UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 13, 1997
XOMA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-14710 94-2756657
(Commission File Number) (IRS Employer Identification No.)
2910 Seventh Street, Berkeley, California 94710
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (510) 644-1170
None
(Former name or former address, if changed since last report)
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Item 5. Other Events
On August 14, 1997, XOMA Corporation issued the announcement
attached hereto as Exhibit 1, which is incorporated herein by reference.
Item 7. Exhibits
1. Press Release dated August 14, 1997
2. Certificate of Designation of Convertible Preferred Stock, Series G
3. Form of Common Stock Purchase Warrant
4. Form of Convertible Preferred Stock Purchase Agreement by and
between XOMA Corporation and the purchasers of Series G Preferred Stock
5. Form of Registration Rights Agreement by and between XOMA Corporation
and the purchasers of Series G Preferred Stock
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: August 18, 1997 XOMA CORPORATION
By:/s/ Peter B. Davis
-------------------------------------
Peter B. Davis
Vice President, Finance and
Chief Financial Officer
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EXHIBIT INDEX
Number Description
1. Press Release dated August 14, 1997
2. Certificate of Designation of Convertible Preferred Stock, Series G
3. Form of Common Stock Purchase Warrant
4. Form of Convertible Preferred Stock Purchase Agreement by and between
XOMA Corporation and the purchasers of Series G Preferred Stock
5. Form of Registration Rights Agreement by and between XOMA Corporation and
the purchasers of Series G Preferred Stock
EXHIBIT 1
XOMA REPORTS SECOND QUARTER 1997 FINANCIAL POSITION
Outlines progress in Neuprex(TM) and clinical hull24 studies
Berkeley, CA -- August 14, 1997 -- XOMA Corporation (Nasdaq: XOMA) today
announced financial results for the second quarter of 1997.
XOMA's net loss for the three months ended June 30, 1997 was $8.7 million ($0.22
per share) compared with $5.0 million ($0.16 per share) in the second quarter of
1996. The difference between the two quarters reflects a one-time $3.0 million
revenue item from a technology license in second quarter 1996, as well as
increased R&D spending on Neuprex(TM) clinical trials and on hull24 development.
The company's cash and short-term investments at June 30, 1997 totaled $31.4
million.
Financing
Today XOMA also concluded a private financing for $12.5 million in the form of
5% convertible preferred stock. The same investors have also committed to
provide additional financing of up to $12.5 million at XOMA's option, subject to
certain conditions. The principal investors include Southbrook International
Investments, Ltd; HBK Investments, LP; the Brown Simpson Strategic Growth Fund,
LP; and an affiliate of Credit Suisse First Boston. Brown Simpson Asset
Management, LLC served as advisor to the investors in connection with the
transaction. Shipley Raidy Capital Partners, LP, acted as placement agent on
behalf of XOMA.
Conversions to common stock will be based on the price of XOMA common stock at
the time of conversion. There is no initial discount on the conversion price,
but a discount of 2% will be added for each month the preferred stock is held,
up to a maximum discount of 12%. No conversions will be permitted below a price
of $7.80 for the first 60 days. The maximum conversion price for the first six
months is $9.10. There are certain restrictions on the volume of sales of
underlying common stock by the investors. The investors also received three-year
warrants to purchase up to a total of 432,000 shares at a price of $10.00. The
additional funding commitment also provides for limits on conversion price and
trading and additional warrants, all based on the market price of XOMA common
stock at the time of such funding is provided.
"This financing is consistent with our stated intention to maintain at lease one
year's worth of cash while, so far as we can, minimizing dilution," said Peter
Davis, chief financial officer of XOMA. "The structure of the deal provides
important protection against conversions at prices unfavorable to the company,
and enables us to capture some benefit in the event of favorable future clinical
or other developments."
Clinical Progress
Following a recent meeting with the FDA to review results of its 400-patient
Phase II study in patients suffering hemorrhage due to trauma, XOMA is
finalizing its plans to start Phase III testing. Details of trial design will be
released at the start of the trial. Phase II trial results will be presented at
the Vienna Shock Forum, November 8-11, 1997, in Vienna, Austria.
Enrollment in the Phase III pivotal trial testing Neuprex(TM) in severe
pediatric meningococcemia patients has been higher than anticipated. This trial
should be completed in 1998. In addition, XOMA anticipates completing its
ongoing Phase II trial in patients undergoing partial hepatectomy by around
year-end 1997.
XOMA has started a new series of clinical studies investigating the use of
Neuprex(TM) in cystic fibrosis patients. These patients experience recurring
lung infections, and because of repeated antibiotic treatments, their bacteria
become resistant to most antibiotics. A "natural history" study, collecting data
from cystic fibrosis patients who receive the current standard of care, is near
completion, and a follow-on pharmacokinetics study is expected to begin
enrolling patients this fall.
A Phase IA single-dose, dose-escalation, study for the hull24 product (being
developed in collaboration with Genentech), is proceeding in psoriasis patients
and a Phase IB multi-dose escalation study should begin shortly. Additional
trial sites are being added in Canada to increase enrollment. An organ
transplant study is planned later in 1997.
"We are pleased with how the Neuprex(TM) and hull24 clinical programs are
proceeding," said Jack Castello, chairman, president and CEO of XOMA. "We're
particularly looking forward to the start of our two upcoming Neuprex(TM) trials
in trauma and cystic fibrosis."
Licensing Activities
In addition to previously announced agreements to license XOMA's bacterial cell
expression technology for production of recombinant pharmaceuticals, the company
concluded a licensing arrangement with the Hoechst Group during the second
quarter. This brings to eleven the number of such agreements.
In another development, IDEC Pharmaceuticals (Nasdaq: IDPH) recently received a
unanimous recommendation from an FDA advisory committee for marketing clearance
of IDEC's Rituxam(TM) antibody to treat relapsed or refractory, low-grade or
follicular non-Hodgkin's B-cell lymphoma. XOMA is entitled to royalties from
sales of Rituxan(TM), under an exclusive license relating to XOMA's patented
IgG1 anti-CD20 chimeric antibodies.
XOMA Corporation is a biopharmaceutical company developing products to treat
infectious diseases, serious infectious complications of traumatic injury and
surgery, and immunological disorders. XOMA is focused on accelerated development
of pharmaceutical products derived from BPI (bactericidal/
permeability-increasing protein). Discovered in white blood cells in 1978 by
Drs. Peter Elsbach and Jerrold Weiss at New York University Medical Center
(NYU), BPI is a host-defense protein that kills bacteria, binds to, neutralizes
and accelerates clearance of endotoxin (a poisonous component of gram-negative
bacteria), enhances the effectiveness of many antibiotics and inhibits
angiogenesis (the formation of blood vessels). XOMA is developing a pipeline of
pharmaceutical products from BPI that take advantage of the molecule's multiple
capabilities.
Neuprex(TM) (rBPI21) is the first product from the BPI drug development platform
to reach clinical trials. Additional BPI-derived products are in preclinical
development, including I-PREX(TM), a topical ophthalmic formulation of rBPI21,
and Mycoprex(TM), a BPI peptide antifungal product. The company also has
considerable experience in developing and testing products, including monoclonal
antibodies, for inflammatory diseases and immunological disorders. A humanized
monoclonal antibody produce, hu1124, is currently in development with Genentech
as a treatment for psoriasis and organ transplant rejection.
This press release contains certain forward-looking statements that involve a
number of risks and uncertainties. Actual events or results may differ
materially from the company's expectations. In addition to matters described in
the press release, results of pending or future clinical trials, actions by the
U.S. Food and Drug Administration, changes in the status of the company's
collaborative relationships, and future actions by the U.S. Patent and Trademark
Office, as well as the risk factors listed from time to time in the Company's
SEC reports (including but not limited to its Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997 and its Annual Report on Form 10-K for the year
ended December 31, 1996) may affect the actual results achieved by the company.
These forward-looking statements represent the company's judgment as of the date
of this release.
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<CAPTION>
Consolidated Financial Statements Follow
XOMA CORPORATION
CONDENSED BALANCE SHEETS
(in thousands)
June 30 December 31
1997 1996
<S> <C> <C>
Assets:
Cash and cash equivalents $ 183 $ 1,213
Short-Term investments 31,228 45,447
Notes, interest and other receivables 883 1,123
Other current assets 314 219
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Total current assets 32,608 48,002
Property and equipment 29,610 29,191
Accumulated depreciation (24,926) (24,093)
Assets held for sale 4,442 4,442
Other assets 133 133
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$41,867 $57,675
======= =======
Liabilities and Stockholders' Equity
Accounts payable $ 1,176 $ 1,778
Other current liabilities 7,593 6,901
----- -----
Total current liabilities 8,769 8,679
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Non-current Liabilities
Convertible debentures 14,273 13,545
Other non-current liabilities 432 703
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Total non-current liabilities 14,705 14,248
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Stockholder's equity 18,393 34,748
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$41,867 $57,675
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<TABLE>
<CAPTION>
XOMA CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
License and other revenue $ 281 $3,005 $938 $3,005
Product sales and royalties 12 13 29 30
----- ------ ---- ------
293 3,018 967 3,035
---- ----- --- ------
Expenses:
Research and development 7,776 6,625 15,246 12,610
General and administrative 1,449 1,756 3,027 3,020
----- ----- ------ ------
9,225 8,381 18,273 15,630
----- ----- ------ ------
Loss from Operations (8,932) (5,363) (17,306) (12,595)
Other Income (Expense):
Investment income 530 529 1,122 906
Other Income (expense) (263) (153) (495) (295)
----- ----- ----- -----
Net Loss $(8,665) $(4,987) $(16,679) $(11,984)
======== ======== ========= =========
Net Loss per Common Share $ (0.22) $ (0.16) $ (0.42) $ (0.40)
Weighted average common
shares outstanding 39,672 31,438 39,645 29,808
</TABLE>
EXHIBIT 2
CERTIFICATE OF DESIGNATION OF
CONVERTIBLE PREFERRED STOCK, SERIES G
OF XOMA CORPORATION
The undersigned, Peter B. Davis and Christopher J. Margolin, hereby certify
that:
I. They are the duly elected and acting Vice President and
Secretary respectively, of XOMA Corporation, a Delaware corporation (the
"Company").
II. The Certificate of Incorporation of the Company
authorizes 1,000,000 shares of preferred stock, par value $.05 per share, of
which none are issued and outstanding.
III. The following is a true and correct copy of resolutions
duly adopted by the Board of Directors of the Company (the "Board of Directors")
at a meeting duly held on August 6, 1997, which constituted all requisite action
on the part of the Company for adoption of such resolutions.
RESOLUTIONS
WHEREAS, the Board of Directors is authorized to provide for
the issuance of the shares of preferred stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each such
series, and to fix the designations, powers, preferences and relative,
participating, optional or special rights of the shares of each such series and
the qualifications, limitations or restrictions thereof.
WHEREAS, the Board of Directors desires, pursuant to its
authority as aforesaid, to designate a new series of preferred stock, set the
number of shares constituting such series and fix the rights, preferences,
privileges and restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors
hereby designates a new series of preferred stock and the number of shares
constituting such series and fixes the rights, preferences, privileges and
restrictions relating to such series as follows:
Section 1. Designation, Amount and Par Value. The series of
preferred stock shall be designated as Convertible Preferred Stock, Series G
(the "Preferred Stock"), and the number of shares so designated shall be 1,250
(which shall not be subject to increase without the consent of the holders
hereof as provided in Section 3). Each share of Preferred Stock shall have a par
value of $.05 per share and a stated value of $10,000 per share (the "Stated
Value").
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Section 2. Dividends.
(a) Holders of Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors out of funds legally available
therefor, and the Company shall pay, cumulative dividends at the rate per share
(as a percentage of the Stated Value per share) equal to 5% per annum, payable,
in cash or shares of Common Stock (as defined in Section 7) at (subject to the
terms and conditions set fort herein) the option of the Company. Dividends on
the Preferred Stock shall be calculated on the basis of a 360-day year, shall
accrue daily commencing on the Original Issue Date (as defined in Section 7),
and shall be deemed to accrue from such date whether or not earned or declared
and whether or not there are profits, surplus or other funds of the Company
legally available for the payment of dividends. Accrued dividends of the
Preferred Stock shall be paid on the date on which such Preferred Stock is
converted, provided, that the Company shall have the option to pay dividends
more frequently as and when declared by the Board of Directors. The party that
holds the Preferred Stock on an applicable record date for any dividend payment
will be entitled to receive such dividend payment and any other accrued and
unpaid dividends which accrued prior to such dividend payment date, without
regard to any sale or disposition of such Preferred Stock subsequent to the
applicable record date but prior to the applicable dividend payment date. Except
as otherwise provided herein, if at any time the Company pays less than the
total amount of dividends then accrued on account of the Preferred Stock, such
payment shall be distributed ratably among the holders of the Preferred Stock
based upon the number of shares held by each holder. Payment of dividends on the
Preferred Stock is further subject to the provisions of Section 5(c)(i). The
Company shall provide the holders semi-annual notice of its intention to pay
dividends in cash or shares of Common Stock, semi-annually in arrears,
applicable to such share of Preferred Stock. Such notice shall be delivered to
all Holders not less than 10 Trading Days prior to June 30 and December 31 of
each year for so long as shares of Preferred Stock are outstanding. Provided
that the Company is in compliance with its obligations under this Certificate of
Designation, the Purchase Agreement and the Registration Rights Agreement,
notwithstanding any other provision of this Section 2, the Company may elect by
written notice mailed to the Holders of the Preferred Stock at their address
appearing on the records of the Company not later than the payment date for such
dividend, not to declare or make payment of the amount of any semi-annual
dividend to the holders of shares of Preferred Stock on the required date, in
which case the accrued and unpaid dividends shall be calculated and paid on the
Conversion Date for such shares of Preferred Stock.
(b) Notwithstanding anything to the contrary contained
herein, the Company may not issue shares of Common Stock in payment of dividends
(and must deliver cash in respect thereof) on the Preferred Stock if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay such dividends in shares of Common Stock;
(ii) the shares of Common Stock to be issued in respect
of such dividends are not registered for resale pursuant to an effective
registration statement that names the recipient of such dividend as a selling
stockholder thereunder and may not be sold without
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volume restrictions pursuant to Rule 144 promulgated under the Securities Act of
1933, as amended (the "Securities Act"), as determined by counsel to the Company
(which may be in-house counsel) pursuant to a written opinion letter, addressed
to the Company's transfer agent in the form and substance reasonably acceptable
to the holder;
(iii) the shares of Common Stock to be issued in respect
of such dividends are not listed on the Nasdaq National Market (or The New York
Stock Exchange) and any other exchange or quotation system on which the Common
Stock is then listed for trading;
(iv) the issuance of such shares would result in the
recipient thereof beneficially owning, in accordance with Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended, more than 4.999% of the
issued and outstanding shares of Common Stock;
(v) the Company has failed to timely satisfy its
obligations pursuant to any Conversion Notice (as defined in Section 5(a)(ii));
or
(vi) if the issuance of such shares would result in the
recipient thereof owning in excess of 19.99% of the issued and outstanding
shares of Common Stock.
(c) So long as any Preferred Stock shall remain outstanding,
neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as defined in
Section 7), nor shall the Company directly or indirectly pay or declare any
dividend or make any distribution (other than a dividend or distribution
described in Section 5) upon, nor shall any distribution be made in respect of,
any Junior Securities, nor shall any monies be set aside for or applied to the
purchase or redemption (through a sinking fund or otherwise) of any Junior
Securities or shares pari passu with the Preferred Stock, except for repurchases
effected by the Company on the open market, pursuant to a direct stock purchase
plan.
Section 3. Voting Rights. Except as otherwise provided herein
and as otherwise required by law, the Preferred Stock shall have no voting
rights. However, so long as any shares of Preferred Stock are outstanding, the
Company shall not and shall cause its subsidiary not to, without the affirmative
vote of the holders all of the shares of the Preferred Stock then outstanding,
(a) amend its certificate of incorporation, bylaws or other charter documents so
as to materially and adversely affect any dividend, conversion or transfer
rights of any Holder; (b) declare, authorize, set aside or pay any dividend or
other distribution with respect to the Common Stock except as permitted under
this Certificate of Designation and as would not materially and adversely affect
the rights of any Holder hereunder; (c) repay, repurchase or offer to repay,
repurchase or otherwise acquire shares of its Common Stock, except for
repurchases effected by the Company on the open market, pursuant to a direct
stock purchase plan; (d) authorize or create any class of equity or equity
equivalent security that ranks senior to the Preferred Stock; or (e) enter into
any agreement with respect to any of the foregoing.
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Section 4. Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a "Liquidation"),
the holders of Preferred Stock shall be entitled to receive out of the assets of
the Company, whether such assets are capital or surplus, for each share of
Preferred Stock an amount equal to the Stated Value plus all accrued but unpaid
dividends per share, whether declared or not, before any distribution or payment
shall be made to the holders of any Junior Securities, and if the assets of the
Company shall be insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders of Preferred Stock shall be distributed
among the holders of Preferred Stock ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were
paid in full. A sale, conveyance or disposition of all or substantially all of
the assets of the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, or a consolidation or merger of the Company with or into
any other company or companies shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Section 5. The Company shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each record holder of Preferred Stock.
Section 5. Conversion.
(a)(i) Each share of Preferred Stock (in minimum amounts of
$100,000 or such lesser amounts as any converting holder of Preferred Stock then
holds) shall be convertible into shares of Common Stock (subject to reduction
pursuant to Section 5(a)(iii) and Section 3.8 of the Purchase Agreement (as
defined in Section 7)) at the Conversion Ratio (as defined in Section 7) at the
option of the holder in whole or in part at any time after the Original Issue
Date. The holder shall effect conversions by surrendering the certificate or
certificates representing the shares of Preferred Stock to be converted to the
Company, together with the form of conversion notice attached hereto as Exhibit
A (the "Holder Conversion Notice"). Each Holder Conversion Notice shall specify
the number of shares of Preferred Stock to be converted and the date on which
such conversion is to be effected, which date may not be prior to the date the
holder delivers such Holder Conversion Notice by facsimile (the "Holder
Conversion Date"). If no Holder Conversion Date is specified in a Holder
Conversion Notice, the Holder Conversion Date shall be the date that the Holder
Conversion Notice is deemed delivered pursuant to Section 5(i). Subject to
Sections 5(b) and 5(a)(iii) hereof and Section 4.10 of the Purchase Agreement,
each Holder Conversion Notice, once given, shall be irrevocable. If the holder
is converting less than all shares of Preferred Stock represented by the
certificate or certificates tendered by the holder with the Holder Conversion
Notice, or if a conversion hereunder cannot be effected in full for any reason,
the Company shall promptly deliver to such holder (in the manner and within the
time set forth in Section 5(b)) a certificate for such number of shares as have
not been converted.
(ii) On or after the third anniversary of the Original
Issue Date, the Company may require the conversion of all or a portion of the
then outstanding and unconverted shares of Preferred Stock at the Conversion
Ratio (subject to reduction pursuant to Section 5(a)(iii)) by delivering to the
holder of such shares to be converted a notice in the form attached hereto as
Exhibit B (the "Company Conversion Notice"), provided, that, no such conversion
is permitted unless at the time of the delivery of the Company Conversion Notice
and on the
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Company Conversion Date (as defined below), (a) an Underlying Shares
Registration Statement covering the resale of the shares of Common Stock
issuable upon such conversion is effective, (b) the shares of Common Stock
issuable upon such conversion are listed for trading on the Nasdaq National
Market (or The New York Stock Exchange or any other principal exchange) and any
other exchange or quotation system on which the Common Stock is then listed for
trading and (c) the Company is in compliance with all of its obligations under
this Certificate of Designation, the Purchase Agreement and the Registration
Rights Agreement. Each Company Conversion Notice shall specify the number of
shares of Preferred Stock to be converted and the date on which such conversion
is to be effected, which date may not be prior to the day after the Company
delivers such Company Conversion Notice by facsimile (the "Company Conversion
Date"). If no Company Conversion Date is specified in a Company Conversion
Notice, the Company Conversion Date shall be the date that the Company
Conversion Notice is deemed delivered pursuant to Section 5(i). A Holder
Conversion Date and a Company Conversion Date are sometimes referred to herein
as the "Conversion Date" and a Holder Conversion Notice and a Company Conversion
Notice are sometimes referred to as a "Conversion Notice." Any conversion
pursuant to this Section 5(a)(ii) shall be subject to Section 5(b) with respect
to consequences of the Company's failure to deliver shares of Common Stock in
respect of a conversion under this Section. If the Company is converting less
than all shares of Preferred Stock represented by the certificate or
certificates tendered by the holder in response to a Company Conversion Notice,
or if a conversion hereunder cannot be effected in full for any reason, the
Company shall promptly deliver to such tendering holder (in the manner and
within the time set forth in Section 5(b)) a certificate for such number of
shares as have not been converted.
(iii) Certain Regulatory Approval. If on the Conversion
Date applicable to any conversion, (A) the Common Stock is then listed for
trading on the Nasdaq National Market, the American Stock Exchange or if the
rules of the Nasdaq Stock Market, Inc. are hereafter amended to extend or adopt
rules similar to Rule 4460(i) promulgated thereby (or any successor or
replacement provision thereof) to the Nasdaq SmallCap Market and the Company's
Common Stock is listed for trading on such market or exchange, (B) the
Conversion Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon conversion of all outstanding
shares of Preferred Stock, together with any shares of Common Stock previously
issued upon conversion of Preferred Stock and in respect of payment of dividends
hereunder, would equal or exceed 20% of the number of shares of Common Stock
outstanding on the Original Issue Date (the "Issuable Maximum"), and (C) the
Company has not previously obtained Shareholder Approval (as defined below),
then the Company shall issue to any holder so requesting conversion of Preferred
Stock its pro rata portion of the Issuable Maximum in the same ratio that the
number of shares of Preferred Stock held by any such holder bears to all shares
of Preferred Stock then outstanding and, with respect to any shares of Common
Stock that otherwise would have been issuable to such holder in respect of the
Conversion Notice at issue or in respect of payment of dividends hereunder in
excess of such holders pro rata portion of the Issuable Maximum (the "Surplus
Amount", the Company shall have the option to either (1) as promptly as
possible, but in no event later than 90 days after such Conversion Date, convene
a meeting of the holders of the Common Stock and use its reasonable efforts
(which may include, among other things, hiring a proxy solicitor) to obtain the
Shareholder Approval and the approval of the Company's Board of Directors or (2)
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redeem, from funds legally available therefor at the time of such redemption,
such holder's Surplus Amount of the Preferred Stock subject to such Conversion
Notice at a price per share equal to the product of (i) the average Per Share
Market Value for the five (5) Trading Days immediately preceding (x) the
Conversion Date or (y) the date of payment in full by the Company of such
redemption price, whichever is greater, and (ii) the Conversion Ratio calculated
on the Conversion Date; provided, however, that if the Company has elected to
obtain Shareholder Approval under clause (1) above, the holders of a majority of
the outstanding shares of Preferred Stock may request, in lieu of such meeting,
that the Company redeem each holder's Surplus Amount as set forth herein and
provided, further that if the Company fails for any reason to obtain such
Shareholder Approval within the time period set forth in (1) above, the Company
shall be obligated to redeem the Preferred Stock not converted as a result of
the provisions of this Section in accordance with the provisions of clause (2)
above, and in such case the interest contemplated by the immediately succeeding
sentence shall be deemed to accrue from the Conversion Date. If the holder has
requested that the Company redeem shares of Preferred Stock pursuant to this
Section and the Company fails for any reason to pay the redemption price under
clause (2) above within seven days after the Conversion Date, the Company will
pay interest on such redemption price at a rate of 15% per annum to the
converting holder of Preferred Stock, accruing from the Conversion Date until
the redemption price plus any accrued interest thereon is paid in full. The
entire redemption price, including interest thereon, shall be paid in cash.
"Shareholder Approval" means the approval by a majority of the total votes cast
on the proposal, in person or by proxy, at a meeting of the shareholders of the
Company held in accordance with the Company's Certificate of Incorporation and
by-laws, of the issuance by the Company of shares of Common Stock exceeding the
Issuable Maximum as a consequence of the conversion of Preferred Stock into
Common Stock at a price less than the greater of the book or market value on the
Original Issue Date as and to the extent required pursuant to Rule 4460(i) of
the Nasdaq Stock Market or Rule 713 of the American Stock Exchange (or any
successor or replacement provision thereof), as applicable.
(b) Not later than two Trading Days after receipt by the
Company of a properly completed and duly executed Conversion Notice and an
original share certificate representing the shares of Preferred Stock to be
converted, the Company will deliver to the holder (i) a certificate or
certificates which shall be free of restrictive legends and trading restrictions
(other than those required by Section 4.1(b) of the Purchase Agreement)
representing the number of shares of Common Stock being acquired upon the
conversion of shares of Preferred Stock (subject to reduction pursuant to
Section 5(a)(iii) and Section 3.8 of the Purchase Agreement), (ii) one or more
certificates representing the number of shares of Preferred Stock not converted,
(iii) a bank check in the amount of accrued and unpaid dividends (if the Company
has elected to pay accrued dividends in cash) and (iv) if the Company has
elected to pay accrued dividends in shares of Common Stock, certificates, which
shall be free of restrictive legends and trading restrictions (other than those
required by the Purchase Agreement), representing such number of Shares of
Common Stock as equals such dividend divided by the Conversion Price on the
Conversion Date; provided, however, that the Company shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon
conversion of any shares of Preferred Stock until certificates evidencing such
shares of Preferred Stock are delivered for conversion to the Company, or the
holder of such Preferred Stock notifies the Company that such certificates have
been lost, stolen or destroyed and provides a bond (or other adequate
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security) reasonably satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection therewith. If in the case of any
Conversion Notice such certificate or certificates, including for purposes
hereof, any shares of Common Stock to be issued on the Conversion Date on
account of accrued but unpaid dividends hereunder, are not delivered to or as
directed by the applicable holder by the second Trading Day after receipt by the
Company of a properly completed and duly executed Conversion Notice and an
original share certificate representing the shares of Preferred Stock to be
converted, the holder shall be entitled by written notice to the Company at any
time on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for conversion.
If the Company fails to deliver to the holder such certificate or certificates
pursuant to this Section, including for purposes hereof, any shares of Common
Stock to be issued on the Conversion Date on account of accrued but unpaid
dividends hereunder, prior to the fourth Trading Day after receipt by the
Company of a properly completed and duly executed Conversion Notice and an
original share certificate representing the shares of Preferred Stock to be
converted, the Company shall pay to such holder, in cash, as liquidated damages
and not as a penalty, $2,500 for each day after such fourth Trading Day until
such certificates are delivered. If the Company fails to deliver to the holder
such certificate or certificates pursuant to this Section prior to the 11th day
after receipt by the Company of a properly completed and duly executed
Conversion Notice and an original share certificate representing the shares of
Preferred Stock to be converted, the Company shall, at the holder's option (i)
redeem, from funds legally available therefor at the time of such redemption,
such number of shares of Preferred Stock then held by such holder, as requested
by such holder, and (ii) pay all accrued but unpaid dividends on account of the
Preferred Stock for which the Company shall have failed to issue Common Stock
certificates hereunder, in cash. The redemption price shall be equal to the sum
of (A) the aggregate of all accrued but unpaid dividends, plus (B) the number of
shares of Preferred Stock then held by such holder multiplied by (1) the average
Per Share Market Value for the five (5) Trading Days immediately preceding (x)
the Conversion Date or (y) the date of payment in full by the Company of such
prepayment price, whichever is greater, multiplied by, (2) the Conversion Ratio
calculated on the Conversion Date. If the holder has requested that the Company
redeem shares of Preferred Stock pursuant to this Section and the Company fails
for any reason to pay the redemption price under (2) above within seven days
after such notice is deemed delivered pursuant to Section 5(i), the Company will
pay interest on the redemption price at a rate of 15% per annum, in cash to such
holder, accruing from such seventh day until the redemption price and any
accrued interest thereon is paid in full. Nothing herein shall limit a holder's
right to pursue actual damages for the Company's failure to deliver certificates
representing shares of Common upon conversion within the period specified herein
(including, without limitation, damages relating to any purchase of shares of
Common Stock by such holder to make delivery on a sale effected in anticipation
of receiving certificates representing shares of Common Stock upon conversion,
such damages to be in an amount equal to (A) the aggregate amount paid by such
holder for the shares of Common Stock so purchased minus (B) the aggregate
amount of net proceeds, if any, received by such holder from the sale of the
shares of Common Stock issued by the Company pursuant to such conversion), and
such holder shall have the right to pursue all remedies available to it at law
or in equity (including, without limitation, a decree of specific performance
and/or injunctive relief).
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(c) (i) The conversion price for each share of Preferred
Stock (the "Conversion Price") in effect on any Conversion Date shall be, (A) at
any time prior to February 13, 1998, the lesser of (a) 140% of the average Per
Share Market Value for the five (5) Trading Days immediately preceding the
Original Issue Date (the "Initial Conversion Price") or (b) the "Applicable
Percentage" (as defined below) of the average Per Share Market Value for the
five (5) Trading Days immediately preceding the Conversion Date, or (B) at any
time on or after February 13, 1998, the "Applicable Percentage" of the average
Per Share Market Value for the five (5) Trading Days immediately preceding the
Conversion Date; provided that, (a) if the Underlying Shares Registration
Statement is not filed on or prior to the 30th day after the Original Issue
Date, or (b) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 12d1-2 promulgated under the Securities
Exchange Act of 1934, as amended, within five (5) Trading Days of the date that
the Company is notified (orally or in writing, whichever is earlier) by the
staff of the Commission that an Underlying Shares Registration Statement will
not be "reviewed," or not subject to further review or (c) if the Underlying
Shares Registration Statement is not declared effective by the Commission on or
prior to the 90th day after the Original Issue Date, or (d) if such Underlying
Shares Registration Statement is filed with and declared effective by the
Commission but thereafter ceases to be effective as to all Registrable
Securities (as such term is defined in the Registration Rights Agreement) at any
time prior to the expiration of the "Effectiveness Period" (as such term as
defined in the Registration Rights Agreement), without being succeeded within 10
Trading Days by a subsequent Underlying Shares Registration Statement filed with
and declared effective by the Commission, or (e) if trading in the Common Stock
shall be suspended for any reason (other than as a result of the suspension of
trading in securities generally) for more than five (5) Trading Days in the
aggregate, or (f) if the conversion rights of the holders of Preferred Stock
hereunder are suspended for five (5) consecutive Trading Days (other than as a
result of the suspension of trading in securities on such market or exchange
generally or temporary suspensions pending the release of material information
or due to circumstances within the Company's control, which may include among
other things, suspension of the effectiveness of the Underlying Securities
Registration Statement by the Commission or a suspension imposed by the
Company's board of directors pending any release of material non-public
information) or (g) if the Company breaches in a material respect any covenant
or other material term or condition to the Purchase Agreement (other than a
representation or warranty contained therein), the Registration Rights Agreement
or any other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated thereby, and such breach continues
for a period of thirty (30) days after written notice thereof to the Company
(any such failure being referred to as an "Event," and for purposes of clauses
(a), (c) and (f) the date on which such Event occurs, or for purposes of clause
(b) the date on which such five (5) Trading Days period is exceeded, or for
purposes of clause (d) the date which such 10 Trading Day- period is exceeded,
or for purposes of clause (e) the date on which such three Trading Day period is
exceeded, or for clause (g) the date on which such thirty (30) day period is
exceeded, being referred to as "Event Date"), the Conversion Price shall be
decreased by 1.5% each month (i.e., the Conversion Price would decrease by 1.5%
as of the Event Date and an additional 1.5% as of the first monthly anniversary
of the Event Date) until the earlier to occur of the second month anniversary
after the Event Date and such time as the applicable Event is cured. Commencing
the second month anniversary after the Event Date, the Company shall pay to the
holders of the Preferred Stock $25,000 (each holder being entitled to receive
such portion of
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such amount as equals its pro rata portion of the Preferred Stock then
outstanding) in cash as liquidated damages, and not as a penalty on the first
day of each monthly anniversary of the Event Date until such time as the
applicable Event, is cured. Any decrease in the Conversion Price pursuant to
this Section shall continue notwithstanding the fact that the Event causing such
decrease has been subsequently cured. The provisions of this Section are not
exclusive and shall in no way limit the Company's obligations under the
Registration Rights Agreement. "Applicable Percentage" means (i) 100% if the
Conversion Date or any redemption or repurchase date, if applicable, occurs on
or prior to the 30th day after the Original Issue Date, (ii) 98% if the
Conversion Date or any redemption or repurchase date, if applicable, occurs on
or after the 31st and before the 60th day after the Original Issue Date, (iii)
96% if the Conversion Date or any redemption or repurchase date, if applicable,
is on or after the 61st and before the 90th day after the Original Issue Date,
(iv) 94% if the Conversion Date or any redemption or repurchase date, if
applicable, occurs on or after the 91st and before the 120th day after the
Original Issue Date, (v) 92% if the Conversion Date or any redemption or
repurchase date, if applicable, occurs on or after the 121st and before the
150th day after the Original Issue Date, (vi) 90% if the Conversion Date or any
redemption or repurchase date, if applicable, occurs on or after the 151st and
before the 180th day after the Original Issue Date, and (vii) 88% if the
Conversion Date or any redemption or repurchase date, if applicable, is more
than 180 days after the Original Issue Date (the "Maximum Conversion Price").
(ii) If the Company, at any time while any shares of
Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities payable
in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
a larger number of shares, (c) combine outstanding shares of Common Stock into a
smaller number of shares, or (d) issue by reclassification of shares of Common
Stock any shares of capital stock of the Company, the Initial Conversion Price
or Maximum Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 5(c)(ii) shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights or warrants to all holders
of Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Per Share Market Value of Common Stock
at the record date mentioned below, the Initial Conversion Price or Maximum
Conversion Price shall be multiplied by a fraction, of which the denominator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at such Per Share
Market Value. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become
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effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Initial Conversion Price or Maximum
Conversion Price pursuant to this Section 5(c)(iii), if any such right or
warrant shall expire and shall not have been exercised, the Initial Conversion
Price or Maximum Conversion Price shall immediately upon such expiration be
recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Initial Conversion Price or Maximum Conversion Price made pursuant to the
provisions of this Section 5 after the issuance of such rights or warrants) had
the adjustment of the Initial Conversion Price or Maximum Conversion Price made
upon the issuance of such rights or warrants been made on the basis of offering
for subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while shares of
Preferred Stock are outstanding, shall distribute to all holders of Common Stock
(and not to holders of Preferred Stock) evidences of its indebtedness or assets
or rights or warrants to subscribe for or purchase any security (excluding those
referred to in Sections 5(c)(ii) and (iii) above), then in each such case the
Initial Conversion Price or Maximum Conversion Price at which each share of
Preferred Stock shall thereafter be convertible shall be determined by
multiplying the Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Per Share Market Value of
Common Stock determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value of the Common Stock on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Board of Directors in
good faith; provided, however, that in the event of a distribution exceeding ten
percent (10%) of the net assets of the Company, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority in
interest of the shares of Preferred Stock then outstanding; and provided,
further, that the Company, after receipt of the determination by such Appraiser
shall have the right to select an additional Appraiser, in good faith, in which
case the fair market value shall be equal to the average of the determinations
by each such Appraiser. In either case the adjustments shall be described in a
statement provided to the holders of Preferred Stock of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
(v) All calculations under this Section 5 shall be made
to the nearest cent or the nearest whole share, as the case may be.
(vi) Whenever the Initial Conversion Price or Maximum
Conversion Price is adjusted pursuant to Section 5(c)(ii),(iii) or (iv), the
Company shall promptly mail to
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each holder of Preferred Stock, a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(vii) In case of any reclassification of the Common
Stock, any consolidation or merger of the Company with or into another person
pursuant to which (i) a majority of the Company's Board of Directors will not
constitute a majority of the board of directors of the surviving entity or (ii)
less than 65% of the outstanding shares of the capital stock of the surviving
entity will be held by the same shareholders of the Company, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the holders of the Preferred Stock then
outstanding shall have the right thereafter to, at their option, (A) convert
such shares only into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification, consolidation, merger, sale, transfer or share
exchange, and the holders of the Preferred Stock shall be entitled upon such
event to receive such amount of securities, cash or property as the shares of
the Common Stock of the Company into which such shares of Preferred Stock could
have been converted immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange would have been entitled or (B) require
the Company to redeem, from funds legally available therefor at the time of such
redemption, its shares of Preferred Stock at a price per share equal to the
product of (i) the average Per Share Market Value for the five (5) Trading Days
immediately preceding (1) the effective date, the date of the closing or the
date of the announcement, as the case may be, of the reclassification,
consolidation, merger, sale, transfer or share exchange the triggering such
redemption right or (2) the date of payment in full by the Company of the
redemption price hereunder, whichever is greater, and (ii) the Conversion Ratio
calculated on the date of the closing or the effective date, as the case may be,
of the reclassification, consolidation, merger, sale, transfer or share exchange
triggering such redemption right, as the case may be. The entire redemption
price shall be paid in cash, and the terms of payment of such redemption price
shall be subject to the provisions set forth in Section 6(b). The terms of any
such consolidation, merger, sale, transfer or share exchange shall include such
terms so as to continue to give to the holder of Preferred Stock the right to
receive the securities, cash or property set forth in this Section 5(c)(vii)
upon any conversion or redemption following such consolidation, merger, sale,
transfer or share exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
(viii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or
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purchase any shares of capital stock of any class or
of any rights; or
D. the approval of any stockholders of the Company shall
be required in connection with any reclassification
of the Common Stock of the Company, any consolidation
or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets
of the Company, of any compulsory share of exchange
whereby the Common Stock is converted into other
securities, cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of
the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Preferred Stock, and shall cause to be mailed to
the holders of Preferred Stock at their last addresses as they shall appear upon
the stock books of the Company, at least 15 Trading Days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice. Holders are entitled
to convert shares of Preferred Stock during the 30-day period commencing the
date of such notice to the effective date of the event triggering such notice.
(ix) If the Company (i) makes a public announcement that
it intends to enter into a Change of Control Transaction (as defined below) or
(ii) any person, group or entity (including the Company, but excluding a Holder
or any affiliate of a Holder) publicly announces a bona fide tender offer,
exchange offer or other transaction to purchase 50% or more of the Common Stock
(such announcement being referred to herein as a "Major Announcement" and the
date on which a Major Announcement is made, the "Announcement Date"), then, in
the event that a Holder seeks to convert shares of Preferred Stock on or
following the Announcement Date, the Conversion Price shall, effective upon the
Announcement Date and continuing through the earlier to occur of the
consummation of the proposed transaction or tender offer, exchange offer or
other transaction and the Abandonment Date (as defined below), be equal to the
lower of (x) the average Per Share Market Value on the five Trading Days
immediately preceding (but not including) the Announcement Date and (y) the
Conversion Price in effect on the Conversion Date for such Preferred Stock.
"Abandonment Date" means with
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respect to any proposed transaction or tender offer, exchange offer or other
transaction for which a public announcement as contemplated by this paragraph
has been made, the date upon which the Company (in the case of clause (i) above)
or the person, group or entity (in the case of clause (ii) above) publicly
announces the termination or abandonment of the proposed transaction or tender
offer, exchange offer or another transaction which caused this paragraph to
become operative.
(d) If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are not
adequately covered by the other provisions hereof and which might materially and
adversely affect the rights of the holders of Preferred Stock (different than or
distinguished from the effect generally on rights of holders of any class of the
Company's capital stock) or if at any time any such conditions are expected to
arise by reason of any action contemplated by the Company, the Company shall
mail a written notice briefly describing the action contemplated and the
material adverse effects of such action on the rights of the holders of
Preferred Stock at least 15 Trading Days prior to the effective date of such
action, and an Appraiser selected by the holders of majority in interest of the
Preferred Stock shall give its opinion as to the adjustment, if any (not
inconsistent with the standards established in this Section 5), of the
Conversion Price (including, if necessary, any adjustment as to the securities
into which shares of Preferred Stock may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting the
rights of the holders of shares of Preferred Stock; provided, however, that the
Company, after receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in good faith, in which case the
adjustment shall be equal to the average of the adjustments recommended by each
such Appraiser. The Board of Directors shall make the adjustment recommended
forthwith upon the receipt of such opinion or opinions or the taking of any such
action contemplated, as the case may be; provided, however, that no such
adjustment of the Conversion Price shall be made which in the opinion of the
Appraiser(s) giving the aforesaid opinion or opinions would result in an
increase of the Conversion Price to more than the Conversion Price then in
effect.
(e) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued Common Stock solely for
the purpose of issuance upon conversion of Preferred Stock and payment of
dividends on Preferred Stock, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
holders of Preferred Stock, not less than such number of shares of Common Stock
as shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be issuable
(taking into account the adjustments and restrictions of Section 5(c)) upon the
conversion of all outstanding shares of Preferred Stock and payment of dividends
hereunder. The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and freely tradeable.
(f) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but shall instead round to the nearest whole share. All cash payments
hereunder, whether for dividends, upon redemptions or otherwise, shall be
rounded to the nearest $.01.
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(g) The issuance of certificates for shares of Common Stock
on conversion of Preferred Stock shall be made without charge to the holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the holder of such shares of Preferred
Stock so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(h) Shares of Preferred Stock converted into Common Stock
shall be canceled and shall have the status of authorized but unissued shares of
undesignated stock.
(i) Any and all notices or other communications or deliveries
to be provided by the holders of the Preferred Stock hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile or sent by a nationally recognized overnight courier
service, addressed to the attention of the Legal Department of the Company at
the facsimile telephone number or address of the principal place of business of
the Company as set forth in the Purchase Agreement. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to each holder of Preferred
Stock at the facsimile telephone number or address of such holder appearing on
the books of the Company, or if no such facsimile telephone number or address
appears, at the principal place of business of the holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 7:00 p.m. (Eastern Time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 7:00 p.m. (New
York Time) on any date and earlier than 11:59 p.m. (New York Time) on such date,
(iii) upon receipt, if sent by a nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.
Section 6. Redemptions.
(a) All outstanding and unconverted shares of Preferred Stock
on the third anniversary of the Original Issue Date may, at the Company's
option, be converted pursuant to Section 5(a)(ii) or redeemed by the Company
pursuant to this Section 6(a), from funds legally available therefor at a price
per share of Preferred Stock equal to 112% of the aggregate Stated Value of the
outstanding Preferred Stock plus accrued dividends. Thereafter, all shares of
Preferred Stock shall cease to be outstanding and shall have the status of
authorized but undesignated stock. The entire redemption price shall be paid in
cash.
(b) If any portion of the applicable redemption price under
Section 6(a) shall not be paid by the Company within seven (7) calendar days
after the date due, interest shall accrue thereon at the rate of 15% per annum
until the redemption price plus all such interest is paid in
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full (which amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of such redemption price remains unpaid for more than 7
calendar days after the date due, the holder of the Preferred Stock subject to
such redemption may elect, by written notice to the Company given within 30 days
after the date due, to either (i) demand conversion in accordance with the
formula and the time frame therefor set forth in Section 5 of all of the shares
of Preferred Stock for which such redemption price, plus accrued liquidated
damages thereof, has not been paid in full (the "Unpaid Redemption Shares"), in
which event the Per Share Market Price for such shares shall be the lower of the
Per Share Market Price calculated on the date such redemption price was
originally due and the Per Share Market Price as of the holder's written demand
for conversion, or (ii) invalidate ab initio such redemption, notwithstanding
anything herein contained to the contrary. If the holder elects option (i)
above, the Company shall within three (3) Trading Days of its receipt of such
election deliver to the holder the shares of Common Stock issuable upon
conversion of the Unpaid Redemption Shares subject to such holder conversion
demand and otherwise perform its obligations hereunder with respect thereto; or,
if the Holder elects option (ii) above, the Company shall promptly, and in any
event not later than three (3) Trading Days from receipt of holder's notice of
such election, return to the holder all of the Unpaid Redemption Shares.
Section 7. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Common Stock" means the Company's common stock, $.0005 par value
per share, of the Company and stock of any other class into which such shares
may hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is Stated Value plus accrued but unpaid dividends (including any
accrued but unpaid interest thereon) but only to the extent not paid in shares
of Common Stock in accordance with the terms hereof, and of which the
denominator is the Conversion Price at such time.
"Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation preference
to the Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance of
any shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
National Market or other stock exchange or quotation system on which the Common
Stock is then listed or if there is no such price on such date, then the closing
bid price on such exchange or quotation system on the date nearest preceding
such date, or (b) if the Common Stock is not listed then on the Nasdaq National
Market or any stock exchange or quotation system, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by the Nasdaq
Stock Market or in the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its
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functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the holder, or (d) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good faith by the holders
of a majority in interest of the shares of the Preferred Stock; provided,
however, that the Company, after receipt of the determination by such Appraiser,
shall have the right to select an additional Appraiser, in which case, the fair
market value shall be equal to the average of the determinations by each such
Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock
Purchase Agreement, dated as of August 13, 1997, among the Company and the
original holders of the Preferred Stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of August 13, 1997, by and among the Company and the
original holders of Preferred Stock.
"Trading Day" means (a) a day on which the Common Stock is traded
on the Nasdaq National Market or other stock exchange or market on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on the
Nasdaq National Market or any stock exchange or market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Common Stock is not listed or quoted as set
forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on which
banking institutions in the State of New York are authorized or required by law
or other government action to close.
"Underlying Shares" means the number of shares of Common Stock
into which the Shares are convertible in accordance with the terms hereof and
the Purchase Agreement.
-16-
<PAGE>
<PAGE>
RESOLVED FURTHER, that the Vice President and Secretary of the
Company be, and they hereby are, authorized and directed to prepare, execute,
verify, and file with the Secretary of State of Delaware, a Certificate of
Designation in accordance with these resolutions and as required by law.
IN WITNESS WHEREOF, XOMA Corporation has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Peter B. Davis, its
Vice President, and attested by Christopher J. Margolin, its Secretary, this ___
day of August, 1997
XOMA CORPORATION
By:________________________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series G
Convertible Preferred Stock indicated below, into shares of Common Stock, par
value $.0005 per share (the "Common Stock"), of XOMA Corporation (the "Company")
according to the conditions hereof, as of the date written below. If shares are
to be issued in the name of a person other than undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith. No fee will be charged to the holder for any
conversion, except for such transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion
Number of shares of Preferred Stock to be Converted
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Signature
Name
Address
<PAGE>
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of XOMA Corporation (the "Company")
hereby notifies the addressee hereof that the Company hereby elects to exercise
its right to convert [ ] shares of its Series G Convertible Preferred Stock (the
"Preferred Stock") held by the Holder into shares of Common Stock, par value
$.0005 per share (the "Common Stock") of the Company according to the terms
hereof, as of the date written below. No fee will be charged to the Holder for
any conversion hereunder, except for such transfer taxes, if any which may be
incurred by the Company if shares are to be issued in the name of a person other
than the person to whom this notice is addressed.
Conversion calculations:
Date to effect Conversion
Number of shares of Preferred Stock to be Converted
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Name of Holder
Address of Holder
-2-
EXHIBIT 3
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
XOMA CORPORATION
WARRANT
Warrant No. [____] Dated [ ], [ ]
XOMA Corporation, a corporation organized and existing under the laws
of the State of Delaware (the "Company"), hereby certifies that, for value
received, [___________________], or its registered assigns ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company up
to a total of [________] shares of Common Stock, par value $.0005 per share (the
"Common Stock"), of the Company (each such share, a "Warrant Share" and all such
shares, the "Warrant Shares") at an exercise price equal to $[_______] per share
(as adjusted from time to time as provided in Section 8, the "Exercise Price"),
at any time and from time to time from and after the date hereof and through and
including [ ] or earlier as provided herein (the "Expiration Date"), and subject
to the following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
<PAGE>
<PAGE>
2. Registration of Transfers and Exchanges.
(a) The Company shall register a permitted transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at the office specified in or pursuant to Section 3(b). Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof
by the Holder to the office of the Company specified in or pursuant to Section
3(b) for one or more New Warrants, evidencing in the aggregate the right to
purchase the number of Warrant Shares which may then be purchased hereunder. Any
such New Warrant will be dated the date of such exchange.
3. Duration, Exercise of Warrants and Redemption.
(a) This Warrant shall be exercisable by the registered
Holder on any business day before 7:00 P.M., New York time, at any time and from
time to time on or after the date hereof to and including the Expiration Date.
At 7:00 P.M., New York time on the Expiration Date, the portion of this Warrant
not exercised prior thereto shall be and become void and of no value.
(b) Subject to Sections 2(b), 6 and 11, upon surrender of
this Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its office at 2910 Seventh Street,
Berkeley, CA 94710, Attention: Legal Department, or at such other address as the
Company may specify in writing to the then registered Holder, and upon payment
of the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, in lawful money of the United States of America,
in cash or by certified or official bank check or checks, all as specified by
the Holder in the Form of Election to Purchase, the Company shall promptly (but
in no event later than 2 Trading Days after receipt by the Company of this
Warrant and the signed Election to Purchase) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends other than as required
by the Purchase Agreement of even date herewith between the Holder and the
Company. Any person so designated by the Holder to receive Warrant Shares shall
be deemed to have become holder of record of such Warrant Shares as of the Date
of Exercise of this Warrant.
-2-
<PAGE>
<PAGE>
A "Date of Exercise" means the date on which the Company
shall have received (i) this Warrant (or any New Warrant, as applicable), with
the Form of Election to Purchase attached hereto (or attached to such New
Warrant) appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares so indicated by the holder
hereof to be purchased.
A "Trading Day" means (a) a day on which the Common Stock is
traded on the Nasdaq National Market or other stock exchange or market on which
the Common Stock has been listed, or (b) if the Common Stock is not listed on
the Nasdaq National Market or any stock exchange or market, a day on which the
Common Stock if traded on the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Company's Common Stock is not listed or
quoted as set forth in (a), (b) and (c) above, Trading Day shall mean any day
except Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York generally are authorized or
required by law or other government actions to close.
(c) This Warrant shall be exercisable, either in its
entirety or, from time to time, for a portion of the number of Warrant Shares.
If less than all of the Warrant Shares which may be purchased under this Warrant
are exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
4. Piggyback Registration Rights. During the term of this Warrant, the
Company may not file any registration statement with the Securities and Exchange
Commission (other than registration statements of the Company filed on Form S-8
or Form S-4, each as promulgated under the Securities Act of 1933, as amended,
pursuant to which the Company is registering securities pursuant to a Company
employee benefit plan or pursuant to a merger, acquisition or similar
transaction including supplements thereto, but not additionally filed
registration statements in respect of such securities) at any time when there is
not an effective registration statement covering the resale of the Warrant
Shares and naming the Holder as a selling stockholder thereunder, unless the
Company provides the Holder with not less than 20 days notice to each of the
Holder and Robinson Silverman Peace Aronsohn & Berman LLP, attention Eric L.
Cohen, notice of its intention to file such registration statement and provides
the Holder the option to include any or all of the applicable Warrant Shares
therein. The piggyback registration rights granted to the Holder pursuant to
this Section shall continue until all of the Holder's Warrant Shares have been
sold in accordance with an effective registration statement or upon the
expiration of this Warrant. The Company will pay all registration expenses in
connection therewith.
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided,
-3-
<PAGE>
<PAGE>
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder, and the Company shall not be required to issue or cause to be issued or
deliver or cause to be delivered the certificates for Warrant Shares unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid. The Holder shall be responsible for
all other tax liability that may arise as a result of holding or transferring
this Warrant or receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and indemnity, if
reasonably satisfactory to it. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number of
Warrant Shares which are then issuable and deliverable upon the exercise of this
entire Warrant, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holders (taking into account the
adjustments and restrictions of Section 8). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8. Upon each such adjustment of the
Exercise Price pursuant to this Section 8, the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock (as defined below) or on any other
class of capital stock (and not the Common Stock) payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock into a larger number of
shares, or (iii) combine outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any)
-4-
<PAGE>
<PAGE>
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock (excluding treasury shares, if any) outstanding after
such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination, and shall
apply to successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company in which the
consideration therefor is equity or equity equivalent securities or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities or property, then the Holder shall have the right thereafter to
exercise this Warrant only into the shares of stock and other securities and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification, consolidation, merger, sale, transfer or share
exchange, and the Holder shall be entitled upon such event to receive such
amount of securities or property equal to the amount of Warrant Shares such
Holder would have been entitled to had such Holder exercised this Warrant
immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange. The terms of any such consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give to
the Holder the right to receive the securities or property set forth in this
Section 8(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 8(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
a nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the Company) (an
"Appraiser") mutually selected in good faith by the holders of a majority in
interest of the Warrants then outstanding and the Company. Any determination
made by the Appraiser shall be final.
(d) If, at any time while this Warrant is outstanding, the
Company shall issue or cause to be issued rights or warrants to acquire or
otherwise sell or distribute shares of Common Stock to all holders of Common
Stock for a consideration per share less than the Exercise Price then in effect,
then, forthwith upon such issue or sale, the Exercise Price shall be reduced to
the price (calculated to the nearest cent) determined by dividing (i) an amount
-5-
<PAGE>
<PAGE>
equal to the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the Exercise Price, and
(B) the consideration, if any, received or receivable by the Company upon such
issue or sale by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale.
(e) For the purposes of this Section 8, the following
clauses shall also be applicable:
(i) Record Date. In case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to
the nearest cent or the nearest whole share, as the case may be.
(g) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
(iii) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital
stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, any consolidation or merger to which the
Company is a party, any sale or transfer of all or
-6-
<PAGE>
<PAGE>
substantially all of the assets of the Company, or
any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or
property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 15 Trading Days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder may pay the
Exercise Price in cash or, in the event that after the earlier to occur of (i)
90 days from the date hereof or (ii) the date that a registration statement
covering the resale of the Warrant Shares is declared effective, such
Registration Statement is then not effective, pursuant to a cashless exercise,
as follows:
(a) Cash Exercise. The Holder shall deliver immediately
available funds;
(b) Cashless Exercise. The Holder shall surrender this
Warrant to the Company together with a notice of cashless exercise, in which
event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be
issued to the Holder.
Y = the number of Warrant Shares with
respect to which this Warrant is being
exercised.
-7-
<PAGE>
<PAGE>
A = the average of the closing sale prices
of the Common Stock for the five (5) Trading
Days immediately prior to (but not
including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
10. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 10, be issuable
on the exercise of this Warrant, the Company shall, at its option, (i) pay an
amount in cash equal to the Exercise Price multiplied by such fraction or (ii)
round the number of Warrant Shares issuable, to the nearest whole number.
11. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 7:00 p.m. (New York time) on a Trading Day, (ii) the Trading
Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in the Section later
than 7:00 p.m. (New York time) on any date and earlier than 11:59 p.m. (New York
time) on such date, (iii) upon receipt of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The addresses for such
communications shall be: (1) if to the Company, to XOMA Corporation, 2910
Seventh Street, Berkeley, CA 94710, Attention: Legal Department, or to facsimile
no. (510) 649-7571 or (ii) if to the Holder, to the Holder at the address or
facsimile number appearing on the Warrant Register or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section 11.
12. Warrant Agent.
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a
new warrant agent.
(b) Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business
10306-00001/465356.7
-8-
<PAGE>
<PAGE>
shall be a successor warrant agent under this Warrant without any further act.
Any such successor warrant agent shall promptly cause notice of its succession
as warrant agent to be mailed (by first class mail, postage prepaid) to the
Holder at the Holder's last address as shown on the Warrant Register.
13. Miscellaneous.
(a) This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Warrant may be amended only in writing signed by the Company and
the Holder.
(b) Subject to Section 13(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant;
this Warrant shall be for the sole and exclusive benefit of the Company and the
Holder.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.
XOMA CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
-10-
<PAGE>
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To XOMA Corporation:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), par value $.0005 per share, of XOMA
Corporation and encloses herewith $________ in cash or certified or official
bank check or checks, which sum represents the aggregate Exercise Price (as
defined in the Warrant) for the number of shares of Common Stock to which this
Form of Election to Purchase relates, together with any applicable taxes payable
by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is entitled
to purchase in accordance with the enclosed Warrant, the undersigned requests
that a New Warrant (as defined in the Warrant) evidencing the right to purchase
the shares of Common Stock not issuable pursuant to the exercise evidenced
hereby be issued in the name of and delivered to:
(Please print name and address)
Dated: , Name of Holder:
(Print)
(By:)
(Name:)
(Title:)
(Signature must conform in all respects to
name of holder as specified on the face
of the Warrant)
<PAGE>
<PAGE>
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of XOMA Corporation to
which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of XOMA Corporation with full power of
substitution in the premises.
Dated:
- - ---------------, ----
---------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
- - --------------------------
EXHIBIT 4
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"),
dated as of August 13, 1997, among XOMA Corporation, a Delaware corporation (the
"Company"), Southbrook International Investments, Ltd., a British Virgin Islands
corporation ("Southbrook"), HBK Cayman L.P., a Cayman Islands exempt limited
partnership ("HBK Cayman"), HBK Offshore Fund Ltd., a Cayman Islands exempt
company ("HBK Offshore"), HBK Investments L.P., as investment manager for HBK
Cayman and HBK Offshore, Proprietary Convertible Investment Group, Inc., a
Delaware corporation and an affiliate of Credit Suisse First Boston Corporation
("PCIG"), Pine Street Asset Management, LP, a Pennsylvania limited partnership
("Pine Street"), and Brown Simpson Strategic Growth Fund, L.P., a New York
limited partnership ("Brown Simpson"). Southbrook, HBK Cayman, HBK Offshore,
PCIG, Pine Street and Brown Simpson are sometimes referred to herein as a
"Purchaser" and collectively as the "Purchasers".
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers desire to acquire shares of the Company's Convertible Preferred
Stock, Series G and Series H, par value $.05 per share (respectively, the
"Series G Preferred" and the "Series H Preferred") (the Series G Preferred and
Series H Preferred are collectively referred to as the "Preferred Stock" and
shares of Preferred Stock issued and sold in accordance with this Agreement are
referred to as the "Shares");
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, the Company and the Purchasers agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
1.1 Purchase and Sale. (a) Subject to the terms and conditions set
forth herein, the Company shall issue and sell to the Purchasers and the
Purchasers, severally and not jointly, shall purchase (i) 1,250 shares of Series
G Preferred (the "Series G Shares") and (ii) up to 1,250 shares of Series H
Preferred (the "Series H Shares").
(b) The Series G Preferred shall have the respective rights,
preferences and privileges set forth in Exhibit A attached hereto, which shall
be incorporated into a Certificate of Designation to be approved by the
Purchasers and filed on or prior to the Series G Closing (as defined below) by
the Company with the Secretary of State of Delaware (the "Series G
Designation"). The Series H Preferred, if and when issued, shall have respective
rights, preferences and privileges identical to the Series G Designation,
mutatis mutandis, and shall rank pari passu with the Series G Preferred with
regard to dividends, liquidation, voting rights and any other preferential
rights designated therein, except that the
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Conversion Price (as defined below) for conversion of said Shares shall reset as
of the Original Issue Date (as defined below) for such Shares.
The Series H Preferred shall be authorized pursuant to a certificate
of designation to be prepared by the Company and filed on or prior to the Series
H Closing Date (as defined below) by the Company with the Secretary of State of
Delaware (such certificate of designation, together with the Series G
Designation, are referred to as the "Certificates of Designation").
For purposes of this Agreement, "Conversion Price," "Original Issue
Date," "Conversion Date" "Trading Day" and "Per Share Market Value" shall have
the meanings set forth in the Series G Designation. The Shares, the Warrants (as
defined in Section 3.17) and the Underlying Shares (as defined in Section
2.1(d)) are sometimes referred to herein as the "Securities."
1.2 Purchase Price. The purchase price per Share shall be $10,000.
1.3 The Closings.
(a) The Series G Closing. (i) Subject to the terms and
conditions set forth in this Agreement, the Company shall sell and issue to the
Purchasers and the Purchasers shall purchase, the Series G Shares for an
aggregate purchase price of $12,500,000. The closing of the purchase and sale of
the Series G Shares (the "Series G Closing") shall take place at the offices of
Robinson Silverman Pearce Aronsohn & Berman LLP ("Robinson Silverman"), 1290
Avenue of the Americas, New York, New York 10104, immediately following the
execution hereof or such later date as the parties shall agree. The date of the
Series G Closing is hereinafter referred to as the "Series G Closing Date."
(ii) At the Series G Closing, (a) the Company shall
deliver (A) to Southbrook (1) one or more stock certificates representing 413
Series G Shares and the Southbrook Warrant (as defined in Section 3.17), each
registered in the name of Southbrook, (2) the legal opinions of Christopher J.
Margolin, Esq. and Cahill Gordon & Reindel in the form attached hereto as
Exhibits D-1 and D-2 (the "Series G Opinions") and (3) all other documents,
instruments and writings required to have been delivered at or prior to the
Series G Closing by the Company to Southbrook pursuant to this Agreement; (B) to
HBK Cayman (1) one or more stock certificates representing 207 Series G Shares
and the HBK Cayman Warrant (as defined in Section 3.17), each registered in the
name of HBK Cayman, (2) the Series G Opinions and (3) all other documents,
instruments and writings required to have been delivered at or prior to the
Series G Closing by the Company to HBK Cayman pursuant to this Agreement; (C) to
HBK Offshore (1) one or more stock certificates representing 206 Series G Shares
and the HBK Offshore Warrant (as defined in Section 3.17), each registered in
the name of HBK Offshore, (2) the Series G Opinions and (3) all other documents,
instruments and writings required to have been delivered at or prior to the
Series G Closing by the Company to HBK Offshore pursuant to this Agreement; (D)
to PCIG (1) one or more
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stock certificates representing 413 Series G Shares and the PCIG Warrant (as
defined in Section 3.17), each registered in the name of PCIG, (2) the Series G
Opinions and (3) all other documents, instruments and writings required to have
been delivered at or prior to the Series G Closing by the Company to PCIG
pursuant to this Agreement; (E) to Pine Street (1) one or more stock
certificates representing 6 Series G Shares and the Pine Street Warrant (as
defined in Section 3.17), each registered in the name of Pine Street, (2) the
Series G Opinions and (3) all other documents, instruments and writings required
to have been delivered at or prior to the Series G Closing by the Company to
Pine Street pursuant to this Agreement; and (F) to Brown Simpson (1) one or more
stock certificates representing 5 Series G Shares and the Brown Simpson Warrant
(as defined in Section 3.17), each registered in the name of Brown Simpson, (2)
the Series G Opinions and (3) all other documents, instruments and writings
required to have been delivered at or prior to the Series G Closing by the
Company to Brown Simpson pursuant to this Agreement, and (b) each Purchaser
shall deliver to the Company (1) the purchase price for the Series G Shares
being purchased by it at the Series G Closing in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Company for such purpose prior to the Series G Closing Date, and (2) all
documents, instruments and writings required to have been delivered at or prior
to the Series G Closing by such Purchaser pursuant to this Agreement.
(b) The Series H Closing. (i) Subject to the terms and
conditions set forth in this Agreement, the Company shall have the right to
deliver a written notice to the Purchasers (a "Subsequent Financing Notice")
requiring the Purchasers to purchase such number of Series H Shares not to
exceed 1,250, at a purchase price of $10,000 per Share as the Company may
designate in such notice, each Purchaser being obligated (subject to the terms
and conditions hereof) to purchase such portion of such Series H Shares as
equals such Purchaser's pro rata portion of the purchase price for the Series G
Shares issued and sold at the Series G Closing. The Company may deliver a
Subsequent Financing Notice no earlier than the expiration of the 60th Trading
Day after the date that a registration statement (an "Underlying Securities
Registration Statement") contemplated by the Registration Rights Agreement,
dated the date hereof, among the Purchasers and the Company substantially in the
form of Exhibit B attached hereto (the "Registration Rights Agreement")
covering, among other things, the shares of Common Stock issuable upon
conversion of and payment of dividends on the Series G Shares and the shares of
Common Stock issuable upon exercise of the Series G Warrants (as defined in
Section 3.17) has been declared effective by the Securities and Exchange
Commission (the "Commission") (provided, that Trading Days during which any
Purchaser (or its successors, permitted assigns or other successors in interest)
is unable to resell securities under such Underlying Securities Registration
Statement due to circumstances within the Company's control, which may include
among other things, suspension of the effectiveness of the Underlying Securities
Registration Statement by the Commission or a suspension imposed by the
Company's board of directors pending any release of material non-public
information, shall be added to such 60 Trading Day period), and no later than
April 30, 1998 (the "Series H Closing Expiration Date"). Notwithstanding
anything to the contrary contained herein, in the event that the Underlying
Securities
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Registration Statement relating to the Series G Closing is declared effective by
the Commission on or prior to October 31, 1997, the Company shall have the right
to deliver a Subsequent Financing Notice commencing on December 2, 1997 (the
"Early Notice Date") (provided, that the Early Notice Date shall be delayed by
the number of Trading Days during which any Purchaser (or its successors,
permitted assigns or other successors in interest) is unable to resell
securities under such Underlying Securities Registration Statement due to
circumstances within the Company's control, which may include among other
things, suspension of the effectiveness of the Underlying Securities
Registration Statement by the Commission or a suspension imposed by the
Company's board of directors pending any release of material non-public
information). The closing of the purchase and sale of the Series H Shares (the
"Series H Closing") shall take place at the offices of Robinson Silverman on
such date (which may not be prior to the fifteenth (15th) Trading Day after
receipt by the Purchasers of the Subsequent Financing Notice); provided that in
no case shall the Series H Closing take place unless and until the conditions
listed in Section 4.1 have been satisfied or waived by the appropriate party.
The date of the Series H Closing is hereinafter referred to as the "Series H
Closing Date." At any time after the Series G Closing Date and prior to January
1, 1998, the Company may give written notice (a "Termination Notice") to all the
Purchasers indicating that it does not intend to deliver a Subsequent Financing
Notice.
(ii) At the Series H Closing, (a) the Company shall deliver
(A) to each Purchaser (1) a pro rata portion of the Series H Shares (determined
by reference to the amount of Series G Shares issued and sold at the Series G
Closing) to be issued and sold thereat (or such other amount upon which the
parties may agree) and the applicable Series H Warrant (as defined in Section
3.17), each registered in the name of the appropriate Purchaser, (2) the legal
opinion referenced in Section 4.1(l), substantially in the form attached hereto
as Exhibit D-1 and D-2, and (3) all other documents, instruments and writings
required to have been delivered at or prior to the Series H Closing by the
Company to the Purchasers pursuant to this Agreement; and (b) each Purchaser
shall deliver to the Company (1) the purchase price for the Series H Shares
being purchased by it at the Series H Closing in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Company for such purpose on or prior to the Series H Closing Date and (2)
all documents, instruments and writings required to have been delivered at or
prior to the Series H Closing by such Purchaser pursuant to this Agreement. In
the event that a Purchaser ("Defaulting Purchaser") fails to purchase Series H
Shares in accordance with this Section 1.3(b)(ii), notwithstanding the
performance by the Company of its obligations under this Section and the
satisfaction by the Company of the conditions set forth in Section 4.1, the
Company shall notify the non-Defaulting Purchasers of such failure, upon which
the non-Defaulting Purchasers shall have the option to purchase (pro rata in
accordance with the number of Series G Shares purchased by it at the Series G
Closing minus the Series G Shares purchased by the Defaulting Purchaser) all or
any portion of the remaining Series H Shares within 5 Trading Days from the
later of the date it receives notice of such option and the Series H Closing
Date. If the non-Defaulting Purchasers do not elect to purchase the remaining
Series H Shares, the Company may then assign a Defaulting Purchaser's rights
hereunder to a third party without further obligation to the Defaulting
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Purchaser to purchase the Series H Shares, provided, however that if the Company
has not satisfied its obligations under this Section or the conditions set forth
in Section 4.1, such third party shall be reasonably acceptable to the
non-Defaulting Purchasers. Failure by any Purchaser to buy Series H Shares shall
not affect the Company's obligations with respect to the Series G Shares
acquired by such Purchaser, which shall remain unaffected thereby and shall not
affect the non-Defaulting Purchasers obligations to purchase Series H Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than XOMA Limited, a
United Kingdom limited liability company (the "Subsidiary"). The Subsidiary is a
company, duly formed, validly existing and in good standing under the laws of
the jurisdiction of its organization, with the full power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. Each of the Company and the Subsidiary is duly qualified to do
business and is in good standing as a foreign corporation or company in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not, individually or in
the aggregate, reasonably be expected to: (x) adversely affect the legality,
validity or enforceability of any of the Transaction Documents (as defined
below) in any material respect, (y) have or result in a material adverse effect
on the results of operations, assets, or financial condition of the Company and
the Subsidiaries, taken as a whole or (z) adversely impair the Company's ability
to perform fully on a timely basis its obligations under the Transaction
Documents (any one of (x), (y) and (z), being a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and by the Warrants (as defined below), the Certificates of
Designation, the Registration Rights Agreement, and otherwise to carry out its
obligations hereunder and thereunder. This Agreement, the Certificates of
Designation, the Registration Rights Agreement and the Warrants are collectively
referred to as the "Transaction Documents". The execution and delivery of each
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby has been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company. Each of the Transaction Documents has been duly executed by the Company
and when delivered in
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accordance with the terms hereof will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither Company nor the
Subsidiary is in violation of any of the provisions of its respective
certificate of incorporation, articles, by-laws or other charter documents.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). Except as set
forth in Schedule 2.1(c), no shares of Common Stock are entitled to preemptive
or similar rights, nor is any holder of the Common Stock entitled to preemptive
or similar rights, or any rights to receive Common Stock at a price which is
less than the current market price thereof, arising out of any agreement or
understanding with the Company by virtue of any of the Transaction Documents.
Except as disclosed in Schedule 2.1(c), there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or, except as a result of the purchase and sale of the
Shares and Warrants hereunder, securities, rights or obligations convertible
into or exchangeable for, or giving any person any right to subscribe for or
acquire any shares of Common Stock, or contracts, commitments, understandings,
or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. To the knowledge of the Company,
except as specifically disclosed in the SEC Documents (as defined below) or
Schedule 2.1(c), no Person beneficially owns (as determined pursuant to Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) or has the right to acquire by agreement with or by obligation
binding upon the Company beneficial ownership of more than 5% of the Common
Stock. A "Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
(d) Issuance of Shares and Warrants. The Shares and the
Warrants are duly authorized, and when issued and paid for in accordance with
the terms hereof, shall be validly issued, fully paid and nonassessable. The
Company, as at the Series G Closing Date and Series H Closing Date as the case
may be, will have, and at all times while the Shares and any Warrants are
outstanding will maintain, an adequate reserve of duly authorized shares of
Common Stock to enable it to perform its obligations under this Agreement, the
Warrants and the Certificates of Designation with respect to the number of
Shares and Warrants issued and outstanding at such Closing Date. The shares of
Common Stock issuable upon conversion of the Shares, or exercise of the Warrants
or which may be issued as payment of dividends on the Shares are collectively
referred to herein as the "Underlying Shares". Upon issuance in accordance with
the Certificates of Designation and the Warrant, the Underlying Shares will be
duly authorized, validly issued, fully paid and nonassessable,
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free and clear of all liens, claims, encumbrances or defects of any kind
(collectively, "Liens").
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its Certificate of Incorporation or bylaws (each as
amended through the date hereof) or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company is
a party, or (iii) to the knowledge of the Company, result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company is subject
(including Federal and state securities laws and regulations), or by which any
material property or asset of the Company is bound or affected, except in the
case of each of clauses (ii) and (iii), such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as could not reasonably
be expected to, individually or in the aggregate, have or result in a Material
Adverse Effect. The business of the Company is not being conducted in violation
of any law, ordinance or regulation of any governmental authority to which the
Company is subject, except for violations which, individually or in the
aggregate, do not have a Material Adverse Effect.
(f) Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, except for
(i) the filings of the Certificates of Designation with respect to the Shares
with the Secretary of State of Delaware, which filings shall be effected prior
to the Series G Closing Date and the Series H Closing Date, as appropriate, (ii)
the filing of the Underlying Securities Registration Statement(s) with the
Commission ,which shall be filed in the time periods set forth in the
Registration Rights Agreement, (iii) the application(s) or any letter(s)
acceptable to the Nasdaq National Market for the listing of the Underlying
Shares with the Nasdaq National Market (and with any other national securities
exchange or market on which the Common Stock is then listed), (iv) any filings,
notices or registrations under applicable state securities laws, and other than,
in all other cases, where the failure to obtain such consent, waiver,
authorization or order, or to give or make such notice or filing, would not
materially impair or delay the ability of the Company to effect the Series G
Closing or the Series H Closing and to deliver to the Purchasers the Shares and
the Warrants (and, upon conversion of the Shares and exercise of Warrants, the
Underlying Shares) in the manner contemplated hereby and by the Registration
Rights Agreement free and clear of all liens and encumbrances of any nature
whatsoever (the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed
in the Disclosure Materials (as hereinafter defined) there is no action, suit,
notice of violation,
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proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, the Subsidiary or any of their
respective properties before or by any court, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign) which
could reasonably be expected to, individually or in the aggregate, have or
result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor the
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, (ii) is in violation of any order
of any court, arbitrator or governmental body applicable to it or the
Subsidiary's property or assets, or (iii) is in violation of any statute, rule
or regulation of any governmental authority to which it is subject, except as
could not reasonably be expected to, in any such case (individually or in the
aggregate), have or result in a Material Adverse Effect.
(i) Schedules. The Schedules to this Agreement furnished by
or on behalf of the Company do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(j) Private Offering. Neither the Company nor any Person
acting on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Securities to the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act").
(k) SEC Documents. The Company has filed all reports required
to be filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the three years preceding the date hereof (the foregoing
materials being collectively referred to herein as the "SEC Documents" and,
together with the Schedules to this Agreement furnished by or on behalf of the
Company, the "Disclosure Materials") on a timely basis, or has received a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements to which the Company is a party or by which
the property or assets of the Company is subject have been filed as exhibits to
the SEC Documents as required; neither the Company nor the Subsidiary is in
breach of any such agreement where such breach may have or result in a Material
Adverse Effect. The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
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have been prepared in accordance with generally accepted accounting principles
as in effect at the time of filing applied on a consistent basis during the
periods involved, except as may be otherwise indicated in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal year-end audit adjustments. Since the
date of the financial statements included in the Company's last filed Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997, there has been no
event, occurrence or development that has had a Material Adverse Effect which
has not been specifically disclosed in writing to the Purchasers by the Company.
The Company last filed audited financial statements with the Commission on March
27, 1997, and has not received any comments from the Commission in respect
thereof.
(l) Seniority. No class of equity securities of the Company
is senior to the Shares in right of payment, whether upon liquidation,
dissolution or otherwise.
(m) Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(n) Certain Fees. Other than fees and expenses due and
payable to Shipley Raidy Capital Partners, LP, no fees or commissions will be
payable by the Company to any broker, financial advisor, finder, investment
banker, or bank with respect to the transactions contemplated by this Agreement.
The Purchasers shall have no obligation with respect to any fees or with respect
to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions
contemplated by this Agreement. The Company shall indemnify and hold harmless
each of the Purchasers, its employees, officers, directors, agents, and
partners, and their respective affiliates (as such term is defined under Rule
405 promulgated under the Securities Act, an "Affiliate"), from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees.
(o) Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with the offering and sale of
the Shares, the Warrants or the Underlying Shares other than the Disclosure
Materials or (ii) solicited any offer to buy or sell the Shares, the Warrants or
the Underlying Shares by means of any form of general solicitation or
advertising. None of the Disclosure Materials or any other information provided
to the Purchasers by or on behalf of the Company contain any untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
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(p) Form S-3 Eligibility. The Company is, and at each Closing
Date will be, eligible to register securities for resale with the Commission
under Form S-3 promulgated under the Securities Act.
(q) Exclusivity. Other than in accordance with Section
1.3(b)(ii), the Company shall not issue and sell the Preferred Stock to any
Person other than to the Purchasers.
(r) Listing and Maintenance Requirements Compliance. The
Company has not in the two years preceding the date hereof received notice
(written or oral) from any stock exchange or market on which the Common Stock is
or has been listed (or on which it has been quoted) to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such exchange or market.
(s) Patents and Trademarks. To the Company's knowledge, (i)
the Company has, or has rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights and
licenses (collectively, the "Intellectual Property Rights") which are necessary
for use in connection with its business as presently conducted and which the
failure to do so would have a Material Adverse Effect and (ii) there is no
existing infringement by another Person of any of the Intellectual Property
Rights which are necessary for use in connection with the Company's business as
presently conducted, which infringement would have a Material Adverse Effect.
(t) Registration Rights; Rights of Participation. Except as
described on Schedule 2.1(t) hereto, (A) the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (B) no Person,
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any other Transaction Document
which has not been waived.
(u) Acknowledgement of Dilution. The Company acknowledges
that the issuance of the Underlying Shares upon (i) conversion of the Shares and
dividends thereon in accordance with the Certificate of Designation and (ii)
exercise of the Warrants may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligation to issue Underlying Shares
upon (x) conversion of the Shares and dividends thereon in accordance with the
Certificate of Designation and (y) upon exercise of the Warrants is
unconditional and absolute, subject to such limitations set forth herein, in the
Certificate of Designation or pursuant to the Warrant, regardless of the effect
of any such dilution.
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2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is a corporation
duly incorporated or a limited partnership or company duly formed, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation with the requisite corporate power and authority to
enter into and to consummate the transactions contemplated hereby and by the
Registration Rights Agreement and otherwise to carry out its obligations
hereunder and thereunder. The purchase by such Purchaser of the Shares and the
Warrants hereunder has been duly authorized by all necessary action on the part
of such Purchaser. Each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered by such Purchaser and constitutes the valid
and legally binding obligation of such Purchaser, enforceable against such
Purchaser, in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(b) Investment Intent. Such Purchaser is acquiring the
Shares, the Warrants and the Underlying Shares for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Shares, Warrants or Underlying Shares or any part thereof or interest
therein, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all times
to sell or otherwise dispose of all or any part of such Shares, Underlying
Shares or Warrants pursuant to an effective registration statement under the
Securities Act and in compliance with applicable State securities laws or under
an exemption from such registration.
(c) Purchaser Status. At the time such Purchaser, other than
Brown Simpson who does not make such representation, was offered the Shares and
the Warrants, it was, and at the date hereof, it is, and at each Closing Date
and each exercise date under the Warrants, it will be, an "accredited investor"
as defined in Rule 501(a)(1), (2), (3) or (4) under the Securities Act.
(d) Experience of Purchaser. Such Purchaser either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, the Warrants
and the Underlying Shares, and has so evaluated the merits and risks of such
investment.
(e) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Shares, the
Warrants and the Underlying Shares and, at the present time, is able to afford a
complete loss of such investment.
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(f) Access to Information. Such Purchaser acknowledges
receipt of the Disclosure Materials and further acknowledges that it has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Shares and the Warrants, and the
merits and risks of investing in the Shares and the Warrants; (ii) access to
information about the Company and the Company's financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment; and (iii) the opportunity to obtain such
additional information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment and to verify the accuracy and
completeness of the information contained in the Disclosure Materials.
(g) Reliance. Such Purchaser (A) understands and acknowledges
that (i) the Shares and the Warrants are being offered and sold to the Purchaser
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption, depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the foregoing representations and such
Purchaser hereby consents to such reliance and (B) agrees to reasonably
cooperate with the Company in the preparation of a Form D relating to the
offering.
The Company acknowledges and agrees that the Purchasers make
no representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) If any Purchaser should decide to
dispose of Shares or any portion of the Warrants (and upon conversion or
exercise thereof, as the case may be, any of the Underlying Shares) held by it,
such Purchaser understands and agrees that it may do so only pursuant to an
effective registration statement under the Securities Act, to the Company, to an
Affiliate, pursuant to Rule 144 under the Securities Act ("Rule 144"), or
pursuant to an available exemption from the registration requirements of the
Securities Act. In connection with any transfer of Shares, Warrants or any
Underlying Shares other than pursuant to an effective registration statement, to
the Company, to an Affiliate of such Purchaser or pursuant to Rule 144, the
Company may require the transferor thereof to provide to the Company a written
opinion of counsel experienced in the area of United States securities laws
selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred securities under the Securities
Act. Notwithstanding anything
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to the contrary contained herein, any transfer hereunder
shall (i) be for a minimum of 50 Shares or Warrants to purchase at least 50,000
shares of Common Stock, which limitation shall not apply to any single transfer
of Warrants to Brown Simpson and (ii) with respect to Shares only, not be to an
entity principally engaged in health care or a health care related business,
provided, however that health care related investment funds shall be
specifically excluded from this limitation. No one Purchaser shall make more
than five (5) transfers with respect to the Shares, or more than two (2)
transfers with respect to the Warrants, it being understood that any Purchaser
who is an Affiliate of any other Purchaser shall be treated as one Purchaser for
purposes of this Section 3.1(a).
(b) Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Shares, the
Warrants and the Underlying Shares:
[NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]] [[THE SECURITIES
REPRESENTED HEREBY] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS.
[FOR SHARES ONLY] THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSION SET
FORTH IN A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF
AUGUST 13, 1997, EXECUTED BY THE ORIGINAL HOLDER HEREOF. A COPY OF THAT
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF XOMA CORPORATION.
The Underlying Shares issuable upon conversion of Shares,
payment of dividends thereon or exercise of the Warrants, as the case may be,
shall not contain the legend set forth above if the conversion of such Shares,
payment of such dividends or exercise of the Warrants, as the case may be,
occurs at any time while the Underlying Securities Registration Statement is
effective under the Securities Act or in the event there is not an effective
Underlying Securities Registration Statement at such time, if the Underlying
Shares are eligible for resale under, or have been sold pursuant to, Rule 144,
or if in the written opinion of counsel to the Company experienced in the area
of United States securities laws such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the
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Commission). The Company agrees that it will provide each Purchaser, upon
request, with a certificate or certificates representing Underlying Shares, free
from such legend at such time as such legend is no longer required hereunder.
3.2 Stop Transfer Instruction. The Company may not make any notation
on its records or give instructions to any transfer agent of the Company which
expand the scope of the restrictions on transfer set forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser owns Shares,
Underlying Shares or Warrants, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
Section 13(a) or 15(d) of the Exchange Act and, upon the request of any
Purchaser, to promptly furnish such Purchaser with true and complete copies of
all such filings. If the Company is not at the time required to file reports
pursuant to such sections, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as
any other information required thereby, in the time period that such filings
would have been required to have been made under the Exchange Act.
3.4 Copies and Use of Disclosure Materials. The Company consents to
the use of the SEC Documents, and any amendments and supplements thereto, by the
Purchasers in connection with resales of the Shares, the Warrants or the
Underlying Shares other than pursuant to an effective registration statement.
3.5 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares under the securities
or Blue Sky laws of such jurisdictions as each Purchaser may request and shall
continue such qualification at all times through the third anniversary of the
last Closing Date; provided, however, that neither the Company nor the
Subsidiary shall be required in connection therewith to qualify as a foreign
corporation where it is not now so qualified or to take any action that would
subject the Company to general service of process in any such jurisdiction where
it is not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
3.6 Integration. The Company shall not and shall use its best efforts
to ensure that no Affiliate of the Company shall sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Shares, the Warrants or the Underlying Shares in a manner that would
require the registration under the Securities Act of the sale of the Shares, the
Warrants or the Underlying Shares to any Purchaser.
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3.7 Certain Agreements. As long as any Purchaser owns Shares, the
Company shall not and shall cause the Subsidiary not to, without the consent of
the holders of all of the Shares then outstanding, (i) amend its certificate of
incorporation, bylaws or other charter documents so as to materially and
adversely affect any dividend, conversion, liquidation or transfer rights of any
Purchaser; (ii) declare, authorize, set aside or pay any dividend or other
distribution with respect to the Common Stock except as permitted under the
Certificates of Designation and as would not materially and adversely affect the
rights of any Purchaser hereunder or under the Certificates of Designation;
(iii) repay, repurchase or offer to repay, repurchase or otherwise acquire
shares of its Common Stock, except for repurchases effected by the Company on
the open market, pursuant to a direct stock purchase plan; (iv) authorize or
create any class of equity or equity equivalent security that ranks senior to
the Shares; or (v) enter into any agreement with respect to any of the
foregoing.
3.8 Purchaser Ownership of Common Stock. No Purchaser may use its
ability to convert Shares hereunder or under the terms of the Certificates of
Designation or use its ability to acquire shares of Common Stock upon exercise
of the Warrants, to the extent that such conversion or exercise would result in
the Purchaser beneficially owning (for purposes of Rule 13d-3 under the Exchange
Act) more than 4.999% of the outstanding shares of the Common Stock; provided,
however, that if ten days shall have elapsed since any Purchaser has declared a
default by the Company under any Transaction Document, such default shall cause
such Purchaser to exceed such 4.999% limit and such default shall not have been
cured to such Purchaser's satisfaction prior to the expiration of such ten-day
period, the provisions of this Section 3.8 shall be null and void ab initio as
to such Purchaser. Notwithstanding anything to the contrary contained herein,
the provisions of this Section 3.8 shall have no effect on the Company's
obligation to issue shares of Common Stock to the Purchasers upon receipt or
delivery of any conversion or exercise notice. The terms and conditions of this
Section shall not apply to any conversion of Shares at the option of the Company
pursuant to Section 5(a)(ii) of the Certificate of Designation.
3.9 Listing and Reservation of Underlying Shares. (a) The Company
shall (i) not later than the fifth Trading Day following the applicable Closing
Date or the Series H Closing Expiration Date prepare and file with the Nasdaq
National Market (as well as any other national securities exchange or market on
which the Common Stock is then listed) an additional shares listing application
or a letter acceptable to the Nasdaq National Market covering and listing at
least 3,800,000 Underlying Shares of Common Stock, (ii) take all reasonable
steps necessary to cause the Underlying Shares to be approved for listing in the
Nasdaq National Market (as well as on any other national securities exchange or
market on which the Common Stock is then listed) as soon as possible thereafter,
and (iii) provide to the Purchasers evidence of such listing, and the Company
shall take all steps reasonably necessary to maintain the listing of its Common
Stock on such exchange.
(b) The Company shall reserve for issuance upon conversion of the
Shares, for payment of dividends thereupon in shares of Common Stock pursuant to
the terms of the Certificates of Designation, and upon exercise of the Warrants
in accordance with their terms
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the number of shares to be listed on the Nasdaq National Market (and such other
national securities exchange or market on which the Common Stock is then listed
or traded) as set forth in Section 3.9(a). Shares of Common Stock reserved for
issuance upon the conversion of the Shares as set forth in Section 3.9(a) shall
be allocated pro rata to each of the Purchasers in accordance with the amount of
Shares issued and delivered to such Purchaser at the Series G Closing or the
Series H Closing, as applicable. In the event that the Company shall fail to
comply with this Section 3.9, then the Company shall redeem all Shares and
Underlying Shares, in cash, then held by each Purchaser, as set forth in Section
3.11 below.
3.10 Conversion Procedures. Exhibit E attached hereto sets forth the
procedures with respect to the conversion of the Preferred Stock, including the
forms of conversion notice to be provided upon conversion (except as set forth
herein or in the Certificate of Designation), instructions as to the procedures
for conversion, the form of legal opinion, if necessary, that shall be rendered
by the Company to the Company's transfer agent and such other information and
instructions as may be reasonably necessary to enable the Purchaser to exercise
its right of conversion smoothly and expeditiously.
3.11 Purchaser's Rights if Trading in Common Stock is Suspended or
Delisted. If at any time while any Purchaser (or any assignee thereof) owns any
Shares, Warrants or Underlying Shares, trading in the shares of the Common Stock
is suspended on or delisted from the Nasdaq National Market or any other
principal market or exchange for such shares (other than as a result of the
suspension of trading in securities on such market or exchange generally or
temporary suspensions pending the release of material information) for more than
five Trading Days in the aggregate, at the option of any Purchaser exercisable
by written notice to the Company delivered after such suspension or delisting,
the Company shall redeem all Shares and Underlying Shares, in cash, then held by
such Purchaser, at an aggregate purchase price equal to the sum of (I) the
number of Shares then held by such Purchaser multiplied by the product of (1)
the average Per Share Market Value for the five (5) Trading Days immediately
preceding (a) the day of such notice or (b) the date of payment in full of the
redemption price calculated under this Section, whichever is greater and (2) the
Conversion Ratio on the date of the repurchase notice, (II) the aggregate of all
accrued but unpaid dividends payable in respect of all Shares to be redeemed,
(III) the number of Underlying Shares then held by such Purchaser multiplied by
the average Per Share Market Value for the five (5) Trading Days immediately
preceding (A) the date of the notice or (B) the date of payment in full by the
Company of the redemption price calculated under this Section, whichever is
greater, provided, that the Company shall only be required to redeem Underlying
Shares pursuant to this clause (III) if there is not an effective Underlying
Securities Registration Statement covering such Underlying Shares or if the
Company has failed to tender certificates for shares of Common Stock after a
Conversion Notice and an original certificate representing the Shares to be
converted has been delivered, and (IV) interest on the amounts set forth in (I)
- - - (III) above accruing from the 5th Trading Day after such notice until the
repurchase price under this Section is paid in full at the rate of 15% per
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annum. The Company shall provide written notice of any redemption demand made
pursuant to this Section to each other holder of Securities within 24 hours of
its receipt thereof.
3.12 No Violation of Applicable Law. Notwithstanding any provision of
this Agreement to the contrary, if the redemption of Shares or Underlying Shares
otherwise required under this Agreement or the Registration Rights Agreement
would be prohibited by the relevant provisions of the Delaware General
Corporation Law, such redemption shall be effected as soon as it is permitted
under such law; provided, however, that interest payable by the Company with
respect to any such redemption shall continue to accrue in accordance with
Section 3.11.
3.13 Volume and Sale Restrictions. (a) For so long as a Purchaser
holds Shares or Underlying Shares, such Purchaser shall not sell a number of
shares of Common Stock in excess 25% of the trading volume of the Common Stock
for the calendar week in which such sale was made. This limitation shall be of
no force or effect for any sales of Common Stock by any Purchaser at a price
above $6.00 per share with respect to the Series G Shares and 120% of the
average Per Share Market Value for the five Trading Days immediately preceding
the Series H Closing Date, with respect to the Series H Shares, if applicable.
It being understood that, for purposes of this Section 3.13(a), (i) any
Purchasers who are Affiliates shall be treated as one Purchaser, and (ii) Pine
Street and Brown Simpson shall be treated as one Purchaser.
(b) For the sixty (60) days following the Series G Closing
Date and the Series H Closing Date, if applicable, there shall be no sales of
Common Stock or conversions of Shares by any Purchaser at a price below 120% of
the average Per Share Market Value for the five Trading Days immediately
preceding the Series G Closing Date (with respect to the Series G Shares) and
the Series H Closing Date (with respect to the Series H Shares), respectively.
3.14 Notice of Breaches. (a) Each of the Company and each Purchaser
shall give prompt written notice to the other of any breach of any
representation, warranty or other agreement contained in this Agreement or in
the Registration Rights Agreement, as well as any events or occurrences arising
after the date hereof and prior to, with respect to the Series G Closing, the
Series G Closing Date and with respect to the Series H Closing, the Series H
Closing Date, which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained herein
to be incorrect or breached as of such Closing Date. However, no disclosure or
failure to make such disclosure by any party pursuant to this Section 3.14 shall
be deemed to cure any breach of any representation, warranty or other agreement
contained herein or in the Registration Rights Agreement.
(b) Notwithstanding the generality of Section 3.14(a) the
Company shall promptly notify each Purchaser of any notice or claim (written or
oral) that it receives from any lender of the Company to the effect that the
consummation of the transactions
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contemplated hereby and by the Registration Rights Agreement violates or would
violate any written agreement or understanding between such lender and the
Company, and the Company shall promptly furnish by facsimile to the holders of
the Shares a copy of any written statement in support of or relating to such
claim or notice.
(c) The default by any Purchaser of any of its obligations,
representations or warranties under any Transaction Document shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Company's obligations under the Transaction Documents to any non-defaulting
Purchaser.
3.15 Conversion Obligations of the Company. The Company covenants to
convert Shares and to deliver Underlying Shares in accordance with the terms and
conditions and time period set forth in the respective Certificates of
Designation, and to deliver Underlying Shares upon exercise of Warrants in
accordance with the terms and conditions and time periods set forth in the
Warrants.
3.16 Subsequent Registrations. Other than Underlying Shares and other
"Registrable Securities" (as defined in the Registration Rights Agreement) to be
registered in accordance with the Registration Rights Agreement, the Company
shall not, for a period of not less than 75 Trading Days after the date that the
Underlying Shares Registration Statement relating to the securities issued at
the Series G Closing Date and Series H Closing Date, if applicable, is declared
effective by the Commission, without the prior written consent of Purchasers,
(i) issue or sell any of its or any of its Affiliates' equity or equity-
equivalent securities pursuant to Regulation S promulgated under the Securities
Act, or (ii) go effective on any resale registration statement registering for
resale any securities of the Company, other than securities registered for
resale in connection with a collaboration or strategic alliance with the
Company. Any days that any Purchaser (or its successors, permitted assigns or
other successors in interest) is unable to sell Underlying Shares under an
Underlying Securities Registration Statement due to circumstances within the
Company's control, which may include among other things, suspension of the
effectiveness of the Underlying Securities Registration Statement by the
Commission or a suspension imposed by the Company's board of directors pending
any release of material non-public information, shall be added to such 75
Trading Day period for the purposes of (i) and (ii) above.
3.17 The Warrants. (a) At the Series G Closing the Company shall issue
and deliver (i) to Southbrook, a Common Stock purchase warrant (the "Series G
Southbrook Warrant") entitling Southbrook to purchase, on the terms and
conditions set forth therein, 142,733 shares of Common Stock at a price per
share equal to the Series G Warrant Exercise Price (as defined below); (ii) to
HBK Cayman, a Common Stock purchase warrant (the "Series G HBK Cayman Warrant")
entitling HBK Cayman to purchase, on the terms and conditions set forth therein,
71,539 shares of Common Stock at a price per share equal to the Series G Warrant
Exercise Price; (iii) to HBK Offshore, a Common Stock purchase warrant (the
"Series G HBK Offshore Warrant") entitling HBK Offshore to purchase, on the
terms and conditions set forth therein, 71,194 shares of Common Stock at an
exercise price per
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share equal to the Series G Warrant Exercise Price; (iv) to PCIG, a Common Stock
purchase warrant (the "Series G PCIG Warrant") entitling PCIG to purchase, on
the terms and conditions set forth therein, 142,733 shares of Common Stock at a
price per share equal to the Series G Warrant Exercise Price; (v) to Pine
Street, a Common Stock purchase warrant (the "Series G Pine Street Warrant")
entitling Pine Street to purchase, on the terms and conditions set forth
therein, 2,073 shares of Common Stock at a price per share equal to the Series G
Warrant Certificate Price; and (v) to Brown Simpson, a Common Stock purchase
warrant (the "Series G Brown Simpson Warrant," and together with the Southbrook
Series G Warrant, the HBK Cayman Series G Warrant, the HBK Offshore Series G
Warrant and the PCIG Series G Warrant, the "Series G Warrants") entitling Brown
Simpson to purchase, on the terms and conditions set forth therein, 1,728 shares
of Common Stock at a price per share equal to the Series G Warrant Exercise
Price. The "Series G Warrant Exercise Price" shall be equal to $10 per share.
(b) At the earlier to occur of the Series H Closing Date or
the Series H Closing Expiration Date, the Company shall issue and deliver to
each Purchaser a Common Stock purchase warrant with a value (based on the Black
Scholes model of option valuation, using a two-year volatility factor and the
average Per Share Market Value for the five Trading Days immediately preceding
the Series H Closing Date or Series H Closing Expiration Date) equal to 8% of
the aggregate purchase price to be paid by such Purchaser for the Series H
Shares at the Series H Closing or, with respect to Warrants issued on the Series
H Closing Expiration Date, for Series G Shares at the Series G Closing, at a
price per share equal to the Series H Warrant Exercise Price. The "Series H
Warrant Exercise Price" shall equal (a) if the Series H Warrants are issued and
delivered on the Series H Closing Date, 150% of the average Per Share Market
Value for the five Trading Days immediately preceding the Series H Closing Date
or (b) if the Series H Warrants are to be issued and delivered on the Series H
Closing Expiration Date, 150% of the average Per Share Market Value for the five
Trading Days immediately preceding the Series H Closing Expiration Date. The
Common Stock purchase Warrants described in this paragraph are collectively
referred to herein as the "Series H Warrants", and the Series G Warrants and the
Series H Warrants are collectively referred to herein as the "Warrants."
Notwithstanding anything to the contrary contained herein, in the event that the
Company provides a Termination Notice to the Purchasers prior to January 1, 1998
and there is no Series H Closing, the Purchasers shall not be entitled to Series
H Warrants on the Series H Closing Expiration Date.
(c) The Warrants shall be substantially in the form of
Exhibit C. The failure of a Series H Closing to occur with respect to any
Purchaser due to a failure by the Company to timely deliver a Subsequent
Financing Notice or to satisfy all of the conditions set forth in section 4.1
shall not affect the Company's obligation to issue and deliver Series H Warrants
on the Series H Closing Expiration Date.
3.18 Use of Proceeds. The Company shall use all of the net proceeds
from the placement of the Shares and Warrants for working capital purposes and
not for the satisfaction of any portion of Company or Subsidiary debt, to redeem
Company equity or
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equity-equivalent securities or to pay down trade accounts, other than in the
ordinary course of business, consistent with past practices. Pending application
of the proceeds of this placement in the manner permitted hereby, the Company
will invest such proceeds in interest bearing accounts and short-term,
investment grade, interest bearing securities.
3.19 Press Release. The Company shall make timely disclosure of the
Series G Closing Date and the Series H Closing Date, relating to the issue and
sale of the Shares and Warrants to the Purchasers which such press release shall
be approved by Kenneth L.
Henderson, Esq., at Robinson Silverman.
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Series H Shares. The obligation of each Purchaser hereunder to
acquire and pay for the Series H Shares is subject to the satisfaction or waiver
by such Purchaser, at or before the Series H Closing, of each of the following
conditions:
(a) Series G Closing. The Series G Closing shall have
occurred;
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein and in the
Registration Rights Agreement shall be true and correct in all material respects
as of the date when made and as of the Series H Closing Date, as though made on
and as of such date;
(c) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Series H Closing
Date;
(d) Underlying Securities Registration Statements. The
Underlying Securities Registration Statement with respect to the Underlying
Shares issuable on conversion of all outstanding Series G Shares including
dividends thereon and exercise of the Series G Warrants shall have been declared
effective under the Securities Act by the Commission, and such Underlying
Securities Registration Statement shall have remained effective at all times
thereafter, including the 60 Trading Days prior to the date of the Subsequent
Financing Notice (subject to the exception set forth in Section 1.3(b)(i)
herein) and shall not be subject to any stop order and no stop order shall be
pending or threatened as at the Series H Closing Date;
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any
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of the transactions contemplated by this Agreement or the Registration Rights
Agreement relating to the issuance or conversion of any of the Shares or
exercise of any of the Warrants;
(f) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on the
Nasdaq National Market (except for any suspension of trading of securities on
such market generally or of limited duration solely to permit dissemination of
material information regarding the Company);
(g) Listing of Common Stock. The Common Stock shall have been
at all times between the Series G Closing Date and the Series H Closing Date,
and on the Series H Closing Date shall be, listed for trading on the Nasdaq
National Market;
(h) Change of Control. No Change of Control in the Company
shall have occurred. "Change of Control" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity of in excess
of 45% of the voting securities of the Company, (ii) a replacement of more than
one-half of the members of the Company's board of directors which is not
approved by those individuals who are members of the board of directors on the
date hereof in one or a series of related transactions, (iii) the merger of the
Company with or into another entity, (provided, however that, in the event that
a majority of the Company's Board of Directors will constitute a majority of the
board of directors of the surviving entity and more than 65% of the capital
stock of the surviving entity will be held by the same shareholders of the
Company, such transaction shall not be considered a Change of Control with
respect to this Section 4.1(h)), consolidation or sale of all or substantially
all of the assets of the Company in one or a series of related transactions or
(iv) the execution by the Company of an agreement to which the Company is a
party or by which it is bound, providing for any of the events set forth above
in (i), (ii) or (iii);
(i) Market Price of Common Stock. The Per Share Market Value
for the Common Stock shall not have averaged less than $3.875 per share for any
20 consecutive Trading Days after the Series G Closing Date and prior to the
Series H Closing Date, subject to adjustment in the event of any stock splits;
(j) Legal Opinion. The Company shall have delivered to the
Purchasers opinions of legal counsel to the Company in substantially the form
attached hereto as Exhibits D-1 and D-2 and dated the Series H Closing Date;
(k) Required Approvals. All Required Approvals shall have
been obtained;
(l) Shares of Common Stock. On or prior to the Series H
Closing Date, the Company shall have reserved for issuance to the Purchasers an
adequate number of
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Underlying Shares which would be issuable upon conversion in full of the Series
H Shares assuming such conversion occurred on the Original Issue Date for such
Shares;
(m) Delivery of Stock Certificates. The Company shall have
delivered to the Purchaser or such Purchasers' designee the stock certificate(s)
representing the Shares being purchased at the Series H Closing, registered in
the name of such Purchaser, each in form satisfactory to the Purchaser;
(n) Performance of Conversion/Exercise Obligations. The
Company shall have (a) delivered Underlying Shares upon conversion, if any, of
Shares and otherwise performed its obligations in accordance with the terms,
conditions and timing requirements of the Certificate of Designation and (b)
delivered Underlying Shares upon exercise of the Warrants and otherwise
performed its obligations in accordance with the terms of the Warrants; and
(o) Management. Each of (i) the Chief Executive Officer and
(ii) either (A) the Chief Scientific and Medical Officer or (B) the Chief
Financial Officer, shall have at all times retained such position with the
Company and shall not have suffered a voluntary or involuntary material
lessening of their respective responsibilities.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, except as
set forth in the Registration Rights Agreement. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of the Shares
pursuant hereto.
5.2 Entire Agreement; Amendments. This Agreement, together
with the Exhibits and Schedules hereto, the Registration Rights Agreement, the
Certificates of Designation (each when filed) and the Warrants contain the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral or written, with
respect to such matters.
5.3 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by
telecopy or facsimile (with transmission confirmation report) at the address or
number designated below (if delivered on a Trading Day during normal business
hours where such notice is to be received), or the first Trading Day following
such delivery (if delivered on a Trading Day after normal business hours
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where such notice is to be received) or (b) upon receipt of mailing by express
courier service, fully prepaid, addressed to such address. The addresses for
such communications shall be:
If to the Company:
XOMA Corporation
2910 Seventh Street
Berkeley, CA 94710
Attn: Legal Department
Facsimile: (510) 649-7571
With copies (which shall
not of themselves
constitute notice) to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attn: Geoffrey E. Liebmann
Facsimile: (212) 269-5420
If to Southbrook: Southbrook International Investments, Ltd.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, New York 10111
Attn: Robert L. Miller
Facsimile: (212) 332-3256
If to HBK Cayman: HBK Cayman L.P.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Fort Worth, TX 76102
Attn: David C. Haley and
Michael Reese
Facsimile No.: (817) 870-6177
If to HBK Offshore: HBK Offshore Fund Ltd.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Fort Worth, TX 76102
Attn: David C. Haley and
Michael Reese
Facsimile No.: (817) 870-6177
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If to PCIG: Proprietary Convertible Investment
Group, Inc.
c/o Credit Suisse First Boston Corporation
11 Madison Avenue - Third Floor
New York, NY 10010
Attn: Al Weine
Facsimile No.: (212) 325-6519
If to Pine Street: Pine Street Asset Management, LP
1 Tower Bridge, Suite 1370
West Conshohocken, PA 19428
Attn: Kevin J. Raidy
Facsimile No.: (610) 828-4131
If to Brown Simpson: Brown Simpson Strategic Growth Fund L.P.
152 West 57th Street, 40th Floor
New York, NY 10019
Attn: Matthew C. Brown
Facsimile No.: (212) 247-1329
With copies to Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Attn: Eric L. Cohen
Facsimile: (212) 541-4630
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
5.4 Amendments; Waivers. No provision of this Agreement may
be waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and each Purchaser; or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
5.5 Headings. The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
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5.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each of the Purchasers. No
Purchaser may assign this Agreement (other than to an Affiliate of such
Purchaser) or any rights or obligations hereunder without the prior written
consent of the Company, except that any Purchaser may assign its rights
hereunder and under the Transaction Documents without the consent of the Company
as long as such assignee demonstrates to the reasonable satisfaction of the
Company its satisfaction of the representations and warranties set forth in
Section 2.2 and the conditions set forth in Section 3.1. This provision shall
not limit a Purchaser's right to transfer securities or transfer or assign
rights hereunder or under the Registration Rights Agreement.
5.7 No Third-Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
5.8 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by receiving a copy thereof sent to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
5.9 Survival. The agreements and covenants contained in
Article III, Article IV and this Article V shall survive the delivery and
conversion of the Shares pursuant to this Agreement and the representations and
warranties of the Company and the Purchasers contained in Article II shall
survive each Closing hereunder and any conversion of Shares and exercise of
Warrants.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose
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behalf such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
5.11 Publicity. The Company and each Purchaser shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law in which such case the disclosing
party shall provide the other party with prior notice of such public statement.
The Company shall not publicly or otherwise disclose the names of any of the
Purchasers without each such Purchaser's prior written consent.
5.12 Severability. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.13 Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. Each of the Company and the Purchasers
(severally and not jointly) agree that monetary damages would not be adequate
compensation for any loss incurred by reason of any breach of its obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
5.14 Independent Nature of Purchasers' Obligations and
Rights. The obligations of each Purchaser hereunder are several and not joint
with the obligations of the other Purchasers hereunder, and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any Closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
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5.15 No Reliance. Each party acknowledges that (i) it has
such knowledge in business and financial matters as to be fully capable of
evaluating this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice or
representation of any other party in connection with entering into this
Agreement, the other Transaction Documents or such transactions (other than the
representations made in this Agreement or the other Transaction Documents),
(iii) it has not received from any such party any assurance or guarantee as to
the merits (whether legal, regulatory, tax, financial or otherwise) of entering
into this Agreement or the other Transaction Documents or the performance of its
obligations hereunder and thereunder, and (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting advisors
to the extent that it has deemed necessary, and has entered into this Agreement
and the other Transaction Documents based on its own independent judgment and on
the advice of its advisors as it has deemed necessary, and not on any view
(whether written or oral) expressed by such party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
Company:
XOMA CORPORATION
By:_________________________________________
Name:
Title:
Purchasers:
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
By:_________________________________________
Name:
Title:
HBK CAYMAN L.P.
By:_________________________________________
Name:
Title:
HBK OFFSHORE FUND, LTD.
By:_________________________________________
Name:
Title:
HBK INVESTMENTS L.P.
By:_________________________________________
Name:
Title:
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<PAGE>
PROPRIETARY CONVERTIBLE INVESTMENT GROUP, INC.
By:_________________________________________
Name:
Title:
PINE STREET ASSET MANAGEMENT, LP
By:_________________________________________
Name:
Title:
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
By:_________________________________________
Name:
Title:
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of August 13, 1997, among XOMA Corporation, a Delaware
corporation (the "Company"), Southbrook International Investments, Ltd., a
corporation existing under the laws of the British Virgin Islands
("Southbrook"), HBK Cayman L.P., a Cayman Islands exempt limited partnership
("HBK Cayman"), HBK Offshore Fund Ltd., a Cayman Islands exempt company ("HBK
Offshore"), HBK Investments L.P., as investment manager for HBK Cayman and HBK
Offshore, Proprietary Convertible Investment Group, Inc., a Delaware corporation
and an affiliate of Credit Suisse First Boston Corporation ("PCIG"), Pine Street
Asset Management, LP, a Pennsylvania limited partnership ("Pine Street") and
Brown Simpson Strategic Growth Fund, LP, a New York limited partnership ("Brown
Simpson"). Southbrook, HBK Cayman, HBK Offshore, PCIG, Pine Street and Brown
Simpson are each referred to herein as a "Purchaser" and collectively as the
"Purchasers".
This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of the date hereof among the Company and the
Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
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<PAGE>
"Common Stock" means the Company's Common Stock, par value
$.0005 per share.
"Effectiveness Date" means (i) with respect to the
Registration Statement to be filed with respect to the Series G Shares and the
Series G Warrants, the 90th day following the Series G Closing Date and (ii)
with respect to the Registration Statement to be filed with respect to the
Series H Shares and/or the Series H Warrants, the 90th day following the earlier
of the Series H Closing Date and the Series H Closing Expiration Date.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means (i) with respect to the shares of Common
Stock issuable upon conversion of the Series G Shares and exercise of the Series
G Warrants, the 30th day following the Series G Closing Date and (ii) with
respect to the shares of Common Stock issuable upon conversion of the Series H
Shares and exercise of the Series H Warrants, the 30th day following the earlier
of the Series H Closing Date and the Series H Closing Expiration Date.
"Holder" or "Holders" means the holder or holders, as the
case may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock" means the shares of Series G and Series H
Preferred Stock, par value $.05 per share, of the Company issued to the
Purchasers pursuant to the Purchase Agreement.
"Proceeding" means a material action, claim, suit or
investigation.
"Prospectus" means the prospectus included in the
Registration Statement (including, without limitation, a prospectus that
includes any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A promulgated under
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
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Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means (a) with respect to the
Registration Statement to be filed after the Series G Closing, the shares of
Common Stock issuable upon (i) conversion of the Series G Shares, (ii) exercise
of the Series G Warrants issued by the Company to the Purchasers and (iii)
payment of dividends in respect of such Preferred Stock and (b) with respect to
the Registration Statement to be filed after the Series H Closing Date or the
Series H Closing Expiration Date, the shares of Common Stock issuable upon (i)
conversion of the Series H Shares, (ii) exercise of the Series H Warrants issued
by the Company to the Purchasers and (ii) payment of dividends with respect to
such Preferred Shares; provided, however that in order to account for the fact
that the number of shares of Common Stock that are issuable upon conversion of
shares of Preferred Stock is determined in part upon the market price of the
Common Stock at the time of conversion, in the case of each of (a) and (b),
Registrable Securities shall include (but not be limited to) a number of shares
of Common Stock equal to no less than the sum of (1) one and one-half times the
number of shares of Common Stock into which the applicable series of Preferred
Stock are convertible, assuming such conversion occurred on the particular
Closing Date for such tranches of Preferred Stock, (2) the number of shares of
Common Stock issuable on payment of dividends on such Preferred Shares during
the three-year period after the applicable Closing Date and (3) the number of
shares of Common Stock issuable upon exercise in full of the Warrants described
herein, or such other number of shares of Common Stock as agreed to by the
parties to the Purchase Agreement. Notwithstanding anything herein contained to
the contrary, if the actual number of shares of Common Stock into which the
shares of Preferred Stock are convertible exceeds one and one-half times the
number of shares of Common Stock into which the particular series of Preferred
Stock are convertible based upon a computation as at a particular Closing Date,
the term "Registrable Securities" shall be deemed to include such additional
shares of Common Stock. If the number of Registrable Securities exceeds the
number of shares of Common Stock initially registered in respect of any
particular tranche of Preferred Stock based upon the computation on a particular
Closing Date, the Company shall have 10 Trading Days to file an additional
Registration Statement covering all such additional shares of Common Stock.
"Registration Statement" means the registration statements
contemplated by Section 2(a) (and any additional Registration Statements
contemplated in the definition of Registrable Securities), including (in each
case) 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 in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or
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regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as
amended.
"Special Counsel" means any special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
"Trading Day" means (a) a day on which the Common Stock is
traded on the Nasdaq National Market or other stock exchange or market on which
the Common Stock has been listed, or (b) if the Common Stock is not listed on
the Nasdaq National Market or any other exchange or market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provide,
however, in the event that the Common Stock is not listed or quoted in (a), (b)
or (c) above, Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
2. Shelf Registration
(a) On or prior to each applicable Filing Date the Company
shall prepare and file with the Commission a "Shelf" Registration Statement
covering all Registrable Securities for an offering to be made on a continuous
basis pursuant to Rule 415. The Registration Statement shall be on Form S-3
(except if otherwise agreed to by the Company and the Holders of a majority in
interest of the applicable Registrable Securities in accordance herewith or if
the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
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appropriate form in accordance herewith). The Registration Statement shall
state, to the extent permitted by Rule 416 under the Securities Act, that it
also covers such indeterminate number of shares of Common Stock as may be
required to effect (i) conversion of the Preferred Stock to prevent dilution
resulting from stock splits, stock dividends or similar events, or by reason of
changes in the Conversion Price in accordance with the terms of the Certificate
of Designation and (ii) exercise of the Warrants in full to prevent dilution
resulting from stock splits, stock dividends or similar events, or by reason of
changes in the Exercise Price (as defined in the Warrants) in accordance with
the terms of the Warrants. The Company shall (i) not permit any securities other
than the Registrable Securities to be included in the Registration Statement and
(ii) use its commercially reasonable efforts to cause the Registration Statement
to be declared effective under the Securities Act as promptly as possible after
the filing thereof, but in any event prior to the Effectiveness Date, and to
keep such Registration Statement continuously effective under the Securities Act
until the date which is three years after the date that such Registration
Statement is declared effective by the Commission or such earlier date when all
Registrable Securities covered by such Registration Statement have been sold or
may be sold without volume restrictions pursuant to Rule 144 as determined by
the counsel to the Company pursuant to a written opinion letter, addressed to
the Company's transfer agent to such effect (the "Effectiveness Period");
provided, however, that the Company shall not be deemed to have used its
commercially reasonable efforts to keep the Registration Statement effective
during the Effectiveness Period if it voluntarily takes any action that would
result in the Holders not being able to sell the Registrable Securities covered
by such Registration Statement during the Effectiveness Period, unless such
action is required under applicable law or the Company has filed a
post-effective amendment to the Registration Statement and the Commission has
not declared it effective.
(b) If the Holders of a majority of the Registrable
Securities so elect, an offering of Registrable Securities pursuant to the
Registration Statement may be effected on no more than two occasions, in the
form of an Underwritten Offering. In such event, and if the managing
underwriters advise the Company and such Holders in writing that in their
opinion the amount of Registrable Securities proposed to be sold in such
Underwritten Offering exceeds the amount of Registrable Securities which can be
sold in such Underwritten Offering, there shall be included in such Underwritten
Offering the amount of such Registrable Securities which in the opinion of such
managing underwriters can be sold, and such amount shall be allocated pro rata
among the Holders proposing to sell Registrable Securities in such Underwritten
Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering upon consultation with the Company. No
Holder may participate in any Underwritten Offering hereunder unless such Person
(i) agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney,
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indemnities, underwriting agreements and other documents required under the
terms of such arrangements.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to each
applicable Filing Date, a Registration Statement on Form S-3 (or such other form
agreed to by the Company and by the Holders of a majority in interest of the
applicable Registrable Securities in connection with an Underwritten Offering
hereunder or if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance herewith) in accordance with the method
or methods of distribution thereof as specified by the Holders (except if
otherwise directed by the Holders), and use commercially reasonable efforts to
cause the Registration Statement to become effective and remain effective as
provided herein; provided, however, that not less than five (5) Trading Days
prior to the filing of the Registration Statement or any related Prospectus or
any amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall, if reasonably practicable (i) furnish to the Holders, their Special
Counsel and any managing underwriters, copies of all such documents proposed to
be filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, their
Special Counsel and such managing underwriters, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to such Holders and such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. If, following review of
the Registration Statement or any amendment thereto prior to filing, a Holder
shall determine not to be named in such Registration Statement or amendment and
shall so notify the Company within three (3) Trading Days from receipt thereof,
then the Company shall delete the name of any such Holder therein.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as reasonably practicable to any
comments received from the Commission with respect to the Registration Statement
or any amendment thereto and reasonably promptly provide the Holders true and
complete copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all
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material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold
and Robinson Silverman Pearce Aronsohn & Berman LLP (or any other special
counsel to the Holders as shall have been provided in writing to the Company)
immediately (and, in the case of (i)(A) below, not less than five (5) days prior
to such filing) and (if requested by any such Person) confirm such notice in
writing no later than one (1) Trading Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement and
(C) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements to
the Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable Securities or
the initiation of any Proceedings for that purpose; (iv) if at any time any of
the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) 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 Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, 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, in light of the circumstances under which they were
made, not misleading.
(d) Use its commercially reasonable efforts to avoid the
issuance of, or, if issued, obtain the withdrawal of (i) any order suspending
the effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders
of a majority in interest of the Registrable Securities to be sold in connection
with an Underwritten Offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as such managing underwriters and such Holders
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reasonably agree should be included therein and (ii) make all required filings
of such Prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
provided, however, that the Company shall not be required to take any action
pursuant to this Section 3(e) that would, in the opinion of counsel for the
Company, violate applicable law or be materially detrimental to the business
prospects of the Company.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
reasonably promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel,
and any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its commercially reasonable efforts to register or qualify or cooperate with
the selling Holders, any underwriters and their Special Counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a 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 to 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 material tax in any such jurisdiction where it is not
then so subject.
(i) In the event of an Underwritten Offering, cooperate with
the Holders and any managing underwriters to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold
pursuant to a Registration Statement, which certificates shall be free of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such managing underwriters or
Holders may request at least two Trading Days prior to any sale of Registrable
Securities.
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(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the 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, neither the Registration Statement nor such
Prospectus will 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.
(k) Use its commercially reasonable efforts to cause all
Registrable Securities relating to such Registration Statement to be listed on
The Nasdaq National Market and any other securities exchange, quotation system,
market or over-the-counter bulletin board, if any, on which similar securities
issued by the Company are then listed as and when required pursuant to the
Purchase Agreement.
(l) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings) and take all such other actions in connection therewith as may be
reasonably requested by any managing underwriters and the Holders of a majority
of the Registrable Securities being sold, in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to underwriters
in underwritten public offerings, and confirm the same if and when requested;
(ii) in the case of an Underwritten Offering obtain and deliver copies thereof
to the managing underwriters, if any, of opinions of counsel to the Company and
updates thereof addressed to each such underwriter, in form, scope and substance
reasonably satisfactory to any such managing underwriters and Special Counsel to
the selling Holders covering the matters customarily covered in opinions
requested in Underwritten Offerings and such other matters as may be reasonably
requested by such Special Counsel and underwriters; (iii) immediately prior to
the effectiveness of the Registration Statement, and, in the case of an
Underwritten Offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to each selling Holder and each of the underwriters, if
any, in form and substance as are customary in connection with Underwritten
Offerings; (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders and the underwriters, if any, than those set forth in Section 6
(or such other provisions and procedures acceptable to the Company, the managing
underwriters, if any, and holders of a majority of Registrable Securities
participating in such Underwritten Offering); and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their Special
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Counsel and any managing underwriters to evidence the continued validity of the
representations and warranties made pursuant to clause 3(l)(i) above and to
evidence compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, upon
reasonable notice and during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors, agents and employees of the
Company and its subsidiaries to supply all information in each case reasonably
requested by any such Holder, representative, underwriter, attorney or
accountant in connection with the Registration Statement; provided, however,
that any information that is determined in good faith by the Company in writing
to be of a confidential nature at the time of delivery of such information shall
be kept confidential by such Persons, unless (i) disclosure of such information
is required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities; (ii) disclosure of such information, in the
opinion of counsel to such Person, is required by law; (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard by such Person; or (iv) such information becomes
available to such Person from a source other than the Company and such source is
not known by such Person to be bound by a confidentiality agreement with the
Company.
(n) Comply in all material respects with all 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 not later than 45 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) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts Underwritten Offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of the Registration Statement, which statement shall
cover said 12-month period, or such shorter periods as is consistent with the
requirements of Rule 158.
(o) The Company may require each selling Holder to furnish to
the Company such information regarding the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement
and the Company may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or
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any similar Federal statute then in force) the deletion of the reference to such
Holder in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell
any Registrable Securities under the Registration Statement until it has
received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 3(c) and (ii) such Purchaser and its officers, directors
or Affiliates, if any, will comply with the prospectus delivery requirements of
the Securities Act as applicable to them in connection with sales of Registrable
Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), 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 or Registration Statement.
4. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall, except as and to the extent
specified in Section 4(b), be borne by the Company whether or not pursuant to an
Underwritten Offering and whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to be made with The Nasdaq National Market and each other
securities exchange or market on which Registrable Securities are required
hereunder to be listed and (B) in compliance with state securities or Blue Sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Regis- trable
Securities for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriters, if any,
or by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for
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the Holders, in the case of the Special Counsel, to a maximum amount of $5,000
per each Registration Statement, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
(b) If the Holders require an Underwritten Offering pursuant
to the terms hereof, the Company shall be responsible for all costs, fees and
expenses in connection therewith, except for the fees and disbursements of the
Underwriters (including any underwriting commissions and discounts) and their
legal counsel and accountants, and such other fees and expenses otherwise set
forth in Section 4(a)(i) herein (which shall be borne by the Holders).
Therefore, in such circumstances the Holder shall bear the expenses of the fees
and disbursements of any legal counsel or accounting firm retained by the
underwriters in connection with such Underwritten Offering and the costs of any
determination by the underwriters of the eligibility of the Registrable
Securities for investment under the applicable state securities laws. By way of
illustration which is not intended to diminish from the provisions of Section
4(a), the Holders shall not be responsible for, and the Company shall be
required to pay the fees or disbursements incurred by the Company (including by
its legal counsel and accountants) in connection with, the preparation of a
Registration Statement and related Prospectus for such offering, the maintenance
of such Registration Statement in accordance with the terms hereof, the listing
of the Registrable Securities in accordance with the requirements hereof, and
printing expenses incurred to comply with the requirements hereof.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
out-of-pocket costs of preparation and reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any
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form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of 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 to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein, or
to the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or any form of prospectus or in any amendment or supplement
thereto or arising solely out of or based solely upon any omission of 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 to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information regarding such Holder so furnished in writing by
such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such information was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
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not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel, which shall be reasonably
acceptable to the Indemnifying Party, shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 10 Trading Days of written notice thereof to the Indemnifying
Party, together with adequate documentation (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under
Section 5(a) or 5(b) is unavailable to an Indemnified Party because of a failure
or refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by
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reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), the Holder shall not be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by the Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that the Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. 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.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Rule 144
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at any
time the Company is not required to file such reports, they will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rule 144. The Company
further covenants that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144; provided,
however, that the Company shall not be obligated to provide an opinion to any
Holder regarding the sale of Registrable Securities pursuant to exemptions
provided by Rule 144. Upon the request of any Holder, the Company shall deliver
to such Holder a written certification of a duly authorized officer as to
whether it has complied with such requirements.
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7. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor its
subsidiary has, as of the date hereof, nor shall the Company or its subsidiary,
on or after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. Except as set
forth on Schedule 2.1(t) of the Purchase Agreement, neither the Company nor its
subsidiary has previously entered into any agreement granting any registration
rights with respect to any of its securities to any Person. Without limiting the
generality of the foregoing, without the written consent of the Holders of a
majority of the then outstanding Registrable Securities, the Company shall not
grant to any Person the right to request the Company to register any securities
of the Company under the Securities Act unless the rights so granted are subject
in all respects to the prior rights in full of the Holders set forth herein, and
are not otherwise in conflict or inconsistent with the provisions of this
Agreement.
(c) No Piggyback on Registrations. Except as set forth on
Schedule 7(c), neither the Company nor any of its security holders (other than
the Holders in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Registrable Securities, and
the Company shall not enter into any agreement providing any such right to any
of its securityholders, without the consent of the Holders of a majority of the
Registrable Securities.
(d) Piggy-Back Registrations. If at any time prior to the
third anniversary hereof there is not an effective Registration Statement and
the Company shall determine to prepare and file with the Commission a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, then the Company shall send to each holder of Registrable Securities
written notice of such determination and, if within ten (10) Trading Days after
receipt of such notice, any such holder shall so request in writing, the Company
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shall include in such registration statement all or any part of the Registrable
Securities such holder requests to be registered.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two-thirds of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(f) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 7:00 p.m. (New
York time) on a Trading Day, (ii) the Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 7:00
p.m. (New York time) on any date and earlier than 11:59 p.m. (New York time) on
such date, (iii) upon receipt of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
If to the Company: XOMA Corporation
2910 Seventh Street
Berkeley, CA 94710
Attn: Legal Department
Fax: (510) 649-7571
With copies (which
shall not themselves
constitute notice) to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attn: Geoffrey E. Liebmann
Fax: (212) 269-5420
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If to Southbrook: Southbrook International Investments, Ltd.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, New York 10111
Attn: Robert L. Miller
Fax: (212) 332-3256
-18-
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If to HBK Cayman: HBK Cayman L.P.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Forth Worth, TX 76102
Facsimile No.: (817) 870-6234
Attn: David C. Haley and
Michael Reese
If to HBK Offshore: HBK Offshore Fund Ltd.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Forth Worth, TX 76102
Facsimile No.: (817) 870-6234
Attn: David C. Haley and
Michael Reese
If to PCIG: Proprietary Convertible Investment
Group, Inc.
c/o Credit Suisse First Boston
Corporation
11 Madison Avenue - Third Floor
New York, NY 10010
Facsimile No.: (212) 325-6519
Attn: Al Weine
If to Pine Street: Pine Street Asset Management, LP
1 Tower Bridge, Suite 1370
West Conshohocken, PA 19428
Attn: Kevin J. Raidy
Fax: (610) 828-4131
If to Brown Simpson: Brown Simpson strategic Growth Fund
L.P.
152 West 57th Street
40th Floor
New York, NY 10019
Facsimile No.: (212) 247-1329
Attn: Matthew C. Brown
10306-00001/465269.7
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With copies to Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Attn: Eric L. Cohen
Fax: (212) 541-4630
If to any other Person who is then the registered Holder:
To the address of such Holder as it
appears in the stock transfer books of the
Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Purchaser may assign its rights hereunder in the manner and to
the Persons as permitted under the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of each
Purchaser hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by the Purchaser to any assignee or transferee of all
or a portion of the shares of Preferred Stock, the Warrants or the Registrable
Securities if: (i) the Purchaser 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, (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment the further
disposition of such securities by the transferee or assignees restricted under
the Securities Act and applicable state securities laws, (iv) at or before the
time the Company receives the written notice contemplated by clause (ii) of this
Section, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions of this Agreement, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement. The rights to assignment shall apply to the Purchaser's (and to
subsequent) successors and assigns.
(i) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of
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which taken together shall constitute one and the same Agreement. In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.
(j) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(n) Shares Held by The Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than the Purchaser or transferees or successors or assigns
thereof if such Persons are deemed to be Affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
XOMA CORPORATION
By:____________________________________
Name:
Title:
SOUTHBROOK INTERNATIONAL
INVESTMENTS, LTD.
By:____________________________________
Name:
Title:
HBK CAYMAN L.P.
By:____________________________________
Name:
Title:
HBK OFFSHORE FUND, LTD.
By:____________________________________
Name:
Title:
HBK INVESTMENTS L.P.
By:____________________________________
Name:
Title:
PROPRIETARY CONVERTIBLE
INVESTMENT GROUP, INC.
By:____________________________________
Name:
Title:
PINE STREET ASSET MANAGEMENT, LP.
By:____________________________________
Name:
Title:
-22-
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BROWN SIMPSON STRATEGIC
GROWTH FUND, L.P.
By:____________________________________
Name:
Title:
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