherwise) of such person with respect to
letters of credit, bank guaranties or bankers' acceptances, (c) all obligations
and liabilities (contingent or otherwise) in respect of leases of such person
required, in conformity with generally accepted accounting principles, to be
accounted for as capitalized lease obligations on the balance sheet of such
person and all obligations and other liabilities (contingent or otherwise) under
any lease or related document (including a purchase agreement) in connection
with the lease of property which provides that such person is contractually
obligated to purchase or cause a third party to purchase the leased property and
thereby guarantee a minimum residual value of the leased property to the lessor
and the obligations of the person under such lease or related document to
purchase or to cause a third party to purchase such leased property, (d) all
obligations of such person (contingent or otherwise) with respect to an interest
rate or other swap, cap or collar agreement or other similar instrument or
agreement or foreign currency hedge, exchange, purchase or similar instrument or
agreement, (e) all royalty and other payment obligations of such person
(contingent or otherwise) under licenses to or other contractual arrangements
with biotechnology or pharmaceutical companies not in effect on the date hereof,
(f) all direct or indirect guaranties or similar agreements by such person in
respect of, and obligations or liabilities (contingent or otherwise) of such
person to purchase or otherwise acquire or otherwise assure a creditor against
loss in respect of, indebtedness, obligations or liabilities of another person
of the kind described in clauses (a) through (e), (g) any indebtedness or other
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<PAGE>
<PAGE>
obligations described in clauses (a) through (e) secured by any
mortgage, pledge, lien or other encumbrance existing on property which is owned
or held by such person, regardless of whether the indebtedness or other
obligation secured thereby shall have been assumed by such person and (h) any
and all deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or liability of
the kind described in any of clauses (a) through (g).
6. Lost Documents. Upon receipt by the Company of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Note Agreement, and
indemnity satisfactory to the Company (in the case of loss, theft or
destruction) or surrender and cancellation of the Note Agreement (in the case of
mutilation), the Company will make and deliver to the Lender a new Note
Agreement of like tenor and unpaid principal amount and dated as of the date to
which interest has been paid on the unpaid principal balance hereunder.
7. Notices. All notices and other communications required or appropriate to
be given hereunder shall be in writing and shall be delivered by hand or mailed
by certified mail, return receipt requested, or sent by telex or facsimile (in
which case a confirming copy shall also be sent by certified mail or courier),
to the following respective addresses or to such other addresses as may be
specified in any notice delivered or mailed as above provided:
(a) If to the Lender, to:
Genentech, Inc.
460 Point San Bruno Boulevard
South San Francisco, CA 94080
Telephone: (415) 225-1000
Facsimile: (415) 952-9881
Attention: Corporate Secretary
(b) If to the Company to:
Xoma Corporation
2910 7th Street
Berkeley, CA 94710
Telephone: (510) 644-1170
Facsimile: (510) 649-7571
Attention: General Counsel
Any notice of other communication delivered by hand or mailed shall be
deemed to have been delivered on the date on which such notice or communication
is delivered by hand, or in the case of certified mail deposited with the
appropriate postal authorities on the date when such notice of communication is
actually received, and in any other case shall be deemed to have been delivered
on the date on which such notice or communication is actually received.
8. Amendments. No provision of this Note Agreement may be waived, changed
or modified, or the discharge thereof acknowledged orally, but only by an
agreement in writing signed
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<PAGE>
<PAGE>
by the party against which the enforcement of any waiver, change,
modification or discharge is sought.
9. Assignment.
(a) Except as set forth in this Section 9, none of the rights or
obligations of either party hereto may be assigned or transferred without the
prior written consent of the other party hereto.
(b) Neither party may assign any of its rights and obligations under
this Note Agreement in connection with a merger or similar reorganization or the
sale of all or substantially all of its assets; provided, however, that the
Lender may assign such rights and obligations under this Note Agreement to F.
Hoffmann-LaRoche Ltd or any of its affiliates (the "Roche Affiliates") which are
directly or indirectly controlled by it (collectively, with the Roche
Affiliates, "Roche") so long as Roche continues to own at least a majority of
the voting capital stock entitled to participate generally in the election of
directors of the Lender.
(c) The Lender may sell, assign or transfer all or a portion of its
interest herein in accordance with, and with the effect provided for in, Section
6(b) of the Purchase Agreement.
(d) This Note Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the parties. Any assignment not in
accordance with this Note Agreement shall be void.
10. Presentment, Demand, Etc. Except as otherwise provided herein, the
Company hereby waives presentment for payment, demand, protest and notice of
protest for nonpayment of this Note Agreement, and consents to any extension or
postponement of the time of payment or any other indulgence.
11. Governing Law. The parties have agreed that this Note Agreement will be
governed by and construed in accordance with the laws of the State of Delaware.
12. Counterparts. This Note Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
13. Titles. The titles of the Sections of this Note Agreement are inserted
for reference only, and are not to be considered as part of this Note Agreement
in construing this Note Agreement.
14. Disputes. Any disputes under this Agreement will be governed by the
provisions of Article 17 of the Collaboration Agreement.
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<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Note Agreement has been executed and delivered on
the date first above written by duly authorized representatives of the Company
and the Lender.
XOMA CORPORATION
By:
Clarence L. Dellio
Senior Vice President, Operations
GENENTECH, INC.
By:
John P. McLaughlin
Executive Vice President
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<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
Applicable Principal Amount Principal Amount
Tranche Date Borrowed Repaid Interest Paid Amount Converted Notation By
- - ---------- ----------- ----------------- ---------------- ----------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
WHEREVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH
OMISSIONS ARE DENOTED BY AN ASTERISK), SUCH CONFIDENTIAL
INFORMATION HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED, HYPOTHECATED, ASSIGNED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT COVERING THE TRANSFER OR AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS
ON SALE, ASSIGNMENT OR TRANSFER PURSUANT TO THAT CERTAIN COMMON
STOCK AND CONVERTIBLE NOTE PURCHASE AGREEMENT, DATED AS OF
APRIL 22, 1996, BETWEEN THE COMPANY AND GENENTECH, INC., AND
MAY NOT (NOR MAY ANY INTEREST THEREIN) BE SOLD, ASSIGNED,
CONVEYED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OTHER
THAN IN ACCORDANCE WITH THE PROVISIONS THEREOF.
THE SECURITIES REPRESENTED HEREBY (AND, IF APPLICABLE, ANY
SECURITIES ISSUED UPON CONVERSION THEREOF) MAY BE SUBJECT TO
THE RESTRICTIONS SET FORTH IN THAT CERTAIN COMMON STOCK AND
CONVERTIBLE NOTE PURCHASE AGREEMENT, DATED AS OF APRIL 22,
1996, BETWEEN THE COMPANY AND GENENTECH, INC.
Berkeley, California
June 13, 1996
XOMA CORPORATION
AMENDMENT
TO
CONVERTIBLE SUBORDINATED NOTE AGREEMENT
WHEREAS, XOMA CORPORATION (the "Company") and
GENENTECH, INC. (the "Lender") are parties to that certain
Convertible Subordinated Note Agreement dated April 22, 1996
(the "Original Note Agreement"); and
<PAGE>
-2-
WHEREAS, the Company and the Lender desire to amend
the Original Note Agreement as set forth herein;
NOW, THEREFORE, FOR VALUE RECEIVED, the parties agree
to amend the Original Note Agreement as set forth below.
1. Definitions. Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to
them in the Original Note Agreement.
2. When Certain Loans Payable. The Original Note
Agreement is hereby amended by adding as a new Section 1(h) the
following:
(h) When Certain Loans Payable. *
3. Certain Issuances Treated as Prepayments. The
Original Note Agreement is hereby amended by deleting the
heading of Section 3(d) thereof and substituting therefor the
heading "Prepayments and Certain Issuances Under Section 4(a)"
and by adding as a new third sentence of Section 3(d) thereof
the following:
As used herein, prepayments through the issuance of
Series E Preferred Stock shall include any such
issuance pursuant to clause * of Section 4(a).
4. Automatic Conversion. The Original Note
Agreement is hereby amended by deleting the first sentence of
Section 4(a) thereof in its entirety and substituting therefor
the following:
The entire unpaid principal amount of the Note and
each Tranche under this Note and all unpaid accrued
interest thereon shall be automatically converted into
shares of Series E Preferred Stock upon the earliest of
<PAGE>
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(i) the date of receipt of Regulatory Approval (as such
term is defined in the Collaboration Agreement) in the
United States, (ii) *,
(iii) with respect to any Tranche (but only that
Tranche), the date that is ten days after the date that
the unpaid principal of and unpaid accrued interest on
such Tranche becomes due and payable, or (iv) *.
5. Effect of Amendment. Except as expressly
amended or modified hereby, the provisions of the Original Note
Agreement shall remain in full force and effect.
6. Governing Law. The parties have agreed that
this amendment will be governed by and construed in accordance
with the laws of the State of Delaware.
7. Counterparts. This amendment may be executed in
two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the
same instrument.
8. Titles. The titles of the Sections of this
amendment are inserted for reference only, and are not to be
considered as part of this amendment in construing this
amendment.
9. Disputes. Any disputes under this amendment
will be governed by the provisions of Article 17 of the
Collaboration Agreement.
<PAGE>
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IN WITNESS WHEREOF, this amendment has been executed
and delivered on the date first above written by duly
authorized representatives of the Company and the Lender.
XOMA CORPORATION
By:-------------------------------
Clarence L. Dellio
Senior Vice President,
Operations
GENENTECH, INC.
By:-------------------------------
Name:
Title:
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent
to the incorporation by reference in this Registration State-
ment of our report dated February 14, 1996 included in XOMA
Corporation's Form 10-K for the year ended December 31, 1995,
and to all references to our Firm included in this Registration
Statement.
ARTHUR ANDERSEN LLP
San Francisco, California
June 28, 1996
EXHIBIT 23.2
[LETTERHEAD OF MARSHALL, O'TOOLE, GERSTEIN, MURRAY & BORUN]
June 27, 1996
Board of Directors
XOMA Corporation
2910 Seventh Street
Berkeley, CA 94710
Re: Registration Statement on Form S-3
Gentlemen:
Marshall, O'Toole, Gerstein, Murray & Borun hereby
consents to the disclosure of our relationship as patent coun-
sel to XOMA Corporation (the "Company") in the Company's Regis-
tration Statement on Form S-3 (the "Registration Statement"),
and in particular the references to us under the headings "Risk
Factors - No Assurance of Patent Protection/Avoidance of Patent
Infringement" and "Legal Opinions," and to the filing of this
consent as an exhibit to the Registration Statement.
Very truly yours,
Marshall, O'Toole, Gerstein,
Murray & Borun
