As filed with the Securities and Exchange Commission on September 25, 1996
Registration No. 333-07263
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
__________________
XOMA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2756657
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2910 Seventh Street
Berkeley, California 94710
(510) 644-1170
(Address, including ZIP code, and telephone number, including
area code, of registrant's principal executive offices)
__________________________
CHRISTOPHER J. MARGOLIN, ESQ.
XOMA CORPORATION
2910 Seventh Street
Berkeley, California 94710
(510) 644-1170
(Name, address, including ZIP code, and telephone number, including
area code, of agent for service)
__________________
Copy to:
GEOFFREY E. LIEBMANN, ESQ.
CAHILL GORDON & REINDEL
80 Pine Street
New York, New York 10005
(212) 701-3000
__________________
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
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 pur-
suant 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. / /
CALCULATION OF REGISTRATION FEE
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Title of Each Class Proposed Proposed
of Securities Amount Maximum Maximum Amount of
To Be To Be Offering Price Aggregate Registra-
Registered Registered per Unit(1) Offering Price(1) tion Fee
Common Stock,
par value $.0005
per share....... 8,296,489(2)(3) $5.8125 $48,223,342 $16,629(4)
- - -------------------------------------------------------------------------
(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.
(3) Pursuant to Rule 416 under the Securities Act of 1933, any additional
shares of Common Stock issued as a result of the anti-dilution provisions
of the Certificate of Designation relating to the Preferred Stock or of
the Common Stock Purchase Warrants pursuant to which the Common Stock
will be issued are deemed to be registered herewith.
(4) $3,378 of which has already been paid.
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 SEPTEMBER 25, 1996
8,296,489 Shares
XOMA CORPORATION
COMMON STOCK
This Prospectus relates to 8,296,489 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 stockholders named herein or
their permitted transferees or successors (the "Selling Stockhold-
ers"). Any or all of the Common Stock being registered hereby may
be sold from time to time to purchasers directly by the Selling
Stockholders. Alternatively, the Selling Stockholders 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 Stockhold-
ers and/or the purchasers of Common Stock for whom they may act as
agent. To the extent required, the names of the Selling Stock-
holders, the number of shares of Common Stock to be sold, purchase
price, public offering price, the name of any agent, dealer or
underwriter and any applicable commission or discount or other
items constituting compensation or indemnification arrangements
with respect to a particular offering will be set forth in an
accompanying Prospectus Supplement. The Company will receive no
proceeds from the sale by the Selling Stockholders of the Common
Stock offered hereby. The shares of Common Stock to which this
Prospectus relates were issued to the Selling Stockholders either
in the Section 4(2) Private Placement (as defined herein) or from
time to time upon conversion of, as dividends on or upon exercise
of certain securities received in the Regulation D Private Place-
ment (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 Com-
pany. The Company has agreed to indemnify the Selling Stockhold-
ers against certain liabilities, including certain liabilities
under the Securities Act of 1933, as amended (the "Securities
Act"), or to contribute to payments which the Selling Stockholders
may be required to make in respect thereof. See "Plan of Distri-
bution."
The Common Stock is traded on the Nasdaq National Market
under the symbol "XOMA." The last reported sale price of the Com-
mon Stock as reported by the Nasdaq National Market on August 31,
1996 was $5 15/16 per share.
The Common Stock offered hereby involves a high degree
of risk. See "Risk Factors" beginning on page 6 for a discussion
<PAGE>
of certain factors that should be considered by prospective
investors.
____________________
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>
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AVAILABLE INFORMATION
The Company is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and is required to file periodic reports, proxy statements
and other information with the Securities and Exchange Commission
(the "SEC") relating to its business, financial statements and
other matters. Such reports, proxy statements and other informa-
tion may be inspected and copied at the public reference facili-
ties maintained by the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the
SEC located at 500 West Madison Street, Suite 1400, Chicago, Illi-
nois 60661 and at Seven World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material can also be obtained from
the SEC at prescribed rates from the Public Reference Section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed a Registration Statement on Form
S-3 with the SEC under the Securities Act with respect to the Com-
mon Stock offered hereby. As permitted by the rules and regula-
tions of the SEC, this Prospectus omits certain information con-
tained 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. Copies of the Registration Statement
and its exhibits may be inspected without charge at the public
reference facilities maintained by the Commission at 450 Fifth
Street, N.W. Washington, D.C. 20549, and copies of this material
can be obtained from the Public Reference Section of the Commis-
sion at 450 Fifth Street, N.W., Washington, D.C. 20549 at pre-
scribed rates. In addition, the SEC maintains a Web site on the
World Wide Web, and copies of the Registration Statement and its
exhibits may be accessed at this Web site (http://www.sec.gov).
Statements made in this Prospectus as to the contents of any con-
tract, agreement or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or
otherwise filed with the SEC. Each such statement shall be deemed
qualified in its entirety by such reference.
____________________
The Company will provide without charge to each person
to whom a copy of this Prospectus is delivered, upon the written
or oral request of such person, a copy of any or all of the docu-
ments incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated
<PAGE>
-3-
by reference in such documents). Requests for such copies should
be directed to Director, Corporate Communications, XOMA Corpora-
tion, 2910 Seventh Street, Berkeley, California 94710,
(510) 644-1170.
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INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the SEC
pursuant to the Exchange Act are hereby incorporated by reference
in this Prospectus:
(1) Annual Report on Form 10-K for the fiscal year
ended December 31, 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 Reports on Form 10-Q for the quarterly
periods ended March 31, 1996 and June 30, 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 Reg-
istration Statement on Form 8-A dated June 9, 1986 filed on
June 11, 1986 under Section 12 of the Exchange Act, including
any amendment or report for the purpose of updating such
description (Registration No. 33-4793).
All documents filed by the Company with the SEC pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offer-
ing of the Common Stock offered hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part
hereof from the date any such document is filed.
Any statements contained in a document incorporated by
reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus (or in any other subse-
quently filed document which also is incorporated by reference in
this Prospectus) modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed to consti-
tute a part of this Prospectus except as so modified or
superseded.
____________________
No person has been authorized in connection with the
offering made hereby to give any information or make any represen-
tation not contained in this Prospectus and, if given or made,
such information or representation must not be relied upon as hav-
ing been authorized by the Company or any other person. This Pro-
spectus does not constitute an offer to sell or solicitation of
any offer to buy any of the securities offered hereby in any
jurisdiction in which it is unlawful to make such offer or solici-
tation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication
<PAGE>
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that the information contained herein is correct as of any date
subsequent to the date hereof.
<PAGE>
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RISK FACTORS
In addition to the other information included or incor-
porated by reference in this Prospectus, the following factors
should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus.
No Assurance of Regulatory Approvals or Additional Product
Development
XOMA's products are subject to rigorous preclinical and
clinical testing requirements and to approval processes by the
U.S. Food and Drug Administration (the "FDA") and similar author-
ities in other countries. The Company's products are primarily
regulated on a product-by-product basis under the U.S. Food, Drug
and Cosmetic Act and Section 351(a) of the Public Health Service
Act. Most of the Company's human therapeutic products are or will
be classified as biologic products and would be subject to regula-
tion by the FDA Center for Biologics Evaluation and Research
("CBER"). 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 test-
ing under the IND. In mid-1995, the Company initiated three clin-
ical efficacy trials testing the Neuprex(TM) product as a treatment
for the following indications: infectious complications of severe
accidental blood loss (hemorrhagic trauma), meningococcemia (a
potentially deadly bacterial infection principally of children)
and complications following partial hepatectomy (a type of major
liver surgery). A fourth trial, testing the product in combina-
tion with antibiotics to treat severe intra-abdominal infections,
started in the first quarter of 1996. In July 1996, the Company
announced that an independent data safety monitoring bord ("DSMB")
had completed the first interim analysis for the hemorrhagic
trauma trial and concluded that results were consistent with XOMA
proceeding with the trial, and that a separate DSMB had completed
its review of data for the partial hepatectomy trial and found no
safety concerns. In August 1996, the Company announced that it
had been granted a Subpart E designation for its Neuprex(TM) product
for the treatment of severe meningococcemia in pediatric patients
by CBER. No assurance can be given, however, that product
approval for Neuprex(TM) or any other BPI product will be obtained.
<PAGE>
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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 pre-
vious trials. The trial is being managed and co-funded by Pfizer
Inc. ("Pfizer"). In December 1995, the Company announced that a
DSMB had completed the first of two planned interim analyses for
the ongoing trial and concluded that the results met the predeter-
mined criteria for continuing the trial. There can be no assur-
ance that the continuing 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 facili-
ties for E5(R) or Neuprex(TM) will be obtained.
The antibodies currently used by XOMA in its E5(R) product
are derived from ascites produced in mice by Charles River Labora-
tories ("CRL"). If the Company must obtain ascites from other
sources, including its own facilities or a different facility of
CRL, regulatory licensure of such other sources will be required.
There can be no assurance that any such licensure will be obtained
without significant delay, expense or additional clinical testing.
The FDA has substantial discretion in both the product
approval process and manufacturing facility approval process and
it is not possible to predict at what point, or whether, the FDA
will be satisfied with the Company's submissions or whether the
FDA will raise questions which may be material and delay or pre-
clude product approval or manufacturing facility approval. As
additional clinical data are accumulated, they will be submitted
<PAGE>
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to the FDA and may have a material impact on the FDA product
approval process.
The Company has accumulated inventories of raw material
and intermediates for E5(R). Because the achievement, timing and
terms of regulatory licensures and subsequent sales of pharmaceu-
tical products are uncertain, there can be no assurance that the
inventories of raw materials and intermediates will be usable. In
connection with its October 1992 restructuring, the Company estab-
lished 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."
In September 1996, the Company and Genentech, Inc.
("Genentech") announced that the Company had filed an IND with the
FDA for clinical testing of hu1124 in patients with moderate to
severe psoriasis. The hu1124 product, previously referred to as
anti-CD11a, is a humanized monoclonal antibody product XOMA is
developing in collaboration with Genentech for treatment of pso-
riasis and for organ transplant rejection. No assurance can be
given that product approval for hu1124 in this or any other indi-
cation will be obtained.
Other potential XOMA products will require significant
additional development, including extensive clinical testing.
There can be no assurance that any of the products under develop-
ment by the Company will be developed successfully, obtain the
requisite regulatory approval or be successfully manufactured or
marketed.
Need for Additional Funds
XOMA has expended and expects to continue to expend sub-
stantial funds in connection with research and development relat-
ing to its products and production technologies, the scale-up of
its production capabilities, extensive human clinical trials and
the protection of its intellectual property. The Company's cash
position and resulting investment income are sufficient to finance
the Company's currently anticipated needs for operating expenses,
working capital, equipment and current research projects through
approximately the middle of 1998. The Company continues to evalu-
ate strategic alliances, potential partnerships and financing
arrangements which would further strengthen its competitive posi-
tion and provide additional funding. However, no assurance can be
given that operations will generate meaningful funds, that
<PAGE>
-9-
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 avail-
able, the business of the Company will be materially adversely
affected.
History of Losses and Accumulated Deficit
XOMA has experienced significant losses and, as of
June 30, 1996, had an accumulated deficit of approximately $318.5
million.
For the year ended December 31, 1995 and the six months
ended June 30, 1996, XOMA had net losses of approximately $22.5
million, or $0.95 per share, and $12.0 million, or $0.40 per
share, respectively. The Company expects to incur additional
losses in the future. Its ability to achieve a profitable level
of operations is dependent in large part on obtaining regulatory
approval for its products, entering into agreements for product
development and commercialization, and making a transition to a
manufacturing and marketing company. XOMA's ability to fund its
ongoing operations is dependent on the foregoing factors and on
its ability to secure additional funds. There can be no assurance
that the Company will ever achieve a profitable level of opera-
tions or that cash flow from future operations will be sufficient
to meet such obligations.
No Assurance of Effective Marketing
As of the date of this Prospectus, the Company has not
entered into any marketing agreements regarding its Neuprex(TM) prod-
uct. 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 exclu-
sive rights to E5(R) in exchange for funding of certain clinical and
development activities. In January 1994, the territory covered by
the agreements was redefined to include only the countries of
Japan and the United States. Pfizer 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 can-
celed with appropriate notice upon reimbursement by Pfizer of
<PAGE>
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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 incorpo-
rated 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 nec-
essary for the successful commercialization of its products.
Assuming timely regulatory approval, which cannot be
assured, the successful commercialization of XOMA's products will
be dependent to a large extent upon the marketing capabilities of
its pharmaceutical partners. The Company believes that termina-
tion of its relationship with Pfizer 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 phar-
maceutical products. In addition, there can be no assurance that
the Company's, CRL's or Pfizer's existing manufacturing facilities
will receive regulatory approval in a timely manner. If one or
more of the Company's products and the relevant manufacturing
facilities were to receive regulatory approval, no assurance can
be given that these existing manufacturing capabilities would be
able to produce sufficient quantities of such products to meet
market demand. Additionally, no assurance can be given that if
additional manufacturing facilities are needed to meet market
demand, such manufacturing facilities will be successfully
obtained or that the requisite regulatory approval for such facil-
ities will be obtained.
No Assurance of Patent Protection/Avoidance of Patent Infringement
Because of the length of time and the expense associated
with bringing new products through development and government
approval to the marketplace, the pharmaceutical industry has tra-
ditionally placed considerable importance on obtaining and main-
taining patent and trade secret protection for significant new
technologies, products and processes. The Company and other
biotechnology firms hold and are in the process of applying for a
number of patents in the United States and abroad to protect their
products and important processes and also have obtained or have
the right to obtain exclusive licenses to certain patents and
<PAGE>
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applications filed by others. However, the patent position of
biotechnology companies generally is highly uncertain and no con-
sistent 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 manufac-
turer, 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 eight more U.S. Notices of
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
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 circum-
stances. 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.
<PAGE>
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While the Company pursues patent protection, due to
uncertainty as to the future utility of patent protection for
biotechnology products or processes, the Company also relies upon
trade secrets, know-how and continuing technological advancement
to develop and maintain its competitive position. All Company
employees have signed confidentiality agreements under which they
have agreed not to use or disclose any of the Company's propri-
etary information. Research and development contracts and rela-
tionships between the Company and its scientific consultants and
potential customers provide access to aspects of the Company's
know-how that are protected generally under confidentiality agree-
ments with the parties involved. There can be no assurance that
all confidentiality agreements will be honored or are enforceable.
No Assurance of Product Efficacy or the Ability To Compete
Successfully
The biotechnology and pharmaceutical industries are sub-
ject to continuous and substantial technological change. Competi-
tion in the areas of recombinant DNA-based and monoclonal
antibody-based technologies is intense and expected to increase in
the future as a number of established biotechnology firms and
large chemical and pharmaceutical companies diversify into the
field. A number of these large pharmaceutical and chemical com-
panies have enhanced their capabilities by entering into arrange-
ments with, or acquiring, biotechnology companies. Substantially
all of these companies have significantly greater financial
resources, larger research and development and marketing staffs
and larger production facilities than those of the Company. More-
over, certain of these companies have extensive experience in
undertaking preclinical testing and human clinical trials. These
factors may enable such companies to develop products and pro-
cesses competitive with or superior to those of the Company. In
addition, a significant amount of research in biotechnology is
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 includ-
ing 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
<PAGE>
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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 pop-
ulation 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 assur-
ance 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 sup-
plier, CRL, which has multiple manufacturing sites. XOMA and CRL
entered into a supply agreement in 1989 and renewed the agreement
in 1991, committing CRL to supply and the Company to purchase
XOMA's anticipated ascites needs for five years after FDA
licensure of E5(R). Among the requirements for FDA licensure of E5(R)
is that the CRL manufacturing facilities be licensed by the FDA.
If the Company 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 prod-
ucts will depend upon, among other things, the Company's marketing
arrangements for its products. The Company's ability to enter
into marketing arrangements on acceptable terms and/or the terms
of its existing arrangements could be materially adversely
affected if legislation were to be enacted or regulations adopted
which mandates or otherwise results in the reduction or contain-
ment of the cost of pharmaceutical products to consumers. In
addition, if legislation were to be enacted or regulations adopted
which mandates or otherwise results in the reduction of
<PAGE>
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pharmaceutical product manufacturer's prices, the Company's busi-
ness 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 com-
mercialized; however, there can be no assurance that adequate
insurance coverage will be available or be available at acceptable
costs or that a product liability claim would not materially
adversely affect the business or financial condition of the
Company.
Certain Provisions Relating to Changes in Control
The Stockholder Rights Agreement, dated as of
October 27, 1993 (the "Rights Agreement"), between the Company and
First Interstate Bank of California, as Rights Agent, and the Com-
pany's Amended and Restated By-Laws contain provisions that may
have the effect of making more difficult an acquisition of control
of the Company that has not been approved by the Company's Board
of Directors. See "Description of Equity Securities -- Certain
Provisions Relating to Changes in Control of the Company."
Volatility of Stock Price
The market prices for securities of biotechnology com-
panies, including XOMA, have been highly volatile. See "Price
Range of Common Stock and Dividend Information." Announcements
regarding the results of regulatory approval filings, clinical
trials or other testing, technological innovations or new commer-
cial products by XOMA or its competitors, government regulations,
developments concerning proprietary rights or public concern as to
<PAGE>
-15-
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 com-
plications 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.
- hu1124, a humanized monoclonal antibody product that
XOMA is developing in collaboration with Genentech for
treatment of psoriasis and for organ transplant
rejection.
- 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 middle of
1998. The Company continues to evaluate strategic alliances,
potential partnerships, and financing arrangements which would
further strengthen its competitive position and provide additional
funding. The Company has engaged an investment banking firm to
assist in completing one or more strategic alliances with respect
to the Neuprex(TM) product. The Company cannot predict whether or
when any such alliance(s) will be consummated or whether addi-
tional funding will be available when required.
<PAGE>
-16-
In September 1996, the Company received a notice from
the U.S. Environmental Protection Agency ("EPA") that the Company
may have incurred or may incur liability under the Comprehensive
Environmental Response, Compensation and Liability Act in connec-
tion with the RAMP Industries, Inc. site in Denver, Colorado. The
notice indicates that the Company is one of approximately 690 par-
ties to receive the same notice and that, to date, EPA has identi-
fied between 1 and 3 barrels of the approximately 6,000 barrels
located at the site when EPA began clean up as being attributable
to the Company. The notice also states that EPA does not antici-
pate proposing this site for listing on the National Priorities
List of Superfund Sites. Although the Company has not yet com-
pleted its review of this matter, it has no reason to believe at
this time that the outcome of this matter will have a material
adverse effect on its financial condition or results of
operations.
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.
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.
<PAGE>
-17-
High Low
1994:
First Quarter .................... $6 $3 7/8
Second Quarter ................... 4 2 5/8
Third Quarter .................... 3 1/2 2 1/4
Fourth Quarter ................... 4 2 1/2
1995:
First Quarter .................... $3 $1 5/16
Second Quarter ................... 2 5/8 1 5/16
Third Quarter .................... 3 7/8 1 11/16
Fourth Quarter ................... 3 15/16 1 29/32
1996:
First Quarter .................... $5 3/16 $3 5/8
Second Quarter ................... 8 3 7/8
Third Quarter
(through August 30, 1996) ........ 7 4 5/8
On August 30, 1996 the last reported sale price of the
Common Stock as reported on the Nasdaq National Market was
$5 15/16 per share. On August 30, 1996, there were approximately
2,679 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>
-18-
SELLING STOCKHOLDERS
The following table sets forth certain information
regarding the beneficial ownership of Common Stock by the Selling
Stockholders as of September 24, 1996, and the number of shares
of Common Stock covered by this Prospectus.
Beneficial Ownership Number of Shares
Name and Address of of Common Stock prior of Common Stock
Selling Stockholders to the Offering Offered Hereby
Number of Percent
Shares of Class
Genentech, Inc.
460 Point San Bruno Boulevard
South San Francisco, CA 94080 1,500,000(1) 4.4% 1,500,000
Och-Ziff Capital Management, L.P.
153 East 53rd Street
43rd Floor
New York, NY 10022 1,768,609(2) 4.9% 4,179,219(3)
Stockwell Corporation S.A.
c/o Baly Fehlmann
Case Postale 6259
1211 Geneva 6
Switzerland 386,361(2) 1.1% 835,844(3)
Drakefield Corporation
Vanterpool Plaza
2nd Floor
Wickhams Cay I
Road Town Tortola
British Virgin Islands 318,748(2) * 689,571(3)
Alpha Global Fund, Ltd.
c/o International Fund
Administration, Ltd.
Suite 464
48 Par La Ville Road
Hamilton HM11
Bermuda 193,181(2) * 417,922(3)
<PAGE>
-19-
Alpha Atlas Holdings, LDC
c/o International Fund
Administration, Ltd.
Suite 464
48 Par La Ville Road
Hamilton HM11
Bermuda 96,590(2) * 208,961(3)
Owen, Diaz, Altschul Fund I,
Ltd.
c/o International Fund
Administration, Ltd.
Suite 464
48 Par La Ville Road
Hamilton HM11
Bermuda 106,249(2) * 229,857(3)
The Hudson Partnership, L.P.
450 Lexington Avenue
New York, NY 10022 57,954(2) * 125,376(3)
Carlyle International Securi-
ties(5) 31,914 * 31,914(6)
Mr. Arthur G. Altschul, Jr.(5) 126,422(4) * 20,173(6)
Mr. Reinaldo M. Diaz(5) 126,422(4) * 20,173(6)
Mr. Ted B. Owen(5) 126,422(4) * 20,173(6)
Dr. Michael Sorell(5) 17,306 * 17,306(6)
_________________________
* Indicates less than 1%.
(1) Does not include an indeterminate number of shares of Com-
mon Stock issuable upon conversion of the $5 million
aggregate principal amount of the convertible note out-
standing under the Convertible Subordinated Note Agreement
dated as of April 22, 1996, as amended, between the Com-
pany and Genentech (the "Convertible Note") into shares of
the Company's Series E Preferred Stock (as defined below
under "Description of Equity Securities"), at the conver-
sion price of $10,000 per share, and the further conver-
sion of such shares of Series E Preferred Stock into
shares of Common Stock. See "Description of Equity Secu-
rities - Series E Preferred Stock." The Convertible Note
<PAGE>
-20-
and 1,500,000 of the shares of Common Stock being regis-
tered hereby were issued to Genentech in April 1996 in a
transaction exempt from registration under the Securities
Act pursuant Section 4(2) thereof (the "Section 4(2) Pri-
vate Placement"). The collaboration agreement to which
the Section 4(2) Private 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 refer-
ence and has been filed with the SEC as an exhibit to the
Registration Statement of which this Prospectus is a part.
(2) Represents the maximum number of shares of Common Stock
issuable upon conversion of shares of the Company's
Series F Preferred Stock (as defined below under "Descrip-
tion of Equity Securities"), assuming conversion at the
formula price in effect on September 24, 1996 (which price
could fluctuate from time to time based on changes in the
market price of the Common Stock), and giving effect to
applicable contractual restrictions on conversion. Cer-
tain of the Series F Holders (as defined below) have
agreed that in no event shall any such Series F Holders be
entitled to convert any shares thereof 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 such Series F
Holder or any associate or affiliate of or adviser to such
Series F Holder (collectively, the "Restricted Persons")
(other than shares so owned through ownership of Series F
Preferred Stock), would result in a Restricted Person ben-
eficially owning more than 4.9% of the outstanding shares
of Common Stock. See "Description of Equity Securities --
The Series F Preferred Stock." Without giving effect to
the foregoing restriction, the "Number of Shares" and
"Percent of Class" appearing in the table above for Och-
Ziff Capital Management, L.P. would be 1,931,807 and 5.3%,
respectively. None of the other Series F Holders who have
agreed to such restriction would currently be limited by
it. The Series F Preferred Stock was issued by the Com-
pany to the Series F Holders in September 1996 in a trans-
action exempt from the registration requirements of the
Securities Act pursuant to Regulation D thereunder (the
"Regulation D Private Placement").
(3) Represents each holder's pro rata portion of the maximum
number of shares of Common Stock issuable upon conversion
of 1,600 shares of the Series F Preferred Stock held by
Och-Ziff Capital Management, L.P.; Stockwell Corporation
<PAGE>
-21-
S.A.; Drakefield Corporation; Alpha Global Fund, Ltd.;
Alpha Atlas Holdings, LDC; Owen, Diaz, Altschul Fund I,
Ltd.; and The Hudson Partnership, L.P. (collectively, the
"Series F Holders"), respectively, without regard to any
contractual restrictions on conversion.
(4) Includes 106,249 shares attributable to Owen, Diaz,
Altschul Fund I, Ltd., beneficial ownership of which is
shared by this Selling Stockholder with other persons.
(5) The address of these entities and individuals is Carlyle
International Securities, 6 East 43rd Street, 18th Floor,
New York, NY 10175.
(6) Represents shares of Common Stock issuable upon exercise
of warrants to purchase Common Stock issued in the Regula-
tion D Private Placement. See "Description of Equity
Securities -- Warrants."
<PAGE>
-22-
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 34,325,456 shares were outstanding on September 24, 1996,
and 1,000,000 shares of preferred stock, $.05 par value, of
which 650,000 have been designated Series A Cumulative Pre-
ferred Stock (the "Series A Preferred Stock"), of which none
were outstanding on such date, 7,500 have been designated Con-
vertible Preferred Stock, Series E (the "Series E Preferred
Stock"), of which none were outstanding on such date, and 1,600
have been designated Non-Voting Cumulative Convertible Pre-
ferred Stock, Series F (the "Series F Preferred Stock"), all of
which 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>
-23-
(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>
-24-
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>
-25-
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>
-26-
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 5,000 shares of Non-Voting Cumulative Convertible
Preferred Stock, Series D (the "Series D Preferred Stock"),
issued by the Company in an offering of Series D Preferred
Stock and Common Stock exempt from the registration require-
ments of the Securities Act pursuant to Regulation D thereunder
in March 1996, have been converted into an aggregate of
1,048,610 shares of Common Stock.
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
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
<PAGE>
-27-
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.
The Series F Preferred Stock
The 1,600 outstanding shares of Series F Preferred
Stock were issued by the Company to the Series F Holders in an
offering of Series F Preferred Stock exempt from the registra-
tion requirements of the Securities Act pursuant to
Regulation D thereunder in September 1996. Pursuant to the
Certificate of Designations relating to the Series F 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 $500.00 per share, payable semi-annually in arrears,
commencing March 31, 1997. Dividends are payable, at the
option of the Company, in cash, in Common Stock (subject to
certain restrictions thereon) 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 F Preferred Stock ranks senior with
respect to rights on liquidation, winding-up and dissolution of
<PAGE>
-28-
the Company to all classes of Common Stock. Upon any voluntary
or involuntary liquidation, dissolution or winding-up of the
Company, holders of Series F Preferred Stock will be entitled
to receive $10,000 per share, plus accrued and unpaid divi-
dends, before any distribution is made on the Common Stock or
any preferred stock of the Company ranking junior as to liqui-
dation rights to the Series F Preferred Stock, but only after
any payments with respect to liquidation preference of pre-
ferred stock ranking senior as to liquidation rights to the
Series F Preferred 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 F Preferred
Stock, the holders of Series F Preferred Stock are not entitled
to vote on any matter submitted to a vote of stockholders of
the Company.
The holders of Series F Preferred Stock have the
right to convert shares of Series F Preferred Stock into Common
Stock at a conversion price equal to 87% of the then current
market price of the Common Stock on or after the date the Reg-
istration Statement of which this Prospectus forms a part (the
"Registration Statement") is first declared effective by the
SEC (the "SEC Effective Date"); provided that certain of the
Series F Holders have agreed that in no event shall any such
Series F Holder be entitled to convert any shares of Series F
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 such Series F Holder or any associate or affiliate of
or adviser to such holder (collectively, the "Restricted Per-
sons") (other than shares so owned through ownership of
Series F Preferred Stock), would result in a Restricted Person
beneficially owning more than 4.9% of the outstanding shares of
Common Stock; and provided, further, that in the event that for
any five trading days during a ten consecutive trading day
period the conversion of all the outstanding shares of Series F
Preferred Stock upon surrender thereof would require the issu-
ance to any holder of Series F Preferred Stock of more than
such holder's pro rata share of 6,686,750 shares of Common
Stock in the aggregate with respect to all conversions of
Series F Preferred Stock, the Company shall, at the option of
such holder, either redeem all of such holder's shares of the
Series F Preferred Stock not convertible by reason of the limi-
tation described in this proviso at a redemption price of
$11,300 per share (plus all dividends accrued and unpaid
thereon to the applicable redemption date) or, after obtaining
stockholder approval, convert such Series F Preferred Stock
<PAGE>
-29-
into shares of Common Stock. In addition, subject to the limi-
tation described in the proviso of the preceding sentence, the
Company has the right, so long as it is in material compliance
with its obligations to the holders of the Series F Preferred
Stock and the Registration Statement is then effective, exer-
cisable at any time on or after the date which is 365 days
after the SEC Effective Date (which period will be extended in
certain events), to require the holders thereof to convert all
or any part of their shares of Series F Preferred Stock into
Common Stock at a conversion price equal to 87% of the then
current market price of the Common Stock.
The holders of Series F Preferred Stock entitled to
the benefits of the Registration Statement are entitled to
redeem their shares of Series F Preferred Stock at the redemp-
tion price set forth in the preceding paragraph if (i) the Cor-
poration obtains the stockholder approval referred to in the
preceding paragraph but has an insufficient number of autho-
rized but unissued shares of Common Stock to effect conversion
of all outstanding shares of Series F Preferred Stock, (ii) no
closing bid price of the Common Stock is available for five
trading days, (iii) the Common Stock is no longer listed for
trading on a national securities exchange or the Nasdaq
National Market for ten days, or (iv) this Prospectus cannot be
used by such holders for a 30-day period.
The Warrants
The Company issued 109,739 warrants (the "Warrants")
to purchase shares of Common Stock in the Regulation D Private
Placement. Each Warrant entitles the holder thereof to pur-
chase one share of Common Stock, subject to anti-dilution
adjustments. The Warrants are exercisable from and after
September 24, 1996, with one-half thereof expiring March 24,
1998 and the remainder expiring on September 24, 1999, at an
exercise price of $7.29 per share.
The Warrants have not been registered under the Secu-
rities Act and may not be transferred except pursuant to an
effective registration statement under the Securities Act or
pursuant to an exception from registration thereunder. Addi-
tionally, the Warrants contain certain restrictions on their
transfer. The Company is not obligated and does not intend to
register the Warrants under the Securities Act.
<PAGE>
-30-
Certain Provisions Relating to Changes in Control of the
Company
Certain provisions of the Amended and Restated
By-Laws of the Company (the "By-Laws") and the Rights (summa-
rized above) may delay, defer or prevent a change in control of
the Company that a stockholder might consider to be in his or
her best interest, including those applicable to a change in
control of the Company that might result in a premium over the
market price for the shares of Common Stock held by
stockholders.
Special Meeting of Stockholders. The By-Laws provide
that meetings of stockholders of the Company may be called only
by the Chief Executive Officer or the Board of Directors of the
Company. This provision may make it more difficult for stock-
holders to take action opposed by management or the Board of
Directors of the Company.
Advance Notice Requirements for Stockholder Proposals
and Director Nominations. The By-Laws provide that stockhold-
ers seeking to bring business before an annual meeting of
stockholders or to nominate candidates for election as direc-
tors at an annual meeting of stockholders, must provide timely
notice thereof in writing. To be timely, a stockholder's
notice must be received by the Secretary of the Company not
less than sixty nor more than ninety days prior to the first
anniversary of the preceding year's annual meeting, or in the
case of an annual meeting that is called for a date that is
more than thirty days or delayed by more than sixty days from
such anniversary, notice by the stockholder to be timely must
be so received not earlier than the ninetieth day prior to such
annual meeting and not later than the close of business on the
later of (1) the sixtieth day prior to such annual meeting or
(2) the tenth day following the day on which such notice of the
date of the annual meeting was mailed or publicly disclosed.
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."
<PAGE>
-31-
Transfer Agent and Registrar
Wells Fargo Bank, N.A., as successor to First Inter-
state Bank of California, is the transfer agent and registrar
of the Common Stock.
PLAN OF DISTRIBUTION
Any or all of the Common Stock being registered
hereby may be sold from time to time to purchasers directly by
any Selling Stockholder. Alternatively, any 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 such Selling Stockholder and/or the purchasers of Common
Stock for whom they may act as agent. Any such Selling Stock-
holder, and any such underwriters, dealers or agents that par-
ticipate in the distribution of Common Stock, may be deemed to
be underwriters, 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 commis-
sions under the Securities Act. To the extent required, the
names of the Selling Stockholders, the number of shares of Com-
mon Stock to be sold, purchase price, public offering price,
the name of any agent, dealer or underwriter and any applicable
commission or discount or other items constituting compensation
or indemnification arrangements with respect to a particular
offering will be set forth in an accompanying Prospectus Sup-
plement. The Company will receive no proceeds from the sale by
any Selling Stockholder of the Common Stock offered hereby.
In connection with distributions of the Common Stock,
any 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 such Selling Stockholder. Any Selling
Stockholder also may sell the Common Stock short and deliver
the Common Stock to close out such short positions. Any 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. Any 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.
<PAGE>
-32-
The shares of Common Stock covered by this Prospectus
are (i) shares of Common Stock purchased by Genentech in the
Section 4(2) Private Placement, (ii) shares of Common Stock
issuable upon conversion of shares of the Series F Preferred
Stock purchased by the Series F Holders in the Regulation D
Private Placement, (iii) shares of Common Stock that may be
paid as dividends on the Series F Preferred Stock and
(iv) shares underlying the Warrants issued to Carlyle Interna-
tional Securities, the placement agent in the Regulation D Pri-
vate Placement, and its designees as compensation for services
rendered in connection with the Regulation D Private Placement.
All Registration Expenses incurred in connection with
the registration of the Common Stock to which this Prospectus
relates, estimated to be approximately $220,000, 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 (i) as to
Genentech, all expenses incurred by the Company in complying
with the registration rights granted to the Selling Stockhold-
ers pursuant to which the Registration Statement to which this
Prospectus relates has been filed and (ii) as to the other
Selling Stockholders, all reasonable expenses of registration
of the Common Stock to which this Prospectus relates (other
than fees and expenses of investment bankers, brokerage commis-
sions and the Selling Stockholders' counsel fees and expenses,
if any).
The Company has agreed to indemnify the Selling
Stockholders against certain liabilities, including certain
liabilities under the Securities Act, or to contribute to pay-
ments which the Selling Stockholders 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.
<PAGE>
-33-
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 8,296,489 Shares
made, such information or representa-
tions must not be relied upon as having XOMA Corporation
been authorized by the Company or the
Selling Stockholders. 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 Stockholders.............
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 .............................. $ 16,629
Nasdaq fee ........................................ 35,000
Legal fees and expenses (including
Blue Sky fees and expenses) ..................... 150,000
Accounting fees and expenses ...................... 6,000
Miscellaneous ..................................... 12,371
---------
Total ............................................. $ 220,000
=========
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*
4.8 Certificate of Designations of Non-Voting Cumula-
tive Convertible Preferred Stock, Series F
4.9 Form of Common Stock Purchase Warrant
5.1 Opinion of Cahill Gordon & Reindel as to the
shares of Common Stock purchased by Genentech*
5.2 Opinion of Cahill Gordon & Reindel as to the
shares of Common Stock issuable upon conversion
of or as dividends on the Series F Preferred
Stock and upon exercise of the Warrants
10.1 Collaboration Agreement, dated as of April 22,
1996, between XOMA Corporation and Genentech,
Inc. (with certain confidential information omit-
ted, which omitted information is the subject of
a confidential treatment request and has been
II-2
<PAGE>
filed separately with the Securities and Exchange
Commission)
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, which omitted
information is the subject of a confidential
treatment request and has been filed separately
with the Securities and Exchange Commission)
10.3 Convertible Subordinated Note Agreement, dated
April 22, 1996, between XOMA Corporation and
Genentech (with certain confidential information
omitted, which omitted information is the subject
of a confidential treatment request and has been
filed separately with the Securities and Exchange
Commission)*
10.4 Amendment to Convertible Subordinated Note Agree-
ment, dated June 13, 1996, between XOMA Corpora-
tion and Genentech, Inc. (with certain confiden-
tial information omitted, which omitted informa-
tion is the subject of a confidential treatment
request and has been filed separately with the
Securities and Exchange Commission)*
10.5 Form of Preferred Stock Subscription Agreement,
dated as of September 20, 1996, by and between
XOMA Corporation and the purchasers of Series F
Preferred Stock
10.6 Form of Registration Rights Agreement, dated as
of September 24, 1996, by and between XOMA Corpo-
ration and the purchasers of Series F Preferred
Stock
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Marshall, O'Toole, Gerstein, Murray &
Borun
23.3 Consent of Cahill Gordon & Reindel (included in
Exhibits 5.1* and 5.2)
24.1 Power of Attorney (included on the signature page
hereto)*
____________________
II-3
<PAGE>
* Previously filed.
(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
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
II-4
<PAGE>
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
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
II-5
<PAGE>
incorporated 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 September 25, 1996.
XOMA CORPORATION
By: /s/Christopher J. Margolin
Christopher J. Margolin
Vice President,
General Counsel and
Secretary
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 capacities and on the
dates indicated.
Signature Title Date
* Chairman of the Board,
- - --------------------- President and Chief
John L. Castello Executive Officer
(Principal Executive
Officer) September 25, 1996
* Chief Scientific and
- - ------------------- Medical Officer and
Patrick J. Scannon Director September 25, 1996
/s/Peter B. Davis Vice President,
- - ------------------- Finance and Chief
Peter B. Davis Financial Officer
(Principal Financial
and Accounting
Officer) September 25, 1996
* Director September 25, 1996
- - --------------------
James G. Andress
* Director September 25, 1996
- - --------------------
William K. Bowes, Jr.
* Director September 25, 1996
- - --------------------
Arthur Kornberg
II-8
<PAGE>
* Director September 25, 1996
- - --------------------
Steven C. Mendell
* Director September 25, 1996
- - --------------------
W. Denman Van Ness
*By: /s/Christopher J. Margolin
--------------------------
Christopher J. Margolin
Attorney-in-Fact
II-9
<PAGE>
EXHIBIT INDEX
Exhibit
Number Page
4.1 Restated Certificate of Incorporation(1)
4.2 Certificate of Amendment of Restated Cer-
tificate 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 Interstate Bank of California as
Rights Agent(3)
4.5 Certificate of Designations of Non-Voting
Cumulative Convertible Preferred Stock,
Series D (4)
4.6 Certificate of Designation of Convertible
Preferred Stock, Series E (4)
4.7 Amended Certificate of Designation of Con-
vertible Preferred Stock, Series E*
4.8 Certificate of Designations of Non-Voting
Cumulative Convertible Preferred Stock,
Series F
4.9 Form of Common Stock Purchase Warrant
5.1 Opinion of Cahill Gordon & Reindel as to the
shares of Common Stock purchased by
Genentech*
5.2 Opinion of Cahill Gordon & Reindel as to the
shares of Common Stock issuable upon conver-
sion of or as dividends on the Series F Pre-
ferred Stock and upon exercise of the
Warrants
10.1 Collaboration Agreement, dated as of April
22, 1996, between XOMA Corporation and
Genentech, Inc. (with certain confidential
information omitted, which omitted informa-
tion is the subject of a confidential treat-
ment request and has been filed separately
with the Securities and Exchange Commission)
<PAGE>
10.2 Common Stock and Convertible Note Purchase
Agreement, dated as of April 22, 1996,
between XOMA Corporation and Genentech, Inc.
(with certain confidential information omit-
ted, which omitted information is the sub-
ject of a confidential treatment request and
has been filed separately with the Securi-
ties and Exchange Commission)
10.3 Convertible Subordinated Note Agreement,
dated April 22, 1996, between XOMA Corpora-
tion and Genentech (with certain confiden-
tial information omitted, which omitted
information is the subject of a confidential
treatment request and has been filed sepa-
rately with the Securities and Exchange
Commission)*
10.4 Amendment to Convertible Subordinated Note
Agreement, dated June 13, 1996, between XOMA
Corporation and Genentech, Inc. (with cer-
tain confidential information omitted, which
omitted information is the subject of a con-
fidential treatment request and has been
filed separately with the Securities and
Exchange Commission)*
10.5 Form of Preferred Stock Subscription Agree-
ment, dated as of September 20, 1996, by and
between XOMA Corporation and the purchasers
of Series F Preferred Stock
10.6 Form of Registration Rights Agreement, dated
as of September 24, 1996, by and between
XOMA Corporation and the purchasers of
Series F Preferred Stock
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Marshall, O'Toole, Gerstein,
Murray & Borun
23.3 Consent of Cahill Gordon & Reindel (included
in Exhibits 5.1* and 5.2)
25.1 Power of Attorney (included on signature
page to Registration Statement)*
- - -------------------------
* Previously filed.
<PAGE>
(1) Incorporated by reference to the Company's Registration State-
ment 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 State-
ment 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 exist-
ing under and by virtue of the General Corporation Law of the
State of Delaware (the "Corporation"), does hereby certify:
FIRST: That the Board of Directors of the Corpora-
tion, at a meeting duly held, adopted the following resolution:
RESOLVED, that this Board deems it
advisable to amend, and hereby does amend,
Article IV of the Corporation's Restated Cer-
tificate 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
(71,000,000) shares. Such shares shall have
no preemptive or preferential rights of sub-
scription 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
and each such share of common stock shall
<PAGE>
-2-
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 (1,000,000) shares and
each such share of preferred stock shall have
a par value of $.05. The number of autho-
rized 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. Castillo, its
Chairman of the Board, President and Chief Executive Officer,
and Christopher J. Margolin, its Vice President, General Coun-
sel 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
XOMA CORPORATION
CERTIFICATE OF DESIGNATIONS
OF
NON-VOTING CUMULATIVE
CONVERTIBLE PREFERRED STOCK, SERIES F
(Pursuant to Section 151 of the General Corporation Law
of the State of Delaware)
------
XOMA Corporation, a Delaware corporation (the "Corporation"), in
accordance with the provisions of Section 103 of the General Corporation Law of
the State of Delaware DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of the
Corporation (the "Board of Directors" or the "Board") by the Certificate of
Incorporation, as amended, of the Corporation, the Board of Directors, at a
meeting duly called and held on September 16, 1996, adopted a resolution
providing for the creation of a series of the Corporation's Preferred Stock,
$.05 par value, which series is designated "Non-Voting Cumulative Convertible
Preferred Stock, Series F", which resolution is as follows:
RESOLVED, that pursuant to authority vested in the Board of Directors
by the Certificate of Incorporation, as amended, the Board of Directors does
hereby provide for the creation of a series of the Preferred Stock, $.05 par
value (hereafter called the "Preferred Stock"), of the Corporation, and to the
extent that the voting powers and the designations, preferences and relative,
participating, optional or other special rights thereof and the qualifications,
limitations or restrictions of such rights have not been set forth in the
Certificate of Incorporation, as amended, of the Corporation, does hereby fix
the same as follows:
NON-VOTING CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES F
Section 1. Designation and Amount. The shares of such series shall be
designated as "Non-Voting Cumulative Convertible Preferred Stock, Series F" (the
"Series F Convertible Preferred Stock"), and the number of shares constituting
the Series F Convertible Preferred Stock shall be 1,600.
Section 2. Stated Capital. The amount to be represented in stated
capital at all times for each share of Series F Convertible Preferred Stock
shall be the sum of (i) $10,000, and
<PAGE>
(ii) to the extent legally available, the accrued but unpaid dividends on such
share of Series F Convertible Preferred Stock.
Section 3. Rank. All Series F Convertible Preferred Stock shall rank
senior to the Common Stock, par value $.0005 per share, of the Corporation, now
or hereafter issued, as to payment of dividends and distribution of assets upon
liquidation, dissolution, or winding up of the Corporation, whether voluntary or
involuntary.
Section 4. Dividends and Distributions. (a) The holders of shares of
Series F Convertible Preferred Stock shall be entitled to receive, when, as, and
if declared by the Board of Directors out of funds legally available for such
purpose, dividends at the rate of $500.00 per annum per share, and no more,
which shall be fully cumulative, shall accrue on a daily basis without interest
from the date of original issuance and shall be payable semiannually on March 31
and September 30 of each year commencing March 31, 1997 (except that if any such
date is a Saturday, Sunday, or legal holiday, then such dividend shall be
payable on the next succeeding day that is not a Saturday, Sunday, or legal
holiday) to holders of record as they appear on the stock books of the
Corporation on such record dates, not more than 20 nor less than 10 days
preceding the payment dates for such dividends, as shall be fixed by the Board.
Dividends on the Series F Convertible Preferred Stock shall be paid in cash or,
subject to the limitations in Section 4(b), shares of Common Stock, $.0005 par
value, including the related Preferred Stock Purchase Rights (the "Common
Stock") of the Corporation or any combination of cash and shares of Common
Stock, at the option of the Corporation as hereinafter provided. The amount of
the dividends payable per share of Series F Convertible Preferred Stock for each
semiannual dividend period shall be computed by dividing the annual dividend
amount by two. The amount of dividends payable for the initial dividend period
and any period shorter than a full semiannual dividend period shall be computed
on the basis of a 365-day year. No dividends or other distributions, other than
dividends payable solely in shares of Common Stock or other capital stock of the
Corporation ranking junior as to dividends to the Series F Convertible Preferred
Stock (collectively, the "Junior Dividend Stock"), shall be declared, paid or
set apart for payment on, and, except for the use by optionees of Common Stock
to pay for the exercise price of stock options granted pursuant to employee
stock option plans of the Corporation and its subsidiaries, no purchase,
redemption, or other acquisition shall be made by the Corporation of, any shares
of Junior Dividend Stock unless and until all accrued and unpaid dividends on
the Series F Convertible Preferred Stock shall have been paid or declared and
set apart for payment.
If at any time any dividend on any capital stock of the Corporation
ranking senior as to dividends to the Series F
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Convertible Preferred Stock (the "Senior Dividend Stock") shall be in arrears,
in whole or in part, no dividend shall be paid or declared and set apart for
payment on the Series F Convertible Preferred Stock unless and until all accrued
and unpaid dividends have been, or contemporaneously are, paid or declared and
set apart for payment on the Senior Dividend Stock for all dividend periods
terminating on or prior to the date of payment of such full dividends. No full
dividends shall be paid or declared and set apart for payment on any class or
series or the Corporation's capital stock ranking, as to dividends, on a parity
with the Series F Convertible Preferred Stock (the "Parity Dividend Stock"), for
any period unless all accrued and unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Series
F Convertible Preferred Stock for all dividend periods terminating on or prior
to the date of payment of such full dividends. No full dividends shall be paid
or declared and set apart for payment on the Series F Convertible Preferred
Stock for any period unless all accrued and unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full dividends. When dividends are not paid in full upon the
Series F Convertible Preferred Stock and the Parity Dividend Stock, all
dividends paid or declared and set apart for payment upon shares of Series F
Convertible Preferred Stock and the Parity Dividend Stock shall be paid or
declared and set apart for payment pro rata, so that the amount of dividends
paid or declared and set apart for payment per share on the Series F Convertible
Preferred Stock and the Parity Dividend Stock shall in all cases bear to each
other the same ratio that accrued and unpaid dividends per share on the shares
of Series F Convertible Preferred Stock and the Parity Dividend Stock bear to
each other.
Any references to "distribution" contained in this Section 4 shall not
be deemed to include any stock dividend or distributions made in connection with
any liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary.
(b) If the Corporation elects to issue shares of Common Stock in
payment of dividends on the Series F Convertible Preferred Stock, the
Corporation shall issue and dispatch, or cause to be issued and dispatched, to
each holder of such shares a certificate representing the number of whole shares
of Common Stock arrived at by dividing the per share Computed Price (as defined
herein) of such shares of Common Stock into the total amount of cash dividends
such holder would be entitled to receive if the aggregate dividends on the
Series F Convertible Preferred Stock held by such holder which are being paid in
shares of Common Stock were being paid in cash; provided, however, that if
certificates representing shares of Common Stock are issued and dispatched to
holders of Series F Convertible Preferred Stock subsequent to the third trading
day
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after a dividend payment date, the percentage used to calculate the Computed
Price will be reduced by one percentage point for each trading day after the
third trading day following such dividend payment date to the date of dispatch
of shares of Common Stock. No fractional shares of Common Stock shall be issued
in payment of dividends. In lieu thereof, the Corporation may issue a number of
shares of Common Stock to each holder which reflects a rounding to the nearest
whole number of shares of Common Stock or may pay cash. The Corporation shall
not exercise its right to issue shares of Common Stock in payment of dividends
on Series F Convertible Preferred Stock if:
(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes, or held in the Corporation's
treasury, is insufficient to pay the portion of such dividends to be paid
in shares of Common Stock;
(ii) the issuance or delivery of shares of Common Stock as a dividend
payment would require registration with or approval of any governmental
authority under any law or regulation, and such registration or approval
has not been effected or obtained;
(iii) the shares of Common Stock to be issued as a dividend payment
have not been authorized for listing, upon official notice of issuance, on
any securities exchange or market on which the Common Stock is then listed;
or have not been approved for quotation if the Common Stock is traded in
the over-the-counter market;
(iv) the Computed Price (determined without regard to the proviso to
the definition thereof) is less than the par value of the shares of Common
Stock;
(v) the shares of Common Stock (A) cannot be sold or transferred
without restriction by unaffiliated holders who receive such shares of
Common Stock as a dividend payment or (B) are no longer listed on a
national securities exchange, the Nasdaq National Market or the Nasdaq
SmallCap Market; or
(vi) the issuance of shares of Common Stock in payment of dividends on
Series F Convertible Preferred Stock held by any Restricted Person (as
defined in Section 8(a)) would result in such Restricted Person
beneficially owning more than such Restricted Person's Restriction
Percentage (as defined in Section 8(a)) of the Common Stock, determined as
provided in the proviso to the second sentence of Section 8(a).
Shares of Common Stock issued in payment of dividends on Series F
Convertible Preferred Stock pursuant to this Section shall
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be, and for all purposes shall be deemed to be, validly issued, fully paid and
nonassessable shares of Common Stock of the Corporation; the issuance and
delivery thereof is hereby authorized; and the dispatch thereof will be, and for
all purposes shall be deemed to be, payment in full of the cumulative dividends
to which holders are entitled on the applicable dividend payment date.
"Computed Price" of shares of Common Stock means the price equal to 87
percent of the Market Price (as defined in Section 8(b)) of the Common Stock on
the applicable dividend payment date; provided however, that, notwithstanding
the foregoing, in no event shall the Computed Price be less than $.0005 per
share.
(c) Notwithstanding any other provision of this Section 4, the
Corporation may elect by written notice mailed to the holders of the Series F
Convertible Preferred Stock at their addresses appearing on the records of the
Corporation not later than the payment date for such dividend not to declare or
make payment of the amount of any semiannual dividend to the holders of shares
of Series F Convertible Preferred Stock on the date therefor provided in Section
4(a), in which case the accrued and unpaid dividends shall be taken into account
at the time of conversion of shares of Series F Convertible Preferred Stock as
provided in Section 8 and the Corporation shall have no further right
subsequently to pay or declare and set aside for payment such dividends for such
dividend payment date unless the Corporation declares and pays dividends in an
amount equal to 113 percent of the amount of such dividends not so declared or
paid on such payment date and otherwise in accordance with Sections 4(a) and
4(b). Such dividends not so declared shall not bear interest.
(d) The Corporation shall not pay, declare or set apart for such
payment, any dividend on shares of Common Stock, Junior Dividend Stock or Junior
Liquidation Stock (as defined herein) other than (1) dividends on shares of
Common Stock solely in the form of additional shares of Common Stock, (2)
dividends on Junior Dividend Stock solely in the form of shares of Common Stock
or additional shares of Junior Dividend Stock, (3) dividends on Junior
Liquidation Stock solely in the form of shares of Common Stock or additional
shares of Junior Liquidation Stock or (4) regular quarterly cash dividends,
unless contemporaneously therewith, the Corporation shall pay or declare and set
apart for payment dividends on the shares of Series F Convertible Preferred
Stock in an amount per share of Series F Convertible Preferred Stock equal to
the aggregate amount of dividends the holder of such share of Series F
Convertible Preferred Stock would otherwise have been entitled to receive had
such holder converted such share of Series F Convertible Preferred Stock in
accordance with Section 8(a) (but without regard to the limitations on
conversion contained in the
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proviso to the second sentence of Section 8(a) or in Section 8(d)) into shares
of Common Stock as if the Conversion Date (as defined herein) were the earlier
of (x) the record date for the payment of such dividend on shares of Common
Stock, Junior Dividend Stock or Junior Liquidation Stock, as the case may be,
and (y) the trading day prior to the date on which ex-dividend trading in the
Common Stock, Junior Dividend Stock or Junior Liquidation Stock, as the case may
be, begins with respect to such dividend thereon.
(e) Neither the Corporation nor any subsidiary of the Corporation
shall redeem, repurchase (other than pursuant to a Tender Offer, as defined in
Section 4(f), which shall be governed by Section 4(f)) or otherwise acquire in
any one transaction or series of related transactions any shares of Common
Stock, Junior Dividend Stock or Junior Liquidation Stock if the number of shares
so repurchased, redeemed or otherwise acquired in such transaction or series of
related transactions is more than either (x) 5.0% of the number of shares of
Common Stock, Junior Dividend Stock or Junior Liquidation Stock, as the case may
be, outstanding immediately prior to such transaction or series of related
transactions or (y) 1% of the number of shares of Common Stock, Junior Dividend
Stock or Junior Liquidation Stock, as the case may be, outstanding immediately
prior to such transaction or series of related transactions if such transaction
or series of related transactions is with any one person or group of affiliated
persons, unless the Corporation or such subsidiary offers to purchase from each
holder of shares of Series F Convertible Preferred Stock at the time of such
redemption, repurchase or acquisition the same percentage of such holder's
shares of Series F Convertible Preferred Stock as the percentage of the number
of outstanding shares of Common Stock, Junior Dividend Stock or Junior
Liquidation Stock, as the case may be, to be so redeemed, repurchased or
acquired at a purchase price per share of Series F Convertible Preferred Stock
equal to the product obtained by multiplying (1) the number of shares of Common
Stock into which such share of Series F Convertible Preferred Stock could be
converted in accordance with Section 8(a) (but without regard to the limitations
on conversion contained in the proviso to the second sentence of Section 8(a) or
in Section 8(d)) on the date of purchase of such share of Series F Convertible
Preferred Stock times (2) the Market Price of one share of Common Stock on the
date of purchase of such share of Series F Convertible Preferred Stock.
(f) Neither the Corporation nor any subsidiary of the Corporation
shall (1) make any tender offer or exchange offer (a "Tender Offer") for
outstanding shares of Common Stock unless the Corporation contemporaneously
therewith makes an offer, or (2) enter into an agreement regarding a Tender
Offer for outstanding shares of Common Stock by any person other than the
Corporation or any subsidiary of the Corporation unless such person agrees with
the Corporation to make an offer, in either such case, to each
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holder of outstanding shares of Series F Convertible Preferred Stock to purchase
the same percentage of shares of Series F Convertible Preferred Stock held by
such holder as the percentage of outstanding shares of Common Stock offered to
be purchased in such Tender Offer, at a price per share of Series F Convertible
Preferred Stock equal to the product obtained by multiplying (1) the number of
shares of Common Stock into which such share of Series F Convertible Preferred
Stock could be converted in accordance with Section 8(a) (but without regard to
the limitations on conversion contained in the proviso to the second sentence of
Section 8(a) or in Section 8(d)) on the date of purchase of such share of Series
F Convertible Preferred Stock times (2) the cash price (or other consideration)
per share of Common Stock offered in such Tender Offer.
Section 5. Liquidation Preference. In the event of a liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series F Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, an amount per share of Series F Convertible
Preferred Stock equal to the sum of (i) all dividends accrued and unpaid thereon
to the date of final distribution to such holders, and (ii) $10,000.00
(collectively, "the Liquidation Preference"), and no more, before any payment
shall be made or any assets distributed to the holders of Common Stock or any
other class or series of the Corporation's capital stock ranking junior as to
liquidation rights to the Series F Convertible Preferred Stock (collectively,
the "Junior Liquidation Stock"); provided, however, that such rights shall
accrue to the holders of Series F Convertible Preferred Stock only in the event
that the Corporation's payments with respect to the liquidation preference of
the holders of capital stock of the Corporation ranking senior as to liquidation
rights to the Series F Convertible Preferred Stock (the "Senior Liquidation
Stock") are fully met. After the liquidation preferences of the Senior
Liquidation Stock are fully met, the entire assets of the Corporation available
for distribution shall be distributed ratably among the holders of the Series F
Convertible Preferred Stock and any other class or series of the Corporation's
capital stock having parity as to liquidation rights with the Series F
Convertible Preferred Stock (the "Parity Liquidation Stock") in proportion to
the respective preferential amounts to which each is entitled (but only to the
extent of such preferential amounts). After payment in full of the liquidation
price of the shares of the Series F Convertible Preferred Stock and the Parity
Liquidation Stock, the holders of such shares shall not be entitled to any
further participation in any distribution of assets by the Corporation. Neither
a consolidation or merger of the Corporation with another corporation nor a sale
or transfer of all or part of the Corporation's assets for cash, securities, or
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other property in and of itself will be considered a liquidation, dissolution,
or winding up of the Corporation.
Section 6. No Mandatory or Optional Redemption. Except as set forth in
Section 8(d), the shares of Series F Convertible Preferred Stock shall not be
subject to mandatory redemption by the Corporation or redemption at the option
of the Corporation.
Section 7. No Sinking Fund. The shares of Series F Convertible
Preferred Stock shall not be subject to the operation of a purchase, retirement,
or sinking fund.
Section 8. Conversion.
(a) Conversion at Option of Holder. The holders of the Series F
Convertible Preferred Stock may convert their shares of Series F Convertible
Preferred Stock into fully paid and nonassessable shares of Common Stock and
such other securities and property as hereinafter provided. Commencing at any
time on or after the SEC Effective Date (as defined herein) and at any time
thereafter to and including the day prior to the Redemption Date (as defined
herein) for such share of Series F Convertible Preferred Stock, each share of
Series F Convertible Preferred Stock may be converted at the principal executive
offices of the Corporation or at such other office or offices, if any, as the
Board of Directors may designate, into whole shares of Common Stock at the rate
equal to the number of fully paid and nonassessable shares of Common Stock
(calculated as to each conversion to the nearest 1/100th of a share) determined
by dividing (y) the sum of (i) $10,000 and (ii) the amount of dividends (whether
or not earned or declared) accrued on a daily basis on such share of Series F
Convertible Preferred Stock to the Conversion Date ("Convertible Dividends") by
(z) the product of (I) the Conversion Percentage (as defined herein) on the
Conversion Date times (II) the Market Price on the Conversion Date; provided,
however, that in no event shall any beneficial owner of shares of Series F
Convertible Preferred Stock be entitled to convert any shares of Series F
Convertible Preferred Stock in excess of that number of shares of Series F
Convertible Preferred Stock upon conversion of which the sum of (1) the number
of shares of Common Stock beneficially owned by such beneficial owner and any
person whose beneficial ownership of shares of Common Stock would be aggregated
with such beneficial owner's beneficial ownership of shares of Common Stock for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Regulation 13D-G thereunder (each a "Restricted
Person" and collectively, the "Restricted Persons") (other than shares of Common
Stock deemed beneficially owned through the ownership of unconverted shares of
Series F Convertible Preferred Stock) and (2) the number of shares of Common
Stock issuable upon the conversion of the number of shares of Series F
Convertible Preferred Stock with respect to which the determination
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in this proviso is being made, would result in beneficial ownership by such
Restricted Person of more than the percentage, if any, of the outstanding shares
of Common Stock agreed to in writing with the Corporation by or on behalf of
such beneficial owner at or prior to the time such beneficial owner first
acquired any shares of Series F Convertible Preferred Stock (the "Restriction
Percentage"). For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and Regulation 13D-G thereunder, except as otherwise provided in
clause (1) of the proviso to the immediately preceding sentence.
(b) Certain Definitions.
As used herein, "Conversion Date" shall mean the date on which the
notice of conversion referred to in Section 8(c) is actually received by the
Corporation (whether by courier, personal delivery or telephone line facsimile
transmission); provided, however, that the Conversion Date for any such notice
which is so received by the Corporation after 4:00 p.m., New York City time, on
any particular day shall be deemed to be the next following trading day.
As used herein, "Conversion Percentage" shall mean 87 percent.
As used herein, the "Market Price" on any date shall mean (i) if the
Common Stock is listed on a national securities exchange, the arithmetic average
of the last reported bid prices per share of the Common Stock on the principal
securities exchange on which the Common Stock is listed that shall be
consolidated for consolidated trading, if applicable to such exchange, for five
consecutive trading days of such exchange immediately preceding such date, or
(ii) if the Common Stock is not so listed, the arithmetic average of the last
reported bid prices per share of the Common Stock as reported on the Nasdaq
National Market for the five consecutive Nasdaq trading days immediately
preceding such date, or (iii) if the Common Stock is neither so listed nor so
reported, the arithmetic average of the last reported bid price per share of the
Common Stock as quoted by a registered broker-dealer for the last five days for
which such quotes are available immediately prior to such date; provided that
such quotes must have been available for at least five days in the preceding
thirty-day period, or (iv) if the Common Stock is not so listed, so reported or
so quoted, the fair value of the Common Stock on such date, as reasonably
determined by the Board of Directors in good faith after taking into account
such factors as the Board of Directors may deem appropriate, including one or
more professional valuations.
As used herein, "Registration Rights Agreement" shall mean
collectively the several Registration Rights Agreements
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entered into between the Corporation and the initial holders of the Series F
Convertible Preferred Stock, as amended from time to time in accordance with
their terms.
As used herein, "Registration Statement" shall mean the Registration
Statement required to be filed by the Corporation pursuant to Section 2(a) of
the Registration Rights Agreement.
As used herein, "SEC" shall mean the United States Securities and
Exchange Commission.
As used herein, "SEC Effective Date" shall mean, with respect to any
share of Series F Convertible Preferred Stock, the date on which the
Registration Statement is first declared effective by the SEC.
(c) Other Provisions. (1) The holders of shares of Series F
Convertible Preferred Stock at the close of business on the record date for any
dividend payment to holders of Series F Convertible Preferred Stock shall be
entitled to receive the dividend payable on such shares on the corresponding
dividend payment date notwithstanding the conversion thereof after such dividend
payment record date or the Corporation's default in payment of the dividend due
on such dividend payment date; provided, however, that the holder of shares of
Series F Convertible Preferred Stock converted during the period between the
close of business on any record date for a dividend payment and the opening of
business on the corresponding dividend payment date shall pay to the Corporation
upon receipt thereof from the Corporation an amount equal to the dividend
payable on such shares on such dividend payment date if such dividend is paid to
such holder, it being understood that nothing contained in this proviso shall
limit the inclusion, without any act on the part of a holder of shares of Series
F Convertible Preferred Stock, of Convertible Dividends, upon any conversion
pursuant to Section 8(a). A holder of shares of Series F Convertible Preferred
Stock on a record date for a dividend payment who (or whose transferee) converts
such shares into shares of Common Stock on or after the corresponding dividend
payment date will receive the dividend payable by the Corporation on such shares
of Series F Convertible Preferred Stock on such date, and the converting holder
will not be obligated to the Corporation for payment of the amount of such
dividend in connection with such conversion of shares of Series F Convertible
Preferred Stock. Except as provided above, no adjustment shall be made in
respect of cash dividends on Common Stock that may be accrued and unpaid at the
date of surrender for conversion.
(2) The right of the holders of Series F Convertible Preferred Stock
to convert their shares shall be exercised by delivering to the Corporation or
its agent, as provided in Section 8(a) above, a written notice, duly signed by
or on behalf of the
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holder, stating the number of shares of Series F Convertible Preferred Stock to
be converted. No fewer than ten shares (or such lesser number of shares, the
conversion of which is permitted at that time in accordance with the proviso to
the second sentence of Section 8(a) and in accordance with Section 8(d)) of
Series F Convertible Preferred Stock, may be converted in any particular
conversion, unless the Corporation consents to conversion of a smaller number of
shares in any particular instance. The Corporation shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery upon conversion of shares of Common Stock or other securities or
property in a name other than that of the holder of the shares of the Series F
Convertible Preferred Stock being converted, and the Corporation shall not be
required to issue or deliver any such shares or other securities or property
unless and until the person or persons requesting the issuance thereof shall
have paid to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
The holder of shares of Series F Convertible Preferred Stock being converted
shall be responsible for the amount of any withholding tax payable in connection
with such conversion.
(3) If a holder of Series F Convertible Preferred Stock elects to
convert any shares of Series F Convertible Preferred Stock in accordance with
Section 8(a), such holder shall not be required to physically surrender the
certificate(s) representing such shares of Series F Convertible Preferred Stock
to the Corporation unless all of the shares of Series F Convertible Preferred
Stock represented thereby are so converted. Each holder of shares of Series F
Convertible Preferred Stock and the Corporation shall maintain records showing
the number of shares so converted and the dates of such conversions or shall use
such other method, satisfactory to such holder and the Corporation, so as to not
require physical surrender of such certificates upon each such conversion. In
the event of any dispute or discrepancy, such records of the Corporation shall
be controlling and determinative in the absence of manifest error.
Notwithstanding the foregoing, if any shares of Series F Convertible Preferred
Stock evidenced by a particular certificate therefor are converted as aforesaid,
the holder of Series F Convertible Preferred Stock may not transfer the
certificate(s) representing such shares of Series F Convertible Preferred Stock
unless such holder first physically surrenders such certificate(s) to the
Corporation, whereupon the Corporation will forthwith issue and deliver upon the
order of such holder of shares of Series F Convertible Preferred Stock new
certificate(s) of like tenor, registered as such holder of shares of Series F
Convertible Preferred Stock (upon payment by such holder of shares of Series F
Convertible Preferred Stock of any applicable transfer taxes) may request,
representing in the aggregate the remaining number of shares of Series F
Convertible Preferred Stock represented by such certificate(s). Each holder of
shares of Series F Convertible
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Preferred Stock, by acceptance of a certificate for such shares, acknowledges
and agrees that (1) by reason of the provisions of this paragraph and Section
8(d)(1), following conversion of any shares of Series F Convertible Preferred
Stock represented by such certificate, the number of shares of Series F
Convertible Preferred Stock represented by such certificate may be less than the
number of shares stated on such certificate and the number of shares of Common
Stock from the Maximum Share Amount (as defined herein) allocated to the shares
of Series F Convertible Preferred Stock represented by such certificate for
purposes of conversion of such shares may be less than the number thereof on
such certificate and (2) the Corporation may place a legend on the certificates
for shares of Series F Convertible Preferred Stock which refers to or describes
the provisions of this paragraph and Section 8(d)(1).
(4) (A) The Corporation (and any successor corporation) shall take all
action necessary so that 6,686,750 shares (such amount to be subject to
equitable adjustment from time to time for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating to the Common
Stock occurring on or after the date hereof and to reduction for shares of
Common Stock issued on conversion of shares of Series F Convertible Preferred
Stock) of the authorized but unissued Common Stock (or appropriate number of
shares of common stock in the case of any successor corporation) are at all
times reserved by the Corporation (or any successor corporation), free from
preemptive rights, for conversion of the Series F Convertible Preferred Stock
outstanding upon the basis hereinbefore provided, subject to the provisions of
the next succeeding paragraph. (B) If the Corporation shall have obtained the
Stockholder Approval (as defined in Section 8(d)), then thereafter, in addition
to the requirements of this paragraph, the Corporation (and any successor
corporation) shall take all action necessary so that an additional number of
shares of the authorized but unissued Common Stock (or appropriate number of
shares of common stock in the case of any successor corporation) sufficient to
provide for the conversion of the Series F Convertible Preferred Stock
outstanding upon the basis hereinbefore provided are at all times reserved by
the Corporation (or any successor corporation), free from preemptive rights, for
such conversion, subject to the provisions of the next succeeding paragraph. The
sole remedy of any holder for a breach of this clause (B) shall be the right of
redemption as and to the extent provided in Section 8(e). (C) If the Corporation
shall issue any securities or make any change in its capital structure which
would change the number of shares of Common Stock into which each share of the
Series F Convertible Preferred Stock shall be convertible as herein provided,
the Corporation shall at the same time also make proper provision so that
thereafter there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from preemptive rights, for conversion of the
outstanding Series F Convertible Preferred Stock on the new basis.
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(5) In case of any consolidation or merger of the Corporation with any
other corporation (other than a wholly-owned subsidiary of the Corporation) in
which the Corporation is not the surviving corporation, or in case of any sale
or transfer of all or substantially all of the assets of the Corporation, or in
the case of any share exchange pursuant to which all of the outstanding shares
of Common Stock are converted into other securities or property, the Corporation
shall make appropriate provision or cause appropriate provision to be made so
that each holder of shares of Series F Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such shares of Series F
Convertible Preferred Stock into the kind and amount of shares of stock and
other securities and property receivable upon such consolidation, merger, sale,
transfer, or share exchange by a holder of the number of shares of Common Stock
into which such shares of Series F Convertible Preferred Stock could have been
converted immediately prior to the effective date of such consolidation, merger,
sale, transfer, or share exchange. If, in connection with any such
consolidation, merger, sale, transfer, or share exchange, each holder of shares
of Common Stock is entitled to elect to receive either securities, cash, or
other assets upon completion of such transaction, the Corporation shall provide
or cause to be provided to each holder of Series F Convertible Preferred Stock
the right to elect the securities, cash, or other assets into which the Series F
Convertible Preferred Stock held by such holder shall be convertible after
completion of any such transaction on the same terms and subject to the same
conditions applicable to holders of the Common Stock (including, without
limitation, notice of the right to elect, limitations on the period in which
such election shall be made, and the effect of failing to exercise the
election). The Corporation shall not effect any such transaction unless the
provisions of this paragraph have been complied with. The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers, or
share exchanges.
Whenever the Corporation shall propose to take any of the actions
specified in this fifth paragraph of this Section 8(c), the Corporation shall
cause a notice to be mailed at least 20 days prior to the date on which the
books of the Corporation will close or on which a record will be taken for such
action, to the holders of record of the outstanding Series F Convertible
Preferred Stock on the date of such notice. Such notice shall specify the action
proposed to be taken by the Corporation and the date as of which holders of
record of the Common Stock shall participate in any such actions or be entitled
to exchange their Common Stock for securities or other property, as the case may
be. Failure by the Corporation to mail the notice or any defect in such notice
shall not affect the validity of the transaction.
(6) Upon receipt by the Corporation from a holder of shares of Series
F Convertible Preferred Stock of a telephone line
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facsimile transmission of a notice of conversion of shares of Series F
Convertible Preferred Stock meeting the requirements for conversion as provided
in Section 8(a) and this Section 8(c), the Corporation shall issue and deliver
or cause to be issued and delivered to such holder certificates for the Common
Stock issuable upon such conversion within three business days after such
receipt, and the person converting shall be deemed to be the holder of record of
the Common Stock issuable upon such conversion, and all rights with respect to
the shares of Series F Convertible Preferred Stock being converted shall
forthwith terminate except the right to receive the Common Stock or other
securities, cash, or other assets as herein provided, on the Conversion Date;
provided, however, that the original notice of conversion is received by the
Corporation by the next business day following receipt by the Corporation of the
telephone line facsimile transmission notice of conversion; provided further,
however, that in the event that the original notice of conversion is not
received by the Corporation as herein provided, the Corporation shall issue and
deliver or cause to be issued and delivered certificates for the Common Stock
within two business days of receipt by the Corporation of such original notice
of conversion. If the Corporation shall fail to issue and deliver or cause to be
issued and delivered the certificates for shares of Common Stock upon any such
conversion as required by the foregoing sentence and, as a result of such
failure the holder of the shares of Series F Convertible Preferred Stock so
converted shall suffer any direct damages or liabilities from such failure
(including, without limitation, margin interest and the cost of covering a
purchase (whether by such holder or such holder's securities broker) or
borrowing of shares of Common Stock by such holder for purposes of settling any
trade involving a sale (other than a short sale, as defined in Rule 3b-3 under
the Exchange Act, as in effect from time to time) of shares of Common Stock made
by the holder converting such shares of Series F Convertible Preferred Stock
during the period beginning on the Conversion Date and ending on the date the
Corporation delivers or causes to be delivered to such holder the shares of
Common Stock issuable upon such conversion), then the Corporation shall upon
demand of such holder pay to such holder an amount equal to the actual direct,
out-of-pocket damages and liabilities suffered by such holder which the holder
documents to the reasonable satisfaction of the Corporation; provided, however,
that the Corporation shall not be liable to any such holder to the extent the
failure of the Corporation to deliver or cause to be delivered such shares of
Common Stock results from fire, flood, storm, earthquake, shipwreck, strike,
war, acts of terrorism, crash involving facilities of a common carrier, act of
God or any similar event outside the control of the Corporation; provided
further, however, that a holder converting shares of Series F Convertible
Preferred Stock (1) shall notify the Corporation in writing (or by telephone
conversation, confirmed in writing) as promptly as practicable after becoming
aware that shares of Common Stock issued on conversion of shares of Series F
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Convertible Preferred Stock have not been received as provided in the foregoing
sentence and (2) upon becoming aware such certificates have not been received as
provided in the foregoing sentence, thereafter use commercially reasonable steps
to mitigate any damages or liabilities for which the Corporation may be held
liable to such holder hereunder; and provided even further, however, that in
computing the amount of such actual direct, out-of-pocket damages from covering
a purchase of shares of Common Stock, the amount thereof shall be reduced by the
Market Value on the date of delivery to such holder of the shares of Common
Stock the failure of which to deliver on a timely basis gave rise to liability
of the Corporation hereunder. As used herein, the "Market Value" on any date
shall mean (i) if the Common Stock is listed on a national securities exchange,
the last reported bid price per share of the Common Stock on the principal
securities exchange on which the Common Stock is listed that shall be
consolidated for consolidated trading, if applicable to such exchange on the
date immediately preceding such date of delivery, or (ii) if the Common Stock is
not so listed, the last reported bid price per share of the Common Stock as
reported on the Nasdaq National Market on the date immediately preceding such
date of delivery or (iii) if the Common Stock is neither so listed nor so
reported, the last reported bid price per share of the Common Stock as quoted by
a registered broker-dealer on the date immediately preceding such date of
delivery or for which such quote is available immediately prior to such date;
provided that such quotes must have been available for at least five days in the
preceding thirty-day period, or (iv) if the Common Stock is not so listed, so
reported or so quoted, the fair value of the Common Stock on such date, as
reasonably determined by the Board of Directors in good faith after taking into
account such factors as the Board of Directors may deem appropriate, including
one or more professional valuations.
(7) No fractional shares of Common Stock shall be issued upon
conversion of Series F Convertible Preferred Stock but, in lieu of any fraction
of a share of Common Stock which would otherwise be issuable in respect of the
aggregate number of such shares converted at one time by the same holder, the
Corporation shall round the number of shares of Common Stock issued on such
conversion to the nearest whole share.
(d) Limitation on Shares Issuable on Conversion; Stockholder Approval;
Mandatory Redemption. (1) Notwithstanding any other provision herein, unless the
Stockholder Approval shall have been obtained from the stockholders of the
Corporation or waived by the National Association of Securities Dealers, Inc.
(the "NASD"), the Corporation shall not be required to issue upon conversion of
shares of Series F Convertible Preferred Stock more than 6,686,750 shares (such
amount to be subject to equitable adjustment from time to time for stock splits,
stock dividends,
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combinations, capital reorganizations and similar events relating to the Common
Stock occurring after the date of filing this Certificate of Designations with
the Secretary of State of the State of Delaware) of Common Stock (the "Maximum
Share Amount"), less the aggregate number of shares of Common Stock issued by
the Corporation pursuant to Section 4 as dividends on the Series F Convertible
Preferred Stock, upon conversion of shares of Series F Convertible Preferred
Stock. The foregoing amount of 6,686,750 (as so adjusted from time to time)
shall be allocated among the shares of Series F Convertible Preferred Stock at
the time of initial issuance thereof pro rata based on the total number of
authorized shares of Series F Convertible Preferred Stock provided in Section 1.
Each certificate for shares of Series F Convertible Preferred Stock initially
issued shall bear a notation as to the number of shares constituting the portion
of the Maximum Share Amount allocated to the shares of Series F Convertible
Preferred Stock represented by such certificate for purposes of conversion
thereof. The Corporation shall maintain records which show the number of shares
of Common Stock issued by the Corporation pursuant to Section 4 as dividends on
the shares of Series F Convertible Preferred Stock represented by each
certificate, which records shall be controlling in the absence of manifest
error. Upon surrender of any certificate for shares of Series F Convertible
Preferred Stock for transfer or re-registration thereof (or, at the option of
the holder, for conversion of less than all of the shares of Series F
Convertible Preferred Stock represented thereby), the Corporation shall make a
notation on the new certificate issued upon such transfer or re-registration or
evidencing such unconverted shares, as the case may be, as to the remaining
number of shares of Common Stock from the Maximum Share Amount remaining
available for conversion of the shares of Series F Convertible Preferred Stock
evidenced by such new certificate (including, without limitation, by taking into
account the number of shares of Common Stock issued by the Corporation pursuant
to Section 4 as a dividend on the shares of Series F Convertible Preferred Stock
represented by the certificate so surrendered and not previously reflected on
the certificate so surrendered, as shown on the records maintained by the
Corporation). If any certificate for shares of Series F Convertible Preferred
Stock is surrendered for split-up into two or more certificates representing an
aggregate number of shares of Series F Convertible Preferred Stock equal to the
number of shares of Series F Convertible Preferred Stock represented by the
certificate so surrendered (as reduced by any contemporaneous conversion of
shares of Series F Convertible Preferred Stock represented by the certificate so
surrendered), each certificate issued on such split-up shall bear a notation of
the portion of the Maximum Share Amount allocated thereto determined by pro rata
allocation from among the remaining portion of the Maximum Share Amount
allocated to the certificate so surrendered. If any shares of Series F
Convertible Preferred Stock represented by a single certificate are converted in
full, all of
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the portion of the Maximum Share Amount allocated to such shares of Series F
Convertible Preferred Stock which remains unissued after such conversion shall
be re-allocated pro rata to the outstanding shares of Series F Convertible
Preferred Stock held of record by the holder of record at the close of business
on the date of such conversion of the shares of Series F Convertible Preferred
Stock so converted, and if there shall be no other shares of Series F
Convertible Preferred Stock held of record by such holder at the close of
business on such date, then such portion of the Maximum Share Amount shall be
allocated pro rata among the shares of Series F Convertible Preferred Stock
outstanding on such date.
(2) The Corporation shall promptly, but in no event later than five
business days after the occurrence, give notice to each holder (by telephone
line facsimile transmission at such number as such holder has specified in
writing to the Corporation for such purposes or, if such holder shall not have
specified any such number, by overnight courier or first class mail, postage
prepaid, at such holder's address as the same appears on the stock books of the
Corporation) and any holder may at any time after the occurrence give notice to
the Corporation, in either case, if on any five trading days within any period
of ten consecutive trading days the Corporation would not have been required to
convert shares of Series F Convertible Preferred Stock of such holder as a
consequence of the limitations set forth in Section 8(d)(1) had all outstanding
shares of Series F Convertible Preferred Stock been converted into Common Stock
on each such day, determined without regard to the limitation, if any, on such
holder contained in the proviso to the second sentence of Section 8(a) (any such
notice, whether given by the Corporation or a holder, an "Inconvertibility
Notice"). If the Corporation shall have given or been required to give any
Inconvertibility Notice, or if a holder shall have given any Inconvertibility
Notice, then within ten business days after such Inconvertibility Notice is
given or was required to be given, the holder receiving or giving, as the case
may be, the Inconvertibility Notice shall have the right by written notice to
the Corporation (which written notice may be contained in the Inconvertibility
Notice given by the holder) to direct the Corporation either (i) to convene a
meeting of the holders of Common Stock or to seek written consents of
stockholders in lieu of a meeting as promptly as practicable and use its
reasonable best efforts to obtain the Stockholder Approval, or (ii) to redeem
the portion of such holder's outstanding shares of Series F Convertible
Preferred Stock (which, if applicable, shall be all of such holder's outstanding
shares of Series F Convertible Preferred Stock) as shall not, on the business
day prior to the date of such redemption, be convertible into shares of Common
Stock by reason of the limitations set forth in Section 8(d)(1) (determined
without regard to the limitation, if any, on such holder contained in the
proviso to the second sentence of Section 8(a)), within five business days after
such holder so directs the Corporation, at a
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price per share equal to the Redemption Price (as defined herein). If a holder
so directs the Corporation to convene a meeting of the stockholders or to seek
written consents in lieu thereof to obtain the Stockholder Approval, the
Corporation shall have the right, in lieu of convening such meeting or seeking
such consents, to give a notice of redemption within ten business days after
such holder so directs the Corporation to obtain the Stockholder Approval, and
thereafter shall be obligated to redeem in accordance with such notice of
redemption and this Section 8(d) the portion of such holder's outstanding shares
of Series F Convertible Preferred Stock (which, if applicable, shall be all of
such holder's outstanding shares of Series F Convertible Preferred Stock) as
shall not, on the business day prior to the date of giving notice of such
redemption, be convertible into shares of Common Stock by reason of the
limitations set forth in Section 8(d)(1) (determined without regard to the
limitation, if any, on such holder contained in the proviso to the second
sentence of Section 8(a)), at a price per share equal to the Redemption Price.
If a holder directs the Corporation to convene a meeting of the stockholders or
to seek written consents in lieu thereof to obtain the Stockholder Approval and,
prior to the mailing by the Corporation to its stockholders of proxy materials
for such meeting (or written consents for stockholder action in lieu of such
meeting) (x) the Corporation would have been able, within the limitations set
forth in Section 8(d)(1), to convert all of such holder's outstanding shares of
Series F Convertible Preferred Stock on any three trading days within any period
of five consecutive trading days commencing after the period of ten consecutive
trading days which gave rise to the applicable Inconvertibility Notice from the
Corporation or a holder of shares of Series F Convertible Preferred Stock, as
the case may be, had all outstanding shares of Series F Convertible Preferred
Stock been surrendered for conversion into Common Stock on each such day
(determined without regard to the limitation, if any, on such holder contained
in the proviso to the second sentence of Section 8(a)) or (y) the Corporation
shall have redeemed the outstanding shares of Series F Convertible Preferred
Stock of such holder which shall not, on the business day prior to the date of
giving notice of such redemption, be convertible into shares of Common Stock by
reason of the limitations set forth in Section 8(d)(1) in accordance with this
Section 8(d) (determined without regard to the limitation, if any, on such
holder contained in the proviso to the second sentence of Section 8(a)), at a
price per share equal to the Redemption Price, then in either such case the
Corporation shall have the right to abandon its efforts to seek the Stockholder
Approval in respect of such holder. If a holder directs the Corporation to
redeem outstanding shares of Series F Convertible Preferred Stock and, prior to
the expiration of the five business day period referred to in clause (ii) of the
second sentence of this paragraph with respect thereto, the Corporation would
have been able, within the limitations set forth in Section 8(d)(1), to convert
all of such holder's outstanding shares of
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Series F Convertible Preferred Stock (determined without regard to the
limitation, if any, on such holder contained in the proviso to the second
sentence of Section 8(a)) on any three trading days within any period of five
consecutive trading days commencing after the period of ten consecutive trading
days which gave rise to the applicable Inconvertibility Notice from the
Corporation or such holder of shares of Series F Convertible Preferred Stock, as
the case may be, had all of such holder's outstanding shares of Series F
Convertible Preferred Stock been surrendered for conversion into Common Stock on
each of such three trading days within such five trading day period, then the
Corporation shall not be required to redeem any shares of Series F Convertible
Preferred Stock by reason of such Inconvertibility Notice. In the event the
Stockholder Approval in respect of a holder contemplated in clause (i) of the
second sentence of this paragraph is sought but is not obtained at such meeting
or any adjournment thereof (or through solicitation of written consents), the
Corporation shall thereafter promptly (but in no event more than five business
days thereafter) redeem such portion (which, if applicable, shall be all of such
holder's outstanding shares of Series F Convertible Preferred Stock) of such
holder's outstanding shares of Series F Convertible Preferred Stock as shall
not, on the business day prior to the date of giving notice of such redemption,
be convertible into shares of Common Stock by reason of the limitations set
forth in Section 8(d)(1) (determined without regard to the limitation, if any,
on such holder contained in the proviso to the second sentence of Section 8(a)),
at a price per share equal to the Redemption Price.
(3) Notwithstanding the giving of any notice by the Corporation to the
holders of Series F Convertible Preferred Stock pursuant to Section 8(d)(2) or
the giving or the absence of any notice by the holders of the Series F
Convertible Preferred Stock in response thereto or any redemption of shares of
Series F Convertible Preferred Stock pursuant to Section 8(d)(2) or any
abandonment of the Corporation's efforts to seek the Stockholder Approval
pursuant thereto, thereafter the provisions of Section 8(d)(2) shall continue to
be applicable on any occasion unless the Stockholder Approval shall have been
obtained from the stockholders of the Corporation or waived by the NASD.
(4) Any notice of redemption required to be given by the Corporation
(a "Notice of Redemption") under this Section 8(d) shall be delivered to the
holder of the shares of Series F Convertible Preferred Stock entitled to such
notice at their addresses appearing on the records of the Corporation; provided,
however, that any failure or defect in the giving of notice to any such holder
shall not affect the obligation of the Corporation to redeem shares of the
Series F Convertible Preferred Stock. Any Notice of Redemption shall state (1)
that the Corporation is redeeming all or a portion of such holder's outstanding
shares of Series F Convertible Preferred Stock pursuant to this Section 8(d),
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(2) the number of shares of Series F Convertible Preferred Stock held by such
holder which are to be redeemed, (3) the Redemption Price per share of Series F
Convertible Preferred Stock to be redeemed, determined in accordance with this
Section, and (4) the Redemption Date of such shares of Series F Convertible
Preferred Stock, determined in accordance with this Section 8(d). As used
herein, the term "Redemption Date" means the date on which the Corporation is
required to redeem shares of Series F Convertible Preferred Stock as provided in
this Section 8(d). On the Redemption Date, the Corporation shall make payment in
immediately available funds of the applicable Redemption Price to such holder of
shares of Series F Convertible Preferred Stock to be redeemed to or upon the
order of such holder as specified by such holder in writing to the Corporation
at least one business day prior to the Redemption Date. If the Corporation is
required to redeem all or any portion of a holder's outstanding shares of Series
F Convertible Preferred Stock pursuant to this Section 8(d), the Corporation
shall make payment to such holder of the shares of Series F Convertible
Preferred Stock to be redeemed in respect of each share of Series F Convertible
Preferred Stock to be redeemed of an amount equal to the sum of (A) $11,300.00
and (B) all dividends accrued and unpaid thereon to the applicable Redemption
Date (such sum being referred to herein as the "Redemption Price"). Upon
redemption of less than all of the shares of Series F Convertible Preferred
Stock evidenced by a particular certificate, promptly, but in no event later
than three business days after surrender of such certificate to the Corporation,
the Corporation shall issue a replacement certificate for the shares of Series F
Convertible Preferred Stock evidenced by such certificate which have not been
redeemed. Only whole shares of Series F Convertible Preferred Stock may be
redeemed.
(5) As used in this Section 8(d), "Stockholder Approval" means the
approval by a majority of the votes cast by the holders of shares of Common
Stock (in person or by proxy) at a meeting of the stockholders of the
Corporation (duly convened at which a quorum was present), or a written consent
of holders of shares of Common Stock entitled to such number of votes given
without a meeting, of the issuance by the Corporation of 20% or more of the
outstanding Common Stock of the Corporation for less than the greater of the
book or market value of such Common Stock on conversion of the Series F
Convertible Preferred Stock, as and to the extent required under Section
4460(i)(1)(D) of the rules of the NASD (or any successor or replacement
provision thereof).
(e) Redemption at Option of Holders. (i) Each holder of shares of
Series F Convertible Preferred Stock who at the time is entitled to the benefits
of the Registration Statement shall be entitled, at such holder's option, by
notice to the Corporation given within 20 days after the occurrence of an
Optional Redemption Event, to require the Corporation to redeem all or a portion
of
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such shares (but in no event less than ten shares, unless such holder holds less
than ten shares, in which case such holder must redeem all of such holder's
shares) upon the occurrence of an Optional Redemption Event.
An Optional Redemption Event means any one of the following events:
(A) If, at any time after the Corporation has obtained Stockholder
Approval as contemplated in Section 8(d) of this Certificate of
Designations, the number of authorized but unissued shares of the
Corporation's Common Stock shall not be sufficient to effect the conversion
in full of all outstanding shares of Series F Convertible Preferred Stock
otherwise convertible in accordance with this Certificate of Designations;
(B) For any period of five consecutive trading days following the SEC
Effective Date there shall be no closing bid price of the Common Stock on
any national securities exchange or the Nasdaq National Market;
(C) The Common Stock ceases to be listed for trading on any national
securities exchange or the Nasdaq National Market for ten consecutive days;
or
(D) The inability for 30 or more consecutive days of any holder of
shares of Series F Convertible Preferred Stock who is entitled to optional
redemption rights under this Section 8(e) to sell such shares of Common
Stock issued or issuable on conversion of shares of Series F Convertible
Preferred Stock pursuant to the Registration Statement by reason of the
occurrence of a Black-Out Day (as defined in Section 8(f)) on each day in
such 30-day period.
(ii) To exercise the optional redemption right, a holder of Series F
Convertible Preferred Stock shall deliver to the Corporation a notice of
redemption (an "Optional Redemption Notice"), accompanied by the certificate for
the shares of Series F Convertible Preferred Stock to be redeemed. Any Optional
Redemption Notice shall state (1) that the holder delivering such notice is
thereby requiring the Corporation to redeem shares of Series F Convertible
Preferred Stock pursuant to this Section 8(e), (2) the Optional Redemption Event
giving rise to such redemption, and (3) the number of shares of Series F
Convertible Preferred Stock held by such holder which are to be redeemed. In no
event later than five business days following receipt of such notice by the
Corporation, the Corporation shall make payment in immediately available funds
of the applicable Redemption Price with respect to the shares of Series F
Convertible Preferred Stock to be redeemed to or upon the order of such holder
as specified by such holder in
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the Optional Redemption Notice. Upon redemption of less than all of the shares
of Series F Convertible Preferred Stock evidenced by a particular certificate,
promptly, but in no event later than five business days after surrender of such
certificate to the Corporation, the Corporation shall issue a replacement
certificate for the shares of Series F Convertible Preferred Stock which have
not been redeemed. Only whole shares of Series F Convertible Preferred Stock may
be redeemed.
(f) Conversion at Option of Corporation. So long as the Corporation
shall be in compliance in all material respects with its obligations to the
holders of the Series F Convertible Preferred Stock (including its obligations
under the Registration Rights Agreement and the provisions of this Certificate
of Designations) and so long as the Registration Statement shall be effective
(in the case of application of this Section 8(f) to any period during which the
Registration Statement is required to be kept effective as provided in Section
3(a) of the Registration Rights Agreement), the Corporation shall have the
right, exercisable at any time or from time to time on or after the date which
is 365 days after the SEC Effective Date (the "Corporation Conversion
Commencement Date"), adjusted as described in the proviso below, by notice (a
"Corporation Conversion Notice") to the holders of the Series F Convertible
Preferred Stock to require the holders of the Series F Convertible Preferred
Stock to convert, in accordance with the provisions, and subject to the
limitations, of this Section 8, all or any part of the outstanding shares of
Series F Convertible Preferred Stock into shares of Common Stock effective as of
the date the Corporation Conversion Notice is given to the extent the same are
on such date convertible into shares of Common Stock; provided, however, that
the Corporation Conversion Commencement Date shall be extended by such number of
days as shall correspond to the number of Black-Out Days (as defined herein)
occurring prior to the otherwise applicable Corporation Conversion Commencement
Date. As used herein, the term "Black-Out Days" means such period of time
commencing from a holder's receipt of notice from the Corporation of the
happening of any event of the kind described in Sections 3(e) and 3(f) of the
Registration Rights Agreement until the date of receipt by such holder of the
amendment or supplement to the Prospectus referred to in Section 3(e) therein or
notification of lifting of a stop order or re-effectiveness, as the case may be.
The Corporation Conversion Notice shall state (1) the number of shares of Series
F Convertible Preferred Stock which the Corporation seeks to require to be
converted into shares of Common Stock and (2) the conversion date (which shall
be the date the Corporation Conversion Notice is given). If the Corporation
shall give a Corporation Conversion Notice, then, unless theretofore converted
by the holder in accordance herewith, and, so long as the Registration Statement
shall remain effective on the date such Corporation Conversion Notice is given
(in the case of application of this Section 8(f) to any period during which the
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Registration Statement is required to be kept effective as provided in Section
3(a) of the Registration Rights Agreement) and the Corporation shall be in
compliance in all material respects with its obligations under the Registration
Rights Agreement on the date such Corporation Conversion Notice is given, on the
conversion date properly set forth therein, the lesser of (A) the number of
shares of Series F Convertible Preferred Stock which the Corporation seeks to
require to be converted, as set forth in such Corporation Conversion Notice or
(B) the maximum number of shares of Series F Convertible Preferred Stock which
on such conversion date is convertible in accordance with Sections 8(a) and
8(d), shall be converted into such number of shares of Common Stock as shall be
determined pursuant to this Section 8 as if the conversion of such number of
shares of Series F Convertible Preferred Stock were made by the holders thereof
in accordance herewith without any further action on the part of the holders of
such shares of Series F Convertible Preferred Stock. Upon receipt by the
Corporation of certificates for shares of Series F Convertible Preferred Stock
converted into shares of Common Stock in accordance with this Section 8(e) after
a Corporation Conversion Notice is given, the Corporation shall issue and,
within three trading days after such surrender, deliver to or upon the order of
such holder (1) that number of shares of Common Stock for the number of shares
of Series F Convertible Preferred Stock converted as shall be determined in
accordance herewith, (2) a new certificate for the balance of shares of Series F
Convertible Preferred Stock, if any, and (3) payment of the accrued and unpaid
dividends on the shares of Series F Convertible Preferred Stock so converted
(which payment of dividends may be made in accordance with Section 4 if the
Corporation satisfies the requirements thereof). In connection with any
conversion at the option of the Corporation, the Corporation agrees to indemnify
the holders of Series F Convertible Preferred Stock to the same extent set forth
in Section 8(c)(6) of this Certificate of Designations with respect to any
failure to timely deliver certificates representing the Common Stock issuable
upon such conversion in accordance herewith.
Section 9. Voting Rights. Except as provided below and as otherwise
required by law, shares of Series F Convertible Preferred Stock shall not be
entitled to vote on any matter.
The affirmative vote or consent of the holders of a majority of the
outstanding shares of the Series F Convertible Preferred Stock, voting
separately as a class, will be required for any amendment, alteration, or
repeal, whether by merger or consolidation or otherwise, of the Corporation's
Certificate of Incorporation if the amendment, alteration, or repeal adversely
affects the powers, preferences, or special rights of the Series F Convertible
Preferred Stock; provided, however, that any increase in the authorized
preferred stock of the Corporation or the creation and issuance of any stock
which is both Junior Dividend
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Stock and Junior Liquidation Stock or any other capital stock of the Corporation
ranking on a parity with the Series F Convertible Preferred Stock as to
entitlement to dividends and as to preference on liquidation shall not be deemed
to affect adversely such powers, preferences, or special rights.
Section 10. Outstanding Shares. For purposes of this Certificate of
Designations, all shares of Series F Convertible Preferred Stock shall be deemed
outstanding except (i) from the date of conversion of shares of Series F
Convertible Preferred Stock into Common Stock, all shares of Series F
Convertible Preferred Stock converted into Common Stock; and (ii) from the date
of registration of transfer, all shares of Series F Convertible Preferred Stock
held of record by the Corporation or any subsidiary or Affiliate (as defined
herein) of the Corporation. For the purposes of this Certificate of
Designations, "Affiliate" means any person, other than an initial holder of
shares of Series F Convertible Preferred Stock, directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Corporation. "Control" is the power to direct the management and policies of a
person, directly or through one or more intermediaries, whether through the
ownership of voting securities, by contract, or otherwise.
Section 11. Restriction on Transfer of Shares. No holder of shares of
Series F Convertible Preferred Stock shall sell or otherwise transfer any shares
of Series F Convertible Preferred Stock except to a person who is a Permitted
Transferee. A "Permitted Transferee" means a person which (a) (1) is an
"accredited investor" (as defined in Regulation D under the Securities Act of
1933, as amended (the "Securities Act")), (2) acquires at least 200 shares of
Series F Convertible Preferred Stock from a holder of Series F Convertible
Preferred Stock (or such lesser number of shares as shall be held by such holder
at the time of such sale or transfer) and (3) acquires the shares of Series F
Convertible Preferred Stock in a transaction exempt from registration under the
Securities Act and in accordance with any agreement between the Corporation and
the holder making such sale or other transfer of shares of Series F Convertible
Preferred Stock or (b) in the case of any holder which agreed with the
Corporation to purchase at least 1,000 shares of Series F Convertible Preferred
Stock from the Corporation in connection with the initial issuance of shares of
Series F Convertible Preferred Stock, is any one of up to 5 entities of which
70% or more of the beneficial ownership of such entity is beneficially owned by
the beneficial owners of such holder and which entity would, immediately after
such transfer hold at least 50 shares (or such lesser number of shares as at the
time of such transfer are held by the transferring holder) of Series F
Convertible Preferred Stock, in either the case of clause (a) or (b), subject to
the consent of the Corporation, such consent not to be unreasonably withheld (it
being understood that a proposed
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assignment by the Buyer to a competitor or potential competitor of the
Corporation or a person which the Corporation determines in good faith is
accumulating or is likely to accumulate ownership of shares of Common Stock for
hostile or unfriendly purposes or proposes to acquire Shares for a purpose
adverse to the interests of the Corporation or it stockholders may constitute a
basis for withholding such consent).
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IN WITNESS WHEREOF, XOMA Corporation has caused its corporate seal to
be hereunto affixed and this certificate to be signed by Christopher J.
Margolin, its Vice President, General Counsel and Secretary, as of the 24th day
of September, 1996.
XOMA CORPORATION
By______________________________
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.
Right to Purchase _______ Shares
of Common Stock of XOMA Corporation
XOMA CORPORATION
Common Stock Purchase Warrant
Certificate No. __
XOMA CORPORATION, a Delaware corporation (the "Company") hereby
certifies that, for value received, __________________ or registered assigns
(the "Holder"), is entitled, subject to the terms set forth below, to purchase
from the Company at any time or from time to time after the date hereof, and
before 5:00 p.m., New York City time, on the Expiration Date (as hereinafter
defined), _______ fully paid and nonassessable shares of Common Stock, $.0005
par value, of the Company at a purchase price per share equal to the Purchase
Price (as hereinafter defined). The number of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided in this Warrant.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Business Day" as used herein shall mean a day on which
the New York Stock Exchange is open for business.
(b) The term "Common Stock" includes the Company's Common Stock,
$.0005 par value, and the related Preferred Stock Purchase Rights as
authorized on the date hereof, and any other securities into which or for
which the Common Stock or such Preferred Stock Purchase Rights may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Company" shall include XOMA Corporation and any
corporation that shall succeed to or assume the obligations of XOMA
Corporation hereunder.
<PAGE>
(d) The term "Expiration Date" refers to March ___, 1998.1
(e) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate
or otherwise) which the Holder of this Warrant at any time shall be
entitled to receive, or shall have received, on the exercise of this
Warrant, in lieu of or in addition to Common Stock, or which at any time
shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4.
(f) The term "Purchase Price" shall mean $____, subject to adjustment
as provided in this Warrant.
1. Exercise of Warrant.
1.1 Exercise at Option of Holder. This Warrant may be exercised by the
Holder hereof in full or in part at any time or from time to time during the
exercise period specified in the first paragraph hereof until the Expiration
Date by surrender of this Warrant and the subscription form annexed hereto (duly
executed) by such Holder, to the Company at its principal office, accompanied by
payment, in cash or by certified or official bank check payable to the order of
the Company in the amount obtained by multiplying (a) the number of shares of
Common Stock designated by the Holder in the subscription form by (b) the
Purchase Price then in effect. On any partial exercise the Company will
forthwith issue and deliver to or upon the order of the Holder hereof a new
Warrant or Warrants of like tenor, in the name of the Holder hereof or as such
Holder (upon payment by such Holder of any applicable transfer taxes) may
request, providing in the aggregate on the face or faces thereof for the
purchase of the number of shares of Common Stock for which such Warrant or
Warrants may still be exercised.
1.2 Net Issuance. Notwithstanding anything to the contrary contained
in Section 1.1, the Holder may elect to exercise this Warrant in whole or in
part by receiving shares of Common Stock equal to the net issuance value (as
determined below) of this Warrant, or any part hereof, upon surrender of the
Warrant at the principal office of the Company together with the subscription
form annexed hereto (duly executed) by such Holder, in which event the Company
shall issue to the Holder a number of shares of Common Stock computed using the
following formula:
- - ----------------
1 One-half of the warrants will have an expiration date which is three years
after the closing date.
<PAGE>
X = Y (A-B)
-------
A
Where: X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock as to
which this Warrant is to be exercised
A = the current fair market value of one share
of Common Stock calculated as of the last
trading day immediately preceding the
exercise of this Warrant
B = the Purchase Price
As used herein, current fair market value of Common Stock as of a
specified date shall mean with respect to each share of Common Stock the average
of the closing bid prices of the Common Stock on the principal securities market
on which the Common Stock may at the time be traded over a period of five
consecutive Business Days consisting of the day as of which the current fair
market value of a share of Common Stock is being determined (or if such day is
not a Business Day, the Business Day next preceding such day) and the four
consecutive Business Days prior to such day. If on the date for which current
fair market value is to be determined the Common Stock is not eligible for
trading on any securities market, the current fair market value of Common Stock
shall be the highest price per share which the Company could then obtain from a
willing buyer (not a current employee or director) for shares of Common Stock
sold by the Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors of the Company, unless prior to such date the
Company has become subject to a merger, acquisition or other consolidation
pursuant to which the Company is not the surviving party, in which case the
current fair market value of the Common Stock shall be deemed to be the value
received by the holders of the Company's Common Stock for each share thereof
pursuant to the Company's acquisition.
2. Delivery of Stock Certificates, etc., on Exercise. As soon as
practicable after the exercise of this Warrant, and in any event within five
Business Days thereafter, the Company at its expense (including the payment by
it of any applicable issue or stamp taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such Holder shall be entitled on such
exercise, in such denominations as may be requested by such Holder, plus, in
lieu of any fractional share to which such Holder would otherwise be
<PAGE>
entitled, the Corporation may issue a number of shares of Common Stock to such
Holder which reflects a rounding to the nearest whole number of shares of Common
Stock, together with any other stock or other securities any property (including
cash, where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time, all the holders
of Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the Holder of this Warrant, on the
exercise hereof as provided in Section 1, shall be entitled to receive the
amount of stock and other securities and property (including cash in the cases
referred to in subdivisions (b) and (c) of this Section 3) which such Holder
would hold on the date of such exercise if on the date hereof the Holder had
been the holder of record of the number of shares of Common Stock called for on
the face of this Warrant and had thereafter, during the period from the date
hereof to and including the date of such exercise, retained such shares and all
such other or additional stock and other securities and property (including cash
in the case referred to in subdivisions (b) and (c) of this Section 3)
receivable by the Holder as aforesaid during such period, giving effect to all
adjustments called for during such period by Section 4.
4. Adjustment for Reorganization, Consolidation, Merger, etc. In case
at any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition of such reorganization, consolidation, merger, sale or
conveyance, the
<PAGE>
Company shall give at least 30 days notice to the Holder of such pending
transaction whereby the Holder shall have the right to exercise this Warrant
prior to any such reorganization, consolidation, merger, sale or conveyance. Any
exercise of this Warrant pursuant to notice under this paragraph shall be
conditioned upon the closing of such reorganization, consolidation, merger, sale
or conveyance which is the subject of the notice and the exercise of this
Warrant shall not be deemed to have occurred until immediately prior to the
closing of such transaction.
5. Adjustment for Extraordinary Events. In the event that the Company
shall (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock, or (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 5.
The Holder of this Warrant shall thereafter, on the exercise hereof as provided
in Section 1, be entitled to receive that number of shares of Common Stock
determined by multiplying the number of shares of Common Stock which would be
issuable on such exercise as of immediately prior to such issuance by a fraction
of which (i) the numerator is the Purchase Price in effect immediately prior to
such issuance and (ii) the denominator is the Purchase Price in effect on the
date of such exercise.
6. Further Assurances. The Company will take all action that may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of stock, free from all taxes, liens and
charges with respect to the issue thereof, on the exercise of all or any portion
of this Warrant from time to time outstanding.
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend on, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
<PAGE>
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all
or substantially all of the assets of the Company to or consolidation or
merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall also state that the action in question or the
record date is subject to the effectiveness of a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), or a favorable
vote of stockholders if either is required. Such notice shall be mailed at least
ten days prior to the date specified in such notice on which any such action is
to be taken or the record date, whichever is earlier.
8. Reservation of Stock, etc., Issuable on Exercise of Warrants. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.
9. Transfer of Warrant. This Warrant may not be transferred by the
Holder without the prior written consent of the Company except that the original
Holder may transfer this Warrant to a Permitted Transferee (as defined herein).
As used herein, a "Permitted Transferee" means any one of up to four individuals
or entities designated at any time by the original Holder provided that such
individuals or entities are "accredited investors" (as defined in Regulation D
under the Securities Act of 1933, as amended), subject to the prior written
consent of the Company, such consent not to be unreasonably withheld (it being
<PAGE>
understood that a proposed transfer by the Holder to a competitor or potential
competitor of the Company or a person which the Company determines in good faith
is accumulating or is likely to accumulate ownership of shares of Common Stock
for hostile or unfriendly purposes or proposes to acquire this Warrant for a
purpose adverse to the interests of the Company and its stockholders may
constitute a basis for withholding such consent). This Warrant shall inure to
the benefit of the successors to and permitted assigns of the Holder. This
Warrant and all rights hereunder, in whole or in part, are registrable at the
office or agency of the Company referred to below by the Holder hereof in person
or by his duly authorized attorney, upon surrender of this Warrant properly
endorsed.
10. Register of Warrants. The Company shall maintain, at the principal
office of the Company (or such other office as it may designate by notice to the
Holder hereof), a register in which the Company shall record the name and
address of the person in whose name this Warrant has been issued, as well as the
name and address of each successor and prior owner of such Warrant. The Company
shall be entitled to treat the person in whose name this Warrant is so
registered as the sole and absolute owner of this Warrant for all purposes.
11. Exchange of Warrant. Upon permitted transfer or partial exercise
hereof, this Warrant is exchangeable, upon the surrender hereof by the Holder
hereof at the office or agency of the Company referred to in Section 10, for one
or more new Warrants of like tenor representing in the aggregate the right to
subscribe for and purchase the number of shares of Common Stock which may be
subscribed for purchase hereunder, each of such new Warrants to represent the
right to subscribe for and purchase such number of shares as shall be designated
by said Holder hereof at the time of such surrender.
12. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. Warrant Agent. The Company may, by written notice to the Holder,
appoint an agent having an office in the United States of America, for the
purpose of issuing Common Stock (or Other Securities) on the exercise of this
Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 11,
and replacing this Warrant pursuant to Section 12, or any of the foregoing, and
thereafter any such issuance, exchange or
<PAGE>
replacement, as the case may be, shall be made at such office by such agent.
14. Remedies. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
15. No Rights or Liabilities as a Stockholder. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the Holder hereof to purchase Common Stock, and no mere enumeration
herein of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Purchase Price or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
16. Notices, etc. All notices and other communications from the
Company to the registered Holder of this Warrant shall be mailed by first class
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or at the address shown for such Holder on
the register of Warrants referred to in Section 10.
17. Certain Representations and Warranties of the Holder. By
acceptance of this Warrant, the Holder represents and warrants to the Company as
follows:
(a) General. (i) The Holder has all requisite authority to acquire
this Warrant.
(ii) The Holder understands that no United States federal or state
agency or any other government or governmental agency has passed on or made
any recommendation or endorsement of this Warrant or the Common Stock or
Other Securities.
(b) Information Concerning the Company. (i) The Holder is familiar
with the business and financial condition, properties and operations of the
Company. The Holder has been furnished with all materials relating to the
business, finances and operations of the Company and materials relating to
the offer and sale to the Holder of the Warrant and the Common Stock and
Other Securities which have been requested by the Holder. The Holder has
been afforded the opportunity to ask questions of the Company and
<PAGE>
has received complete and satisfactory answers to any such inquiries.
Without limiting the generality of the foregoing, the Holder has had the
opportunity to obtain and to review the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996 and Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996, as filed
with the Securities and Exchange Commission (the "Commission").
(ii) The Holder understands that the acquisition of the Warrant and
the Common Stock or Other Securities involves a high degree of risk,
including the risks outlined in this Warrant.
(c) Status of Holder. (i) The Holder has such knowledge, skill and
experience in business, financial and investment matters to be capable of
evaluating the merits and risks of an investment in this Warrant and the
Common Stock or Other Securities. The Holder is an "accredited investor" as
that term is defined in Rule 501 of the General Rules and Regulations under
the Securities Act by reason of Rule 501(a)(5) or (6). To the extent the
Holder deemed it necessary, the Holder has retained, at its own expense,
and relied upon, appropriate professional advice regarding the investment,
tax and legal merits and consequences of owning this Warrant and the Common
Stock or Other Securities.
(ii) The Holder agrees to furnish any additional information
reasonably requested to assure compliance with applicable federal and state
securities laws in connection with the purchase and sale of this Warrant
and the Common Stock or Other Securities.
(d) Restrictions on Transfer or Sale of the Securities. (i) The Holder
is acquiring this Warrant solely for its own beneficial account, for
investment purposes, and not with a view to, or for resale in connection
with, any distribution of this Warrant or, prior to registration under the
Securities Act, the Common Stock or Other Securities. The Holder
understands that the offer and sale of this Warrant and the offer of the
Common Stock and Other Securities have not been registered under the
Securities Act or any state securities or blue sky laws, by reason of
specific exemptions under the provisions thereof which depend in part upon
the intent of the Holder and the truth and accuracy of the representations
made by the Holder in this Warrant. The Holder understands that the Company
is relying upon the representations and warranties of the Holder contained
in this Warrant (and any supplemental information) for the purpose of
determining whether the offer and sale or the transfer, as the case may be,
of this
<PAGE>
Warrant to the Holder meet the requirements for such exemptions.
(ii) The undersigned understands that this Warrant is and, until such
time as the Common Stock and Other Securities issuable upon exercise of
this Warrant are registered under the Securities Act, the Common Stock and
Other Securities will be "restricted securities" under applicable federal
securities laws and that the Securities Act and the rules and regulations
of the Commission thereunder provide in substance that the undersigned may
sell the Common Stock and Other Securities only pursuant to an effective
registration statement under the Securities Act or an exemption therefrom.
(iii) The Holder agrees: (A) that the undersigned will not, directly
or indirectly, sell, assign, pledge, give, transfer or otherwise dispose of
the Common Stock and Other Securities issuable upon exercise of this
Warrant or any interest therein, or make any offer or attempt to do any of
the foregoing, except pursuant to a registration of such Common Stock and
Other Securities under the Securities Act and all applicable state
securities and blue sky laws or in a transaction which is exempt from the
registration provisions thereunder; and (B) that, prior to registration
under the Securities Act, the certificates for the Common Stock and Other
Securities issuable upon exercise of this Warrant will bear a legend making
reference to the foregoing restrictions.
(iv) The Holder has not offered or sold any portion of this Warrant or
the Common Stock and Other Securities issuable upon exercise of this
Warrant and has no present intention of further dividing this Warrant or
the Common Stock and Other Securities issuable upon exercise of this
Warrant with others except as permitted by Section 9.
18. Legend. Unless theretofore registered for resale under the
Securities Act, each certificate for shares issued upon exercise of this Warrant
shall bear the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under the Securities Act of 1933, as
amended, or an opinion of counsel that registration is not required
under said Act.
19. Miscellaneous. This Warrant and any terms hereof
may be changed, waived, discharged or terminated only by an
<PAGE>
instrument in writing signed by the party against which enforcement or such
change, waiver, discharge or termination is sought. This Warrant shall be
construed and enforced in accordance with and governed by the internal laws of
the State of Delaware. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
<PAGE>
IN WITNESS WHEREOF, XOMA Corporation has caused this Warrant to be
executed on its behalf by one of its officers thereunto duly authorized.
Dated: September , 1996 XOMA CORPORATION
By:___________________________
Name:
Title:
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO XOMA CORPORATION
1. The undersigned Holder of the attached original, executed Warrant
hereby elects to exercise its purchase right under such Warrant with respect to
______________ shares of Common Stock, as defined in the Warrant, of XOMA
Corporation, a Delaware corporation (the "Company").
2. The undersigned Holder (check one):
____ (a) elects to pay the aggregate purchase price for such
shares of Common Stock (the "Exercise Shares") (i) by
lawful money of the United States or the enclosed
certified or official bank check payable in United
States dollars to the order of the Company in the
amount of $___________, or (ii) by wire transfer of
United States funds to the account of the Company in
the amount of $____________, which transfer has been
made before or simultaneously with the delivery of this
Form of Subscription pursuant to the instructions of
the Company;
or
____ (b) elects to receive shares of Common Stock having a value
equal to the value of the Warrant calculated in
accordance with Section 1.2 of the Warrant.
3. Please issue a stock certificate or certificates representing the
appropriate number of shares of Common Stock in the name of the undersigned or
in such other names as is specified below:
Name: _____________________________________
Address: _____________________________________
_____________________________________
Dated:____________ ___, _____ ____________________________
Signature of Holder (Must
conform to name of Holder as
specified on the face of the
Warrant)
----------------------------
----------------------------
(Address)
EXHIBIT 5.2
[LETTERHEAD OF CAHILL GORDON & REINDEL]
September 25, 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 registration
statement on Form S-3 (the "Registration Statement") filed with
the Securities and Exchange Commission (the "Commission") (File
No. 333-07263), as amended, relating to the registration under
the Securities Act of 1933, as amended (the "Act"), of 8,296,489
shares of the Company's Common Stock, par value $.0005 per share
(the "Common Stock"). We have previously provided our opinion,
dated June 28, 1996, relating to 1,500,000 of the shares of Com-
mon Stock covered by the Registration Statement. This opinion
relates to the 6,796,489 shares thereof (the "Shares") not cov-
ered by our previous opinion.
We advise you that in our opinion the Shares, when
issued in the manner and for the consideration contemplated by
the Registration Statement, will be validly issued, 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 Opinions"
in the Registration Statement to our having passed upon the
legal matters referred to above. Our consent to such reference
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 Sec-
tion 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 SECUR-
ITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CON-
FIDENTIAL 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
$8,842,500 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>
-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>
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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.
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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
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(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
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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) $8,842,500 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.
<PAGE>
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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.
<PAGE>
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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.
<PAGE>
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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.
<PAGE>
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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).
<PAGE>
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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.
<PAGE>
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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.
<PAGE>
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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.
<PAGE>
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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
<PAGE>
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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,
<PAGE>
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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).
<PAGE>
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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
<PAGE>
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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
<PAGE>
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.
<PAGE>
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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:
<PAGE>
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- Actual Results
- Forecasts
- Budget
- Inventory Levels
- Sales Returns and Allowance
- 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.
<PAGE>
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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
<PAGE>
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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.
<PAGE>
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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
<PAGE>
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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.
<PAGE>
EXHIBIT B
*
<PAGE>
EXHIBIT C
*
<PAGE>
*
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<PAGE>
*
-3-
<PAGE>
*
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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 SEC-
URITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CON-
FIDENTIAL 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 $8,842,500 hereinafter referred to as the "Stock Purchase Price."
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
<PAGE>
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.
(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-
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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, 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
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<PAGE>
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.
(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
-4-
<PAGE>
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 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
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<PAGE>
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. 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
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<PAGE>
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, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF OTHER THAN IN ACCORDANCE WITH THE PROVISIONS
THEREOF."
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<PAGE>
(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 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.
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<PAGE>
(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.
(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
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<PAGE>
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.
(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:
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<PAGE>
(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).
"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
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<PAGE>
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 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
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<PAGE>
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).
(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
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<PAGE>
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 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)
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<PAGE>
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 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
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<PAGE>
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.
(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
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<PAGE>
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 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
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<PAGE>
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 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:
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<PAGE>
(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.
(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).
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<PAGE>
(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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<PAGE>
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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FORM OF PREFERRED STOCK SUBSCRIPTION AGREEMENT
THIS PREFERRED STOCK SUBSCRIPTION AGREEMENT, dated as of the date of
acceptance set forth below, by and between XOMA CORPORATION, a Delaware
corporation, with headquarters located at 2910 Seventh Street, Berkeley,
California 94710 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H :
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act"); and
WHEREAS, the Buyer wishes to subscribe for and purchase shares of
non-voting convertible preferred stock of the Company, which will be convertible
into shares of Common Stock, $.0005 par value, and the related Preferred Stock
Purchase Rights (the "Common Stock") of the Company, upon the terms and subject
to the conditions of this Agreement, subject to acceptance of this Agreement by
the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(a) Subscription. The undersigned hereby subscribes for and agrees to
purchase from the Company shares (the "Preferred Shares") of Non-Voting
Cumulative Convertible Preferred Stock, Series F, $.05 par value (the "Series F
Preferred Stock"), of the Company in such number as is set forth on the
signature page of this Agreement (subject to reduction as provided in Section
7(b)) at the price per Share and for the aggregate subscription price set forth
on the signature page of this Agreement. The Preferred Shares shall have the
rights, designations and terms as set forth in the form of Certificate of
Designations attached hereto as Annex I (the "Certificate of Designations"). The
aggregate subscription price for the Preferred Shares shall be payable in United
States Dollars. The shares of Common Stock issuable upon conversion of the
Preferred Shares are referred to herein as the "Common Shares." The Common
Shares and the Preferred Shares are referred to herein collectively as the
"Shares."
(b) Form of Payment. The Buyer shall pay the purchase price for the
Preferred Shares by delivering good funds in United
<PAGE>
States Dollars to the escrow agent (the "Buyer Escrow Agent") identified in the
Buyer Escrow Instructions attached hereto as Annex II (the "Buyer Escrow
Instructions"). Such funds shall at all times remain the property of the Buyer,
subject to the terms of the Buyer Escrow Instructions, until required to be
released to the Company in accordance with the Buyer Escrow Instructions.
Promptly, but in no event later than two New York Stock Exchange trading days,
following receipt by the Company from the Buyer Escrow Agent of notice of
payment by the Buyer to the Buyer Escrow Agent of the subscription price of the
Preferred Shares, the Company shall deliver certificates for the Preferred
Shares, registered in the name of the Buyer or as otherwise provided in Section
5 of this Agreement, to the escrow agent (the "Company Escrow Agent") identified
in the Company Escrow Instructions attached hereto as Annex III (the "Company
Escrow Instructions"). The Preferred Shares represented by such certificates
shall at all times remain the property of the Company, subject to the terms of
the Company Escrow Instructions, until required to be released to the Buyer in
accordance with the Company Escrow Instructions; provided, however, that in no
event shall the Company be entitled to exercise any voting rights or give any
consent in respect of such Preferred Shares. By signing this Agreement, the
Buyer agrees to all of the terms and conditions of, and becomes a party to, the
Buyer Escrow Instructions, all of the provisions of which are incorporated
herein by this reference as if set forth in full, and the Company agrees to all
of the terms and conditions of, and becomes a party to, the Company Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full. Neither the Company nor any creditor or
stockholder of the Company or any person claiming rights by, through or on
behalf of the Company shall have any claim, lien, equity, encumbrance or other
right to or in respect of the funds or any other property held pursuant to the
Buyer Escrow Instructions prior to satisfaction of the conditions to the release
thereof to the Company in accordance with the terms of this Agreement and the
Buyer Escrow Instructions. Neither the Buyer nor any creditor or holder of an
equity interest in the Buyer or any person claiming rights by, through or on
behalf of the Buyer shall have any claim, lien, equity, encumbrance or other
right to or in respect of the certificates for the Preferred Shares or any other
property held pursuant to the Company Escrow Instructions prior to satisfaction
of the conditions to the release thereof to the Buyer in accordance with the
terms of this Agreement and the Company Escrow Instructions.
(c) Method of Payment. Payment of the purchase price for the Preferred
Shares shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
<PAGE>
ABA#021000089
For Further Credit to A/C#37179446
for credit to the account of Brian W. Pusch Attorney
Escrow Account
Reference: ODA Fund I, Ltd./XOMA
Not later than 4:00 p.m., New York City time, on the date which is two New York
Stock Exchange trading days after the Company shall have accepted this Agreement
and returned a signed counterpart of this Agreement to the Buyer, the Buyer
shall deposit with the Buyer Escrow Agent the aggregate subscription price for
the Preferred Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(a) The Buyer is purchasing the Preferred Shares for its own account
for investment only and not with a view towards the public sale or distribution
thereof;
(b) The Buyer is an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3);
(c) All subsequent offers and sales of the Shares by the Buyer shall
be made pursuant to registration of the Shares being offered and sold under the
1933 Act or pursuant to an exemption from registration;
(d) The Buyer understands that the Preferred Shares are being offered
and sold, and the Common Shares are being offered, to it in reliance on
exemption from the registration requirements of the 1933 Act provided by
Regulation D and exemptions from state securities laws, including exemptions
available by reason of satisfying the requirements of Regulation D, and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein and in the Prospective Purchaser
Questionnaire, a true and accurate copy of which has been delivered by the Buyer
to the Company (the "Questionnaire"), in order to determine the availability of
such exemptions and the eligibility of the Buyer to acquire the Preferred Shares
and to receive an offer of the Common Shares;
(e) The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances
<PAGE>
and operations of the Company and materials relating to the offer and sale of
the Preferred Shares and the offer of the Common Shares which have been
requested by the Buyer. The Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company covering the terms of the
offering of the Shares and the business, finances and operations of the Company
and have received complete and satisfactory answers to any such inquiries.
Without limiting the generality of the foregoing, the Buyer has had the
opportunity to obtain and to review the Company's (1) Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 and Amendment No. 1 thereto on Form
10-K/A, filed March 26, 1996 and Amendment No. 2 thereto on Form 10-K/A, filed
May 23, 1996, (2) Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1996 and June 30, 1996, (3) Current Report on Form 8-K, dated April
22, 1996, (4) Proxy Statement for its 1996 Annual Meeting of Stockholders, and
(5) Registration Statement on Form S-3, filed with the SEC on June 28, 1996
(collectively, the "SEC Reports"), in each case as filed with the SEC. The Buyer
understands that its investment in the Shares involves a high degree of risk;
(f) The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares;
(g) This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, fraudulent
conveyance, moratorium and other similar laws affecting the enforcement of
creditors' rights generally and except that rights to indemnity and contribution
may be limited by public policy; and
(h) The Buyer understands that the Shares are being offered by the
Company as part of an offering of shares of Series F Preferred Stock and Common
Stock which may be greater than the number of Shares being purchased hereunder
but that there is no minimum amount of the offering and that the Company may
accept or reject this Agreement in its discretion.
(i) Neither the Buyer (or any predecessor in interest to the Buyer)
nor any person affiliated or associated with the Buyer (or any predecessor in
interest to any such person) purchased any shares of Common Stock during the
period from March 2, 1992 to June 3, 1992, inclusive.
[(j) The purchase of the Preferred Shares by the Buyer pursuant to
this Agreement does not require any governmental or regulatory consent, approval
or filing on the part of the Buyer
<PAGE>
or, to the knowledge of the Buyer, on the part of the Company, under the
securities or similar laws of the jurisdiction in which the Buyer's principal
executive offices are located.] [TO BE INSERTED IF BUYER IS AN OFFSHORE ENTITY]
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
(a) Organization and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to (i) own, lease
and operate its properties and to carry on its business as now being conducted,
and (ii) to execute, deliver and perform its obligations under this Agreement,
the Registration Rights Agreement, the form of which is attached hereto as Annex
IV (the "Registration Rights Agreement"), the Certificate of Designations, and
the other agreements executed and delivered by the Company in connection
herewith, and to consummate the transactions contemplated hereby. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in all jurisdictions wherein such qualification is necessary and where failure
so to qualify could have a material adverse effect on the financial condition,
results of operations, business or properties of the Company.
(b) Capitalization. The authorized capital stock of the Company
currently consists of (a) 70,000,000 shares of Common Stock, $.0005 par value
per share, of which 34,324,669 shares were outstanding as of August 31, 1996 and
all of which outstanding shares that are outstanding at the date hereof are
fully paid and nonassessable and on the Closing Date (as defined herein) there
will be no material increase from August 31, 1996 in the number of shares of
Common Stock outstanding; and (b) 1,000,000 shares of Preferred Stock, $.05 par
value per share, of which 650,000 shares are designated as Series A Cumulative
Preferred Stock, none of which are outstanding, 7,500 shares are designated as
Convertible Preferred Stock, Series E, none of which are outstanding, and of
which up to 1,600 shares will be designated as Series F Preferred Stock. As of
August 31, 1996, the Company had outstanding options to purchase 3,191,424
shares of Common Stock. The Company does not have outstanding any material
amount of securities (or obligations to issue any such securities) convertible
into, exchangeable for or otherwise entitling the holders thereof to acquire
shares of Common Stock except as disclosed in the SEC Reports. The outstanding
shares of Common Stock and outstanding options, warrants and other securities to
purchase Common Stock have been duly authorized and validly issued. None of such
outstanding shares of Common Stock, options, warrants and other securities has
been issued in violation of the preemptive rights of any securityholder of the
Company. The offers and sales of such outstanding shares of
<PAGE>
Common Stock, and outstanding options, warrants and other securities to purchase
Common Stock were at all relevant times either registered under the 1933 Act and
applicable state securities laws, or exempt from such registration requirements.
The authorized shares of Common Stock, and outstanding options, warrants and
other securities to purchase Common Stock conform to the descriptions thereof
contained in the SEC Reports. No holder of any of the Company's securities has
any rights, "demand," "piggy-back" or otherwise, to have such securities
registered by reason of the intention to file, filing or effectiveness of the
Registration Statement required to be filed pursuant to Section 2(a) of the
Registration Rights Agreement.
(c) Concerning the Shares and the Common Stock. The Shares have been
duly authorized and the Preferred Shares, when issued, delivered and paid for in
accordance with this Agreement, and the Common Shares, when issued on conversion
of the Preferred Shares in accordance with the Certificate of Designations, as
the case may be, will be duly and validly authorized and issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. The Company has not granted any preemptive or
similar rights which would entitle any stockholder of the Company or any other
person to acquire the Shares. The Common Stock is listed for trading on the
Nasdaq National Market ("Nasdaq") and (1) the Company and the Common Stock meet
the criteria for continued listing and trading on Nasdaq; (2) the Company has
not been notified since January 1, 1994 by the National Association of
Securities Dealers, Inc. of any failure or potential failure to meet the
criteria for continued listing and trading on Nasdaq and (3) no suspension of
trading in the Common Stock is in effect.
(d) Subscription Agreement; Registration Rights Agreement. This
Agreement and the Registration Rights Agreement have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
on behalf of the Company and, assuming the due authorization, execution and
delivery hereof and thereof by the Buyer, this Agreement is, and the
Registration Rights Agreement, when executed and delivered by the Company, will
be, valid and binding agreements of the Company enforceable in accordance with
their respective terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, fraudulent conveyance, moratorium and
other similar laws affecting the enforcement of creditors' rights generally and
except that rights to indemnity and contribution may be limited by public
policy.
(e) Non-contravention. The execution and delivery of this Agreement
and the Registration Rights Agreement by the Company and the consummation by the
Company of the issuance of the Preferred Shares and the issuance of the Common
Shares upon conversion of the Preferred Shares and the other transactions
<PAGE>
contemplated by this Agreement, the Registration Rights Agreement and the terms
of the Series F Preferred Stock and the performance by the Company of its
obligations thereunder do not and will not, with or without the giving of notice
or the lapse of time, or both, conflict with or result in a breach or violation
by the Company of any of the terms or provisions of, or constitute a default
under, or result in the modification of, or result in the creation or imposition
of any lien or other encumbrance upon any properties or assets of the Company
pursuant to, the certificate of incorporation or by-laws of the Company, or any
indenture, mortgage, deed of trust or other material agreement or instrument to
which the Company is a party or by which it or any of its properties or assets
are bound, or (assuming the representations and warranties of the Buyer in
Section 2 hereof and in the Questionnaire, of the other buyers of shares of
Series F Preferred Stock in the other Preferred Stock Subscription Agreements
(collectively, the "Other Subscription Agreements") and Questionnaires executed
by such other buyers, and of Carlyle International Securities (the "Placement
Agent") in the letter to be delivered pursuant to Section 8(e) hereof are true
and correct) any applicable law, rule or regulation or any applicable decree,
judgment or order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or any of its properties or assets, which conflict, breach, violation or
default could have a material adverse effect on the validity or enforceability
of this Agreement, the Registration Rights Agreement or the issuance of the
Preferred Shares or the transactions contemplated by this Agreement, the
Registration Rights Agreement or the terms of the Preferred Shares or on any
right or remedy of the Buyer under this Agreement, the Registration Rights
Agreement or the terms of the Preferred Shares.
(f) Approvals. No authorization, approval or consent of, or filing
with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company for the issuance and sale of the
Shares as contemplated by this Agreement and the Certificate of Designations,
other than (1) listing of the Common Shares on Nasdaq, (2) the filing of a Form
D relating to the Common Shares by the Company with the SEC and (3) the
requirements of any applicable blue sky laws.
(g) Certain Environmental Matters. In September 1996, the Company
received a notice from the U.S. Environmental Protection Agency ("EPA") that the
Company may have incurred or may incur liability under the Comprehensive
Environmental Response, Compensation and Liability Act in connection with the
RAMP Industries, Inc. site in Denver, Colorado. The notice indicates that the
Company is one of approximately 690 parties to
<PAGE>
receive the same notice and that, to date, EPA has identified between 1 and 3
barrels of the approximately 6,000 barrels located at the site when EPA began
clean up as being attributable to the Company. The notice also states that EPA
does not anticipate proposing this site for listing on the National Priorities
List of Superfund Sites. Although the Company has not yet completed its review
of this matter, it has no reason to believe at the date hereof that the outcome
of this matter will have a material adverse effect on its financial condition or
results of operations.
(h) Information Provided. The information provided by or on behalf of
the Company to the Buyer and referred to in Section 2(e) of this Agreement and
the information set forth in Section 3(g) of this Agreement does not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they are made, not misleading.
(i) Absence of Certain Changes. Since December 31, 1995, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition or results of operations
of the Company, except as disclosed in the documents referred to in Section 2(e)
hereof.
(j) Absence of Litigation. Except (i) as set forth in the SEC Reports
and as disclosed in Section 3(g) hereof, and (ii) for applications and
proceedings relating to regulatory approval of new drugs or the granting of
patents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business, condition (financial or other) or results of operations of
the Company or the transactions contemplated by this Agreement or any of the
documents contemplated hereby or which would materially adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents.
(k) Properties. The Company has good title to all property real and
personal (tangible and intangible) and other assets owned by it, free and clear
of all security interests, charges, mortgages, liens or other encumbrances,
except such as are described in the SEC Reports or such as do not materially
interfere with the use of such property made, or proposed to be made, by the
Company. The leases, licenses or other contracts or instruments under which the
Company leases, holds or is entitled to use any property, real or personal, are
valid, subsisting and enforceable only with such exceptions as do not materially
<PAGE>
interfere with the use of such property made, or proposed to be made, by the
Company. The Company has not received notice of any material violation of any
applicable law, ordinance, regulation, order or requirement relating to its
owned or leased properties.
(l) Labor Relations. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(m) SEC Filings. The Company has timely filed all required forms,
reports and other documents with the SEC. All of such forms, reports and other
documents complied, when filed, in all material respects, with all applicable
requirements of the 1933 Act and the Securities Exchange Act of 1934, as amended
(the "1934 Act").
(n) Transfer Agent. The Company has used, and the Company's transfer
agent has accepted, instructions and opinions in substantially the forms
attached as Exhibits 1 and 2 to the Registration Rights Agreement in connection
with the Company's Non-Voting Cumulative Convertible Preferred Stock, Series D,
and the Company has no reason to believe that such transfer agent will not find
acceptable and sufficient instructions and opinions in such form in connection
with the Series F Preferred Stock.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) Transfer Restrictions. The Buyer acknowledges that (1) the
Preferred Shares to be issued to it hereunder have not been and are not being
registered under the provisions of the 1933 Act and, except as provided in the
Registration Rights Agreement, the Common Shares have not been and are not being
registered under the 1933 Act, and the Preferred Shares may not be transferred
unless (A) the Preferred Shares to be transferred are subsequently registered
thereunder for resale by the Buyer or (B) the Buyer shall have delivered to the
Company an opinion, reasonably satisfactory in form, scope and substance to the
Company, of counsel reasonably satisfactory to the Company (which shall include,
but not be limited to, counsel who represented the Buyer in connection with the
negotiation and execution of this Agreement) to the effect that the Preferred
Shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Shares made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such Shares under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Shares
(other than
<PAGE>
registration of the Common Shares pursuant to the Registration Rights Agreement)
under the 1933 Act or to comply with the terms and conditions of any exemption
thereunder.
(b) Restrictive Legend. The Buyer acknowledges and agrees that the
certificates for the Preferred Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Preferred Shares):
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any state
securities laws. The securities have been acquired for investment and
may not be sold, transferred or assigned in the absence of (1) an
effective registration statement for these shares under the Securities
Act of 1933, as amended, or an opinion reasonably satisfactory in
form, scope and substance to the Company of counsel reasonably
satisfactory to the Company that registration is not required under
said Act and (2) registration under or compliance with such state
securities laws.
(c) Registration Rights Agreement. The parties hereto agree to enter
into the Registration Rights Agreement, in the form attached hereto as Annex IV,
on or before the Closing Date.
(d) Form D. The Company agrees to file a Form D with respect to the
Shares as required under Regulation D and to provide a copy thereof to the Buyer
promptly after such filing. The Buyer agrees to cooperate with the Company in
connection with such filing and, upon request of the Company, to provide all
information relating to the Buyer required for such filing.
(e) Nasdaq Listing; Reporting Status. Promptly but in no event later
than five business days following the Closing Date, the Company will file with
Nasdaq an application or other document required by Nasdaq for the listing of
the Common Shares with Nasdaq and shall provide evidence of such filing to the
Buyer. So long as the Buyer beneficially owns any of the Preferred Shares or the
Common Shares, the Company shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company will use its commercially reasonable efforts to
maintain the listing of the Common Stock on Nasdaq or another national
securities exchange for at least six months following the latest date of
conversion of Preferred Shares.
<PAGE>
(f) Use of Proceeds. The Company will use the proceeds from the sale
of the Preferred Shares for internal working capital and shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership enterprise or other person; provided, however, that
nothing in this Section 4(f) shall prohibit the Company from using such proceeds
for the acquisition of or investment in businesses, product lines or
technologies in the fields of research, development or marketing of
pharmaceutical products for the treatment of human and animal diseases and
illnesses or from making any loan to any business engaged in such activity and
in which the Company owns an interest having a majority of the voting or similar
power of such business.
(g) Blue Sky Laws. On or before the Closing Date, the Company shall
take such action as shall be necessary to qualify, or to obtain an exemption
for, the Preferred Shares for sale to the Buyer pursuant to this Agreement and
the Common Shares for sale to the Buyer on conversion of the Preferred Shares
under such of the securities or "blue sky" laws of jurisdictions in the United
States as shall be applicable to the sale of the Preferred Shares to the Buyer
pursuant to this Agreement and issuance of the Common Shares on conversion of
the Preferred Shares. The Company shall furnish to the Buyer copies of all
filings, applications, orders and grants or confirmations of exemptions relating
to such securities or "blue sky" laws on or before the Closing Date. The Buyer
agrees to cooperate with the Company in connection with such actions and, upon
request of the Company, to provide all information, if any, concerning the Buyer
required for such actions.
(h) Limitation on Certain Sales of Common Shares. The Buyer agrees
that, except as hereinafter provided, the Buyer shall not make open market sales
of more than [BEFORE SIGNING INSERT PRO RATA PORTION OF 375,000] Common Shares
(such amount to be subject to equitable adjustment from time to time for stock
splits, stock dividends, combinations, capital reorganizations and similar
events relating to the Common Stock occurring on or after the date of this
Agreement) during any calendar week, unless otherwise agreed to in advance by
the Company. Amounts of Common Shares not sold in any calendar week shall not be
cumulative and may not be carried forward to any future calendar week.
Notwithstanding the foregoing, if on or after the date on which the Registration
Statement required to be filed by the Company with the SEC pursuant to Section
2(a) of the Registration Rights Agreement is first declared effective by the SEC
(the "SEC Effective Date") the arithmetic average of the Closing Prices (as
defined herein) during any period of five consecutive trading days is 20% or
more above the Closing Price on the trading day immediately preceding such
five-day period then, during the period of ten consecutive trading days
immediately following such five-day period the foregoing restriction on the
amount of Common
<PAGE>
Shares which may be sold by the Buyer shall be inapplicable. If any such ten-day
period shall end on any day other than a Friday, then, during the portion of
such calendar week after such ten-day period, the Buyer shall not make open
market sales of Common Shares in an amount in excess of an amount equal to the
product obtained by multiplying (1) [BEFORE SIGNING INSERT PRO RATA PORTION OF
75,000] Common Shares (such amount to be subject to equitable adjustment from
time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring on or
after the date of this Agreement) times (2) the number of trading days in such
calendar week falling after the last day in such ten-day period. As used herein,
the "Closing Price" on any date shall mean (i) if the Common Stock is listed on
a national securities exchange, the last reported bid price per share of the
Common Stock on the principal securities exchange on which the Common Stock is
listed that shall be consolidated for consolidated trading, if applicable to
such exchange, on such date, or (ii) if the Common Stock is not so listed, the
last reported bid price per share of the Common Stock as reported on Nasdaq on
such date, or (iii) if the Common Stock is neither so listed nor so reported,
the last reported bid price per share of the Common Stock as quoted by a
registered broker-dealer on such date; provided that such quotes must have been
available for at least five days in the preceding thirty-day period, or (iv) if
the Common Stock is not so listed, so reported or so quoted, the fair value of
the Common Stock on such date, as reasonably determined by the Board of
Directors of the Company in good faith after taking into account such factors as
the Board of Directors of the Company may deem appropriate, including one or
more professional valuations. Notwithstanding the foregoing limitation, the
Buyer shall be permitted to tender all or any portion of the Common Shares in
connection with any tender offer or exchange offer for outstanding shares of
Common Stock.
(i) Certain Future Financings. The Company shall not issue any equity
securities or securities convertible into, exchangeable for or otherwise
entitling the holder to acquire, any equity securities of the Company during the
period from the date of acceptance of this Agreement by the Company to the date
which is 90 days after the SEC Effective Date without the prior written consent
of the Buyer (which consent shall not be unreasonably withheld or delayed);
provided, however, that nothing in this Section 4(i) shall prohibit the Company
from issuing securities (x) as part of a transaction involving a strategic
alliance, collaboration, joint venture, partnership or other similar arrangement
of the Company, (y) pursuant to compensation plans for employees, directors,
officers, advisers or consultants of the Company or (z) upon exercise of
conversion, exchange, purchase or similar rights issued, granted or given by the
Company and outstanding as of the date of this Agreement.
<PAGE>
(j) Certain Information. From the date hereof to the SEC Effective
Date, the Company shall provide to Och-Ziff Capital Management L.L.C.
information concerning all material developments relating to the matter
described in Section 3(g) hereof of which the Company has knowledge during such
period.
5. TRANSFER OF PREFERRED SHARES; CONVERSION PROCEDURE.
(a) Limitation on Transfer Agent Instructions; Certain Transfers. The
Company warrants that no instruction contrary to the instructions referred to in
Section 3(l) of the Registration Rights Agreement will be given by the Company
to the Company's transfer agent for the Common Stock with respect to the Common
Shares and that the Common Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in the
Registration Rights Agreement. If the Buyer provides the Company with an opinion
of counsel that registration of a proposed resale by the Buyer of any of the
Preferred Shares is not required under the 1933 Act and which opinion otherwise
meets the requirements of clause (1)(B) of Section 4(a) of this Agreement and
such proposed transfer otherwise meets the requirements of the Certificate of
Designations, the Company shall permit the transfer of such Preferred Shares.
(b) Conversion Procedure. In connection with the exercise of
conversion rights relating to the Preferred Shares, the Buyer shall complete,
sign and furnish to the Company by personal delivery, courier or telephone line
facsimile transmission (in each case to be effective on receipt and in the case
of telephone line facsimile transmission, the original conversion certificate
shall promptly be sent to the Company by overnight courier service) a conversion
certificate in the form attached hereto as Annex V, which shall satisfy the
requirements of Section 8(c) of the Certificate of Designations.
6. STOCK DELIVERY INSTRUCTIONS.
The certificates for the Preferred Shares shall be delivered by the
Company to the Company Escrow Agent pursuant to Section 1(b) hereof on a
delivery against payment basis upon release from escrow in accordance with
Section 7(b).
7. CLOSING DATE; ESCROW RELEASES.
(a) The date and time of the issuance and sale of the Preferred Shares
(the "Closing Date") shall be 12:00 noon, New York City time, on the date which
is two New York Stock Exchange trading days after the date on which the Buyer
has deposited the aggregate subscription price for the Preferred Shares with the
<PAGE>
Buyer Escrow Agent in accordance with Section 1(c) hereof, or such other
mutually agreed to time. The closing shall occur on the Closing Date at the Law
Offices of Brian W Pusch, Penthouse Suite, 29 West 57th Street, New York, New
York. The Buyer and the Company agree that, upon completion of the closing on
the Closing Date, the Preferred Shares shall be deemed to be outstanding for all
purposes and the escrow created by the Company Escrow Instructions shall serve
so that all acts necessary for the issuance of the Preferred Shares shall be
deemed to have occurred on the Closing Date and only delivery of the Preferred
Shares to the Buyer shall not have occurred; provided, however, that the
Preferred Shares shall not be deemed fully paid until the purchase price
therefor as provided in this Agreement shall have been released to the Company
from the escrow created by the Buyer Escrow Instructions, which release shall
occur only as provided herein, and the Buyer shall have no liability for payment
of such purchase price other than in accordance with the Buyer Escrow
Instructions.
(b)(1) Promptly after the SEC Effective Date, the Company shall notify
the Buyer (the "Company Notice") that the SEC Effective Date has occurred.
Promptly, but in no event later than two New York Stock Exchange trading days
after the Company Notice has been given to the Buyer, the Company shall notify
the Company Escrow Agent that the SEC Effective Date has occurred. If
(A) no Insolvency Event (as defined herein) shall have occurred and be
continuing;
(B) the representations and warranties of the Company in this
Agreement made on the date of this Agreement and on the Closing Date shall
have been true and correct in all material respects on the date of this
Agreement and on the Closing Date;
(C) the Company shall have performed on or before the SEC Effective
Date all covenants and agreements of the Company required to be performed
on or before the SEC Effective Date;
(D) the Company shall have furnished to the Buyer a written opinion,
dated the SEC Effective Date, addressed to the Buyer, of Cahill Gordon &
Reindel, special counsel for the Company substantially in the form attached
hereto as Annex VI and a written statement of Christopher J. Margolin, Vice
President, General Counsel and Secretary of the Company substantially in
the form attached hereto as Annex VII ; and
(E) the Company shall have furnished to the Buyer a certificate of the
Company, dated the SEC Effective Date, signed by any two of the five
executive officers of the
<PAGE>
Company, to the effect that the signers of such certificate have examined
the Registration Statement and related prospectus and this Agreement and
that:
(i) the representations and warranties of the Company in this
Agreement made on the date of this Agreement and on the Closing Date were
true and correct in all material respects on the date of this Agreement and
on the Closing Date, and the Company has performed on or before the SEC
Effective Date all covenants and agreements of the Company required to be
performed on or before the SEC Effective Date; and
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the Company's knowledge, threatened by the SEC.
then promptly, but in no event later than two New York Stock Exchange trading
days after the later of (x) the date the Company Notice has been given to the
Buyer, and (y) the date of delivery to the Buyer of the documents specified in
the foregoing clauses (D) and (E), the Buyer shall notify the Buyer Escrow Agent
that (1) the SEC Effective Date has occurred and (2) all conditions precedent to
the release of the portion of the Escrow Funds (as defined in the Buyer Escrow
Instructions) to be released to the Company have been satisfied or waived. The
Company and the Buyer agree that, on the latest of (1) the date of receipt by
the Company Escrow Agent of such notice from the Company, (2) the date of
receipt by the Buyer Escrow Agent of such notice from the Buyer, (3) the date of
receipt by the escrow agent acting on behalf of the Company in connection with
the Other Subscription Agreements of the latest of the notices from the Company
to release the securities held by such escrow agents to the buyers under the
Other Subscription Agreements, and (4) the date of receipt by the escrow agent
acting on behalf of the buyers in connection with the Other Subscription
Agreements of the latest of the notices from such buyers to release funds held
by such escrow agents to the Company, or as promptly as practicable thereafter,
the certificate(s) for the Preferred Shares shall be released to the Buyer in
accordance with Section 1 of the Company Escrow Instructions and the portion of
the Escrow Funds to be released to the Company shall be released to the Company
in accordance with Section 1 of the Buyer Escrow Instructions.
(2) As used herein, the term "Insolvency Event" means
(A) a decree or order for relief by a court having jurisdiction in the
premises shall have been entered in respect of the Company in an
involuntary case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency
<PAGE>
or other similar law, including any such decree or order appointing a
custodian or receiver or liquidator or trustee or assignee of the Company
or of all or a major part of its property, or for the winding-up or
liquidation of its affairs (or any petition seeking such decree or order
shall have been filed with such a court and shall not have been withdrawn
or dismissed); or
(B) the Company shall commence a voluntary case under the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law, or shall
consent to the appointment of or taking possession by a custodian or
receiver or liquidator or trustee or assignee of the Company or of all or a
major part of its property, or shall make an assignment for the benefit of
creditors.
(3) Notwithstanding any other provision of this Agreement or any of
the other documents contemplated hereby, if on the date on which the Escrow
Funds are to be released to the Company and the certificate(s) for the Preferred
Shares are to be released to the Buyer any Preferred Shares would not, by reason
of the provisions of Section 8(d)(1) of the Certificate of Designations, be
convertible into shares of Common Stock had all Preferred Shares been
surrendered for conversion into Common Stock on such date (determined without
regard to the proviso to the second sentence of Section 8(a) of the Certificate
of Designations), then the number of Preferred Shares to be released to the
Buyer from the escrow created by the Company Escrow Instructions shall be
reduced pro rata with all other outstanding shares of Series F Preferred Stock
and shares of Series F Preferred Stock which the Company has so agreed to issue
and the amount of Escrow Funds to be released to the Company shall be reduced
accordingly so that the provisions of Section 8(d)(1) of the Certificate of
Designations would not so limit the conversion of any such shares of Series F
Preferred Stock on such date. If the provisions of this Section 7(b)(3) become
applicable, the Company shall instruct the Company Escrow Agent to reduce the
number of Preferred Shares to be released to the Buyer as provided herein (and
shall arrange to subdivide appropriately the certificate(s) for Preferred Shares
held by the Company Escrow Agent to permit such reduction), to release such
reduced number of Preferred Shares to the Buyer and to release the balance of
the shares of Series F Preferred Stock held by the Company Escrow Agent to the
Company, and the Buyer shall instruct the Buyer Escrow Agent to reduce the
amount of the Escrow Funds to be released to the Company as provided herein, to
release such reduced amount of Escrow Funds to the Company and to release the
balance of the Escrow Funds to the Buyer.
(c) If the SEC Effective Date does not occur within 90 days after the
Closing Date, the Buyer shall have the right,
<PAGE>
exercisable by notice to the Company pursuant to this Agreement and to the Buyer
Escrow Agent pursuant to the Buyer Escrow Instructions given at any time prior
to the SEC Effective Date, to terminate the escrow under the Buyer Escrow
Instructions as to all or any portion of the Preferred Shares, whereupon, the
Company shall be entitled to release of the certificates for the Preferred
Shares as to which the escrow created by the Buyer Escrow Instructions is to be
so terminated from the escrow created by the Company Escrow Instructions and the
Buyer shall be entitled to release of an amount equal to all or such portion of
the subscription price for the Preferred Shares as to which the escrow created
by the Buyer Escrow Instructions is to be so terminated, together with interest
thereon as contemplated by the Buyer Escrow Instructions, from the escrow
created by the Buyer Escrow Instructions, and (x) if the Buyer has so notified
the Company and the Buyer Escrow Agent that it wishes to terminate the escrow
created by the Buyer Escrow Instructions with respect to all of the Preferred
Shares, then the Company and the Buyer shall have no further obligations or
liabilities to one another under this Agreement or in connection with the
transactions contemplated hereby and (y) if the Buyer has so notified the
Company and the Buyer Escrow Agent that it wishes to terminate the escrow
created by the Buyer Escrow Instructions with respect to a portion of the
Preferred Shares, then the Company and the Buyer shall have no further
obligations or liabilities to one another in respect of the Preferred Shares as
to which the escrow created by the Buyer Escrow Instructions is so terminated
under this Agreement or in connection with the transactions contemplated hereby.
If the Buyer exercises its right to terminate the escrow created by the Buyer
Escrow Instructions with respect to a portion of the Preferred Shares, then the
Company shall promptly deliver to the Company Escrow Agent a substitute
certificate or certificates for Preferred Shares in such denomination or
denominations as shall be required to accommodate the reduction in the number of
Preferred Shares to be released to the Buyer from the escrow created by the
Company Escrow Instructions.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the
Preferred Shares to the Buyer pursuant to this Agreement is conditioned upon:
(a) The receipt and acceptance by the Company of the Buyer's
subscription for the Preferred Shares as evidenced by execution of this
Agreement by the Company and the return of an executed copy hereof to the Buyer
or its legal counsel;
(b) Delivery by the Buyer to the Buyer Escrow Agent of good funds as
payment in full of an amount equal to the
<PAGE>
subscription price for the Preferred Shares in accordance with Section 1(c)
hereof;
(c) No legal action, suit or proceeding shall be pending or threatened
which (i) demands damages for any alleged liability asserted to arise by reason
of the transaction contemplated by this Agreement and/or (ii) seeks to restrain
or prohibit the transactions contemplated by this Agreement;
(d) The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement and in the Questionnaire as
if made on the Closing Date and the performance by the Buyer on or before the
Closing Date of all covenants and agreements of the Buyer required to be
performed on or before the Closing Date; and
(e) The Company shall have received a letter, dated the Closing Date,
from the Placement Agent addressed to the Company in the form attached hereto as
Annex VIII.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Shares is conditioned upon:
(a) Delivery by the Company to the Company Escrow Agent of the
certificates for the Preferred Shares in accordance with this Agreement;
(b) No legal action, suit or proceeding shall be pending or threatened
which (i) demands damages for any alleged liability asserted to arise by reason
of the transaction contemplated by this Agreement and/or (ii) seeks to restrain
or prohibit the transactions contemplated by this Agreement;
(c) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
such Closing Date;
(d) The receipt by the Buyer of confirmation of the filing with the
Secretary of State of the State of Delaware of the Certificate of Designations
in the form attached hereto as Annex I; and
(e) On the Closing Date, the Buyer having received opinions of counsel
for the Company, dated the Closing Date, substantially in the forms of Annex IX
and Annex X attached hereto.
<PAGE>
10. MISCELLANEOUS.
(a) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California without regard to principles of
conflicts of laws.
(b) This Agreement may be executed in counterparts and by the parties
hereto on separate counterparts, all of which together shall constitute one and
the same instrument. A facsimile transmission of this signed Agreement bearing a
signature on behalf of a party hereto shall be legal and binding on such party.
(c) The headings and captions of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement.
(f) Any notices required or permitted to be given under the terms of
this Agreement shall be in writing and shall be delivered personally (which
shall include telephone line facsimile transmission) or by courier and shall be
effective upon receipt, in each case addressed to a party at such party's
address shown in the introductory paragraph or on the signature page of this
Agreement (facsimile number (510) 649-7571, in the case of the Company, and
facsimile number ______________, in the case of the Buyer) or such other address
as a party shall have provided by notice to the other party in accordance with
this provision. The Buyer hereby designates as its address and telephone line
facsimile number for any notice required or permitted to be given to the Buyer
pursuant to the Certificate of Designations the address and facsimile number
shown on the signature page of this Agreement, until the Buyer shall designate
another address or telephone line facsimile number for such purpose by notice to
the Company.
(g) This Agreement shall be binding on the parties hereto and their
respective successors and permitted assigns. Neither the Company nor the Buyer
may assign its rights or obligations under this Agreement without the prior
written consent of the other party hereto.
<PAGE>
(h) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
or one of its officers thereunto duly authorized as of the date set forth below.
NUMBER OF SHARES OF SERIES F PREFERRED STOCK: __________
PRICE PER SHARE: $10,000.00
AGGREGATE SUBSCRIPTION PRICE: $_______________
For purposes of Section 8(a) of the Certificate of Designations, the
Buyer hereby agrees to the following percentage as the Buyer's Restriction
Percentage:
Please Check One:
---
/__/ 4.9 percent
---
/__/ 9.9 percent
If no box is checked, there will be no such limit.
NAME OF BUYER: ______________________
SIGNATURE ____________________________
Title: _______________________________
Date: _______________________________
Address: __________________________
__________________________
__________________________
Facsimile Number: ____________________
This Agreement has been accepted as of the date set forth
below.
XOMA CORPORATION
By: ______________________________
Peter Davis
Vice President, Finance and
Chief Financial Officer
Date: ____________________________
<PAGE>
Annex IV
to
Preferred Stock
Subscription
Agreement
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of September 24, 1996
(this "Agreement"), is made by and between XOMA CORPORATION, a Delaware
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Preferred Stock Subscription
Agreement, dated as of September 20, 1996, between the Initial Investor and the
Company (the "Subscription Agreement"), the Company has agreed, upon the terms
and subject to the conditions of the Subscription Agreement, to issue and sell
to the Initial Investor shares (the "Preferred Shares") of Non-Voting Cumulative
Convertible Preferred Stock, Series F, $.05 par value (the "Preferred Stock"),
of the Company, which Preferred Shares shall be convertible into shares (the
"Conversion Shares") of Common Stock, $.0005 par value (the "Common Stock"), of
the Company in accordance with the Certificate of Designations pursuant to
Section 151 of the General Corporation Law of the State of Delaware relating to
the Preferred Stock (the "Certificate of Designations");
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws with respect to the
Conversion Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investor" means the Initial Investor and any transferee or
assignee who is a Permitted Transferee (as defined in
<PAGE>
Section 9 hereof) and agrees to become bound by the provisions of this Agreement
in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "Registrable Securities" means the Conversion Shares and any
shares of Common Stock issued by the Company to any Investor in payment of
dividends on the Preferred Shares, in each case together with the related
Preferred Stock Purchase Rights, and any stock or other securities into which or
for which the Common Stock may hereafter be changed, converted or exchanged by
the Company or its successor, as the case may be, and any other securities
issued to holders of such Common Stock (or such shares into which or for which
such shares are so changed, converted or exchanged) upon any reclassification,
share combination, share subdivision, share dividend, merger, consolidation or
similar transaction or event.
(iv) "Registration Statement" means a registration statement of the
Company under the Securities Act.
(b) Capitalized terms defined in the introductory paragraph of or the
recitals to this Agreement have the respective meanings provided therein.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Subscription Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare, and on or prior
to the date which is 20 days after the Closing Date, file with the SEC a
Registration Statement on Form S-3 covering at least [INSERT PRO RATA PORTION OF
6,686,750] shares of Common Stock as Registrable Securities, and which
Registration Statement shall state that, in accordance with Rule 416 under the
Securities Act, such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of the Preferred Shares to prevent dilution resulting from stock
splits, stock dividends or similar transactions or by reason of changes in the
conversion price of the Preferred Shares in accordance with the terms thereof.
If at any time the number of shares included in the Registration Statement
required to be filed as provided in the first sentence of this Section 2(a)
shall not be sufficient to cover the number of shares of Common Stock issuable
on conversion in full of the unconverted
<PAGE>
Preferred Shares, then promptly, but in no event later than 15 days after such
insufficiency shall occur, the Company shall file with the SEC an additional
Registration Statement on Form S-3 or other applicable form covering such number
of shares of Common Stock as shall be sufficient to permit such conversion. For
all purposes of this Agreement such additional Registration Statement shall be
deemed to be the Registration Statement required to be filed by the Company
pursuant to Section 2(a) of this Agreement, and the Company and the Investors
shall have the same rights and obligations with respect to such additional
Registration Statement as they shall have with respect to the initial
Registration Statement required to be filed by the Company pursuant to this
Section 2(a).
(b) Eligibility for Form S-3. The Company represents and warrants that
it meets the requirements for the use of Form S-3 for registration of the resale
by the Initial Investor and any Investor of the Registrable Securities and the
Company shall file all reports required to be filed by the Company with the SEC
in a timely manner so as to maintain such eligibility for the use of Form S-3
for so long as the Company is required to maintain effectiveness of the
Registration Statement in accordance with Section 3(a).
3. Obligations of the Company. In connection with the registration of
the Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than 20 days
after the Closing Date, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter to use its
commercially reasonable best efforts to cause each Registration Statement
relating to Registrable Securities to become effective as soon as practicable
after such filing (the date of such effectiveness being the "SEC Effective
Date"), and keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is three years after the Closing Date (or, if all
of the Preferred Shares have been converted into shares of Common Stock, such
date after which each Investor may sell all Registrable Securities without
registration under the Securities Act pursuant to Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit the Investors to sell securities of the Company to the public
without registration ("Rule 144"), free of any limitation on the volume of such
securities which may be sold in any period), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any 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 in which they were made, not
misleading;
<PAGE>
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement (the "Prospectus")
as may be necessary to keep the Registration Statement effective, and the
Prospectus current, at all times until such date as is three years after the
Closing Date (or such earlier date as shall be permitted under Section 3(a)),
and, during such period, comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement;
(c) furnish to each Investor whose Registrable Securities are included
in the Registration Statement and its legal counsel, (1) promptly after the same
is prepared and publicly distributed, filed with the SEC or received by the
Company, one copy of the Registration Statement and any amendment thereto, each
Prospectus and each amendment or supplement thereto, each letter written by or
on behalf of the Company to the SEC or the staff of the SEC and each item of
correspondence from the SEC or the staff of the SEC relating to such
Registration Statement (other than any portion of any thereof which contains
information for which the Company has sought confidential treatment) and (2)
such number of copies of a Prospectus and all amendments and supplements thereto
and such other documents, as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor;
(d) use commercially reasonable best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such securities or blue sky laws of such jurisdictions as the Investors who hold
a majority in interest of the Registrable Securities being offered reasonably
request, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof at all
times until such date as is three years after the Closing Date, (iii) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times until such date as is three years after
the Closing Date and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale by the Investors in
such jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto (I) to qualify to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings
<PAGE>
that cause more than nominal expense or burden to the Company or (V) to make any
change in its charter or by-laws, which in each case the Board of Directors of
the Company determines to be contrary to the best interests of the Company and
its stockholders;
(e) as promptly as practicable after becoming aware of such event,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits 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, and use its commercially reasonable best efforts promptly
to prepare a supplement or amendment to the Registration Statement to correct
such untrue statement or omission, and deliver a number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
(f) as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold of the issuance
by the SEC of any stop order or other suspension of effectiveness of the
Registration Statement at the earliest possible time;
(g) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold (and identified in writing to the Company by
such Investors prior to the Closing Date) to review the Registration Statement
and all amendments and supplements thereto at least two business days (or such
shorter period as may reasonably be specified by the Company) prior to their
filing with the SEC;
(h) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earning statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
effective date of the Registration Statement;
(i) make available for inspection by any Investor and any attorney,
accountant or other agent retained by any such Investor (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably necessary to enable each Inspector to exercise its due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information which any Inspector may reasonably request for purposes
of such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not
<PAGE>
make any disclosure (except to an Investor) of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction or (ii) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(i). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. The Company shall hold in confidence
and shall not make any disclosure of information concerning an Investor provided
to the Company pursuant to this Agreement unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this or any other agreement. The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Investor, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, such
information;
(j) use its commercially reasonable best efforts to cause all the
Registrable Securities covered by the Registration Statement as of the SEC
Effective Date to be listed on the Nasdaq National Market or such other
principal securities market on which securities of the same class or series
issued by the Company are then listed or traded;
(k) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the SEC Effective Date;
(l) cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be
offered pursuant to the
<PAGE>
Registration Statement and enable such certificates to be in such denominations
or amounts as the Investors may reasonably request and registered in such names
as the Investors may request; and, within three business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an instruction substantially in the
form attached hereto as Exhibit 1 and an opinion of such counsel, if required by
the Company's transfer agent, in the form attached hereto as Exhibit 2; and
(m) take all other commercially reasonable actions necessary to
expedite and facilitate disposition by the Investor of the Registrable
Securities pursuant to the Registration Statement.
4. Obligations of the Investors. In connection with the registration
of the Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least ten (10)
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if any of such Investor's
Registrable Securities are eligible for inclusion in the Registration Statement.
If at least one (1) business day prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), such Investor will immediately
<PAGE>
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Investor's receipt of
the copies of the supplemented or amended Prospectus, or notice of lifting of a
stop order or re-effectiveness of the Registration Statement, as the case may
be, contemplated by Section 3(e) or 3(f) and, if so directed by the Company,
such Investor shall deliver to the Company (at the expense of the Company) or
destroy (and deliver to the Company a certificate of destruction) all copies in
such Investor's possession (other than permanent file copies), of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. Expenses of Registration. All reasonable expenses incurred in
connection with registrations, filings or qualifications pursuant to this
Agreement, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees and the fees and disbursements
of counsel for the Company, but excluding (a) fees and expenses of investment
bankers retained by any Investor, (b) brokerage commissions incurred by any
Investor and (c) the fees and expenses of counsel for the Investors, shall be
borne by the Company.
6. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations in the
Registration Statement, or any post-effective amendment thereof, or any
prospectus included therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any prospectus (as amended or
supplemented, if the Company files
<PAGE>
any amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation under the Securities Act, the Exchange
Act or any state securities law (the matters in the foregoing clauses (i)
through (iii) being, collectively, "Violations"). Subject to the restrictions
set forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Investors and each such controlling person, promptly
as such expenses are incurred and are due and payable, for any documented and
reasonable legal fees or other documented and reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a) (I) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information relating to an Indemnified Person furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; and (II) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to indemnify and hold harmless, to
the same extent and in the same manner set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information relating to an Indemnified Person furnished to the Company by such
Investor
<PAGE>
expressly for use in connection with such Registration Statement; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim as does not
exceed the amount of the net proceeds to such Investor as a result of the sale
of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel reasonably satisfactory to the
Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay for only one separate legal counsel for the
Investors; such legal counsel shall be selected by the Investors holding a
majority in interest of the Registrable Securities included in the Registration
Statement to which the Claim relates. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is
<PAGE>
prejudiced in its ability to defend such action. The indemnification required by
this Section 6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law. In determining
the amount of contribution to which the respective parties are entitled, there
shall be considered the relative fault of each party, the parties' relative
knowledge of and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate under
the circumstances; provided, however, that (a) no contribution shall be made
under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6, (b) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation and (c) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to
<PAGE>
this Agreement shall be automatically assigned by an Investor to (1) any
Permitted Transferee (as defined in the Certificate of Designations) of
Preferred Shares, unless the Company declines to consent to such transfer by
reason of the requirement to amend the Registration Statement by reason of such
transfer, or (2) any Eligible Transferee (as defined herein) of Registrable
Securities in connection with the bona fide transfer for value by such Investor
of at least 375,000 shares of Common Stock (such number to be subject to
equitable adjustment for stock splits, stock dividends, combinations,
reclassifications, reorganizations and similar events), in either such case only
if: (a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. "Eligible Transferee" means a person which
(1) is an "accredited investor" (as defined in Regulation D under the Securities
Act) and (2) is a person the assignment or transfer to which is consented to by
the Company, such consent not to be unreasonably withheld (it being understood
that a proposed assignment by a holder (x) to a competitor or potential
competitor of the Company, (y) to a person which the Company determines in good
faith is accumulating or is likely to accumulate ownership of shares of Common
Stock for hostile or unfriendly purposes or proposes to acquire shares of
Preferred Stock or Common Stock for a purpose adverse to the interests of the
Company or its stockholders or (z) which the Company determines would require
amendment of the Registration Statement, may constitute a basis for withholding
such consent).
10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of
<PAGE>
record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities with
respect to the same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by telephone line facsimile transmission or other means)
or sent by certified mail, return receipt requested, properly addressed and with
proper postage pre-paid (i) if to the Company, at 2910 Seventh Street, Berkeley,
California 94710, Attention: Vice President, General Counsel and Secretary,
telephone line facsimile number (510) 649-7571, (ii) if to the Initial Investor,
at the address set forth under its name in the Subscription Agreement and (iii)
if to any other Investor, at such address as such Investor shall have provided
in writing to the Company, or at such other address as each such party furnishes
by notice given in accordance with this Section 11(b), and shall be effective,
when personally delivered or sent by telephone line facsimile, upon receipt and,
when so sent by certified mail, four days after deposit with the United States
Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of California applicable to agreements
made and to be performed entirely within such State. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
<PAGE>
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company to
perform its obligations under this Agreement, including, without limitation, the
Company's obligations under Section 3(l), or any delay in such performance could
result in direct damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct and consequential
damages caused by any such failure or delay.
(j) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day and
year first above written.
XOMA CORPORATION
By________________________________
Peter Davis
Vice President, Finance
and Chief Financial Officer
INITIAL INVESTOR:
NAME:
By_________________________________
Name:
Title:
<PAGE>
EXHIBIT 1
to
Registration
Rights Agreement
[Company Letterhead]
[Date]
[Name and address of Transfer Agent]
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction
to you (1) to issue shares and the related Preferred Stock Purchase Rights (the
"Conversion Shares") of Common Stock, $.0005 par value (the "Common Stock"), of
XOMA Corporation, a Delaware corporation (the "Company"), to or upon the order
of the registered holders from time to time upon conversion of shares of
Non-Voting Cumulative Convertible Preferred Stock, Series F, $.05 par value (the
"Preferred Stock"), issued by the Company in such amounts as specified by the
Company from time to time [and (2) to transfer or re-register the certificates
for the shares of Common Stock represented by certificate numbers _______ and
_______ for an aggregate of _______ shares (the "Outstanding Shares") of Common
Stock presently registered in the name of [Name of Investor] and heretofore
issued on conversion of shares of Preferred Stock upon surrender of such
certificates to you, notwithstanding the legend appearing on such certificates.*
Certificates for the Conversion Shares should not bear any restrictive legend
and should not be subject to any stop-transfer restriction. [The transfer or
re-registration of the certificates for the Outstanding Shares by you should be
made at such time as you are requested to do so by the record holder of the
Outstanding Shares. The certificate issued upon such transfer or re-registration
should be registered in such name as requested by the holder of record of the
certificate surrendered to you and should not bear any legend which would
restrict the transfer of the shares represented thereby. In addition, you are
hereby directed to remove any stop-transfer instruction relating to the
Outstanding Shares.]*
Contemporaneously with the delivery of this letter, the Company is
delivering to you an opinion of Christopher J. Margolin, Vice President, General
Counsel and Secretary as to registration of [the Outstanding Shares and]* the
Conversion Shares under the Securities Act of 1933, as amended.
- - ---------------
* Delete if no conversions of Preferred Stock have occurred
before this instruction is given.
<PAGE>
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
XOMA CORPORATION
By: _______________________________
Name:
Title:
Enclosures
cc: [Name of Investor]
<PAGE>
EXHIBIT 2
to
Registration
Rights Agreement
[Date]
[Name and address
of transfer agent]
XOMA CORPORATION
Shares of Common Stock
Ladies and Gentlemen:
I am Vice President, General Counsel and Secretary of XOMA
Corporation, a Delaware corporation (the "Company"), and I understand that [Name
of Investor] (the "Holder") has acquired (1) shares (the "Preferred Shares") of
Non-Voting Cumulative Convertible Preferred Stock, Series F, $.05 par value (the
"Preferred Stock"), of the Company [and (2) an aggregate of __________ shares
(the "Shares") of the Company's Common Stock, $.0005 par value (the "Common
Stock"), represented by Certificate Nos. __________ and __________ issued upon
conversion of shares of Preferred Stock.]* The Preferred Shares were purchased
by the Holder pursuant to a Preferred Stock Subscription Agreement, dated as of
__________, 1996, between the Holder and the Company. Pursuant to a Registration
Rights Agreement, dated as of ___________, 1996, between the Company and the
Holder (the "Registration Rights Agreement") entered into in connection with the
purchase by the Holder of the Preferred Shares, the Company agreed with the
Holder, among other things, to register the [Shares and]* shares of Common Stock
issuable upon the conversion of the shares of Preferred Stock (the "Conversion
Shares") under the Securities Act of 1933, as amended (the "Securities Act"),
upon the terms provided in the Registration Rights Agreement. Pursuant to the
Registration Rights Agreement, on __________, the Company filed a Registration
Statement on Form S-__ (File No. 333-__________) (the "Registration Statement")
with the Securities and Exchange Commission (the "SEC") relating to [the Shares
and]* the Conversion Shares, which names the Holder as a selling stockholder
thereunder.
[Other introductory and scope of examination language to be inserted]
- - --------------
* Delete if no conversions of Preferred Stock have occurred
before this opinion is delivered.
<PAGE>
Based on the foregoing, I am of the opinion that [the Shares and]* the
Conversion Shares have been registered under the Securities Act.
[Other appropriate language to be included.]
Very truly yours,
Christopher J. Margolin, Esq.
Vice President, General
Counsel and Secretary
cc: [Name of Investor]
- - -------------
* Delete if no conversions of Preferred Stock have occurred
before this opinion is delivered.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
the incorporation by reference in this Registration Statement 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 refer-
ences to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
San Francisco, California
September 24, 1996
EXHIBIT 23.2
[LETTERHEAD OF MARSHALL, O'TOOLE, GERSTEIN, MURRAY & BORUN]
September 24, 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 con-
sents to the disclosure of our relationship as patent counsel to
XOMA Corporation (the "Company") in the Company's Registration
Statement on Form S-3 (the "Registration Statement"), and in par-
ticular 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
