As filed with the Securities and Exchange Commission on December 23, 1998
Registration No. 333-68045
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------------
POST-EFFECTIVE
Amendment No. 1
to
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------------------------------
XOMA ARIZONA, INC.
(Exact name of registrant as specified in its charter)
------------------------------------------
Arizona 2834 94-2756657
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classifi- Identification
organization) Code Number) Number)
------------------------------------------
2910 Seventh Street
Berkeley, CA 94710
(510) 644-1170
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Christopher J. Margolin, Esq.
c/o XOMA Corporation
2910 Seventh Street
Berkeley, CA 94710
(510) 644-1170
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Geoffrey E. Liebmann, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
(212) 701-3313
------------------------------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ______
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /____
------------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
Item 21. Exhibits
See Exhibit Index immediately preceding Exhibits.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Berkeley, State of
California, on December 23, 1998.
XOMA CORPORATION
By: /s/ John L. Castello
-------------------------------------
Name: John L. Castello
Title: Chairman of the Board,
President and
Chief Executive Officer
II-2
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ John L. Castello Chairman of the Board, President December 23, 1998
- - ------------------------------- and Chief Executive Officer
John L. Castello (Principal Executive Officer) and
Director
/s/ Peter B. Davis Vice President, Finance and Chief December 23, 1998
- - ------------------------------- Financial Officer (Principal Finan-
Peter B. Davis cial and Accounting Officer) and
Director
/s/ Christopher J. Margolin Director December 23, 1998
- - -------------------------------
Christopher J. Margolin
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
2.1 Agreement and Plan of Merger by and between XOMA Corporation and XOMA
Arizona, Inc. dated November 25, 1998.
3.1 Articles of Incorporation of XOMA Arizona, Inc.*
3.2 Amended and Restated Articles of Incorporation of XOMA Arizona, Inc.
(included as Exhibit A to Annex I to the Proxy Statement/Prospectus).*
3.3 By-laws of XOMA Arizona, Inc.*
3.4 Memorandum of Continuance of XOMA Ltd. (included as Annex II to the Proxy
Statement/Prospectus).*
3.5 Bye-Laws of XOMA Ltd. (included as Annex III to the Proxy
Statement/Prospectus).*
4.1 Stockholder Rights Agreement dated October 27, 1993 by and among XOMA
Corporation and First Interstate Bank of California (incorporated herein by
reference to Exhibit 1 to XOMA Corporation's Current Report on 8-K dated
October 27, 1993 filed November 2, 1993).
4.2 Form of Resolution Regarding Preferences and Rights of Series A Preference
Shares of XOMA Ltd.
4.3 Form of Resolution Regarding Preferences and Rights of Series B Preference
Shares of XOMA Ltd.
4.4 Form of Resolution Regarding Preferences and Rights of Series C Preference
Shares of XOMA Ltd.
4.5 Form of Common Stock Purchase Warrant (1996 Warrants) (incorporated herein
by reference to Exhibit 4.9 to XOMA Corporation's Registration Statement on
Form S-3 (File No. 333-07263)).
4.6 Form of Common Stock Purchase Warrant (1997 Warrants) (incorporated herein
by reference to Exhibit 3 to XOMA Corporation's Current Report on Form 8-K
dated August 13, 1997 filed August 18, 1997 (File No. 0-14710)).
4.7 Form of Common Stock Purchase Warrant (1998 Warrants) (incorporated herein
by reference to Exhibit 3 to XOMA Corporation's Current Report on Form 8-K
dated June 26, 1998 filed June 29, 1998 (File No. 0-14710)).
4.8 Form of Common Stock Purchase Warrant (Incyte Warrants) (incorporated
herein by reference to Exhibit 2 to XOMA Corporation's Current Report on
Form 8-K dated July 9, 1998 filed July 16, 1998 (File No. 0-14710)).
5.1 Opinion of Bryan Cave LLP regarding the legality of the securities being
offered.*
5.2 Opinion of Conyers Dill & Pearman regarding the legality of the securities
being offered.*
<PAGE>
8.1 Opinion of Cahill Gordon & Reindel regarding certain U.S. tax matters.*
8.2 Opinion of Conyers Dill & Pearman regarding certain Bermuda tax matters.*
23.1 Consent of Arthur Andersen LLP, Independent Auditors.*
23.2 Consent of Bryan Cave LLP (included in Exhibit 5.1).*
23.3 Consent of Conyers Dill & Pearman (included in Exhibits 5.2 and 8.2).*
23.4 Consent of Cahill Gordon & Reindel (included in Exhibit 8.1).*
23.5 Consent of Lehman Brothers Inc.*
24.1 Power of Attorney.*
99.1 Opinion of Lehman Brothers Inc. (included as Annex IV to the Proxy
Statement/Prospectus).*
99.2 Proxy Card.*
- - ----------
* Previously filed.
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
OF
XOMA CORPORATION ("XOMA-DE")
(a Delaware corporation)
AND
XOMA ARIZONA, INC. ("XOMA-AZ")
(an Arizona corporation)
AGREEMENT AND PLAN OF MERGER (this "Agreement") entered into as of November
25, 1998 by and between XOMA-DE and XOMA-AZ.
WHEREAS, XOMA-DE is a business corporation of the State of Delaware with
its registered office therein located at c/o CT Corporation System, 1209 Orange
Street, Wilmington, DE; and
WHEREAS, the total number of shares of stock which XOMA-DE has authority to
issue is 70,000,000 shares of common stock, each with a par value of $.0005 per
share (each, a "XOMA-DE Common Share"), and 1,000,000 shares of preferred stock,
each with a par value of $.05 per share (each, a "XOMA-DE Preferred Share"); and
WHEREAS, XOMA-AZ is a business corporation of the State of Arizona with its
registered office therein located at c/o CT Corporation System, 3225 North
Central Avenue, Phoenix, AZ; and
WHEREAS, the total number of shares of stock which XOMA-AZ has authority to
issue is 1,000 shares of common stock, each with no par value (each, a "XOMA-AZ
Share"); and
WHEREAS, the General Corporation Law of the State of Delaware permits a
merger of a business corporation of the State of Delaware with and into a
business corporation of another jurisdiction; and
WHEREAS, the Arizona Business Corporation Act permits the merger of a
business corporation of another jurisdiction with and into a business
corporation of the State of Arizona; and
WHEREAS, XOMA-DE and XOMA-AZ and the respective Boards of Directors thereof
deem it in the best interests of said corporations and their respective
shareholders to merge XOMA-DE with and into XOMA-AZ pursuant to the provisions
of the General Corporation Law of the State of Delaware and pursuant to the
provisions of the Arizona Business Corporation Act upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, being thereunto duly entered into by XOMA-DE
and approved by a resolution adopted by its Board of Directors (but subject to
approval by its stockholders) and being thereunto duly entered into by XOMA-AZ
and approved by a resolution adopted by its Board of Directors and further
approved by its shareholder, this Agreement and the terms and conditions thereof
and the mode of carrying the same into effect, together with any provisions
required or permitted to be set forth therein, are hereby determined and agreed
upon as hereinafter set forth.
<PAGE>
1. Merger. XOMA-DE shall, pursuant to the provisions of the General
Corporation Law of the State of Delaware and the provisions of the Arizona
Business Corporation Act, be merged with and into XOMA-AZ, which shall be the
surviving corporation from and after the effective time of the merger (as
hereinafter defined), and which is sometimes herein referred to as the
"surviving corporation," and which shall continue to exist as said surviving
corporation under the name "XOMA Corporation" pursuant to the provisions of the
Arizona Business Corporation Act. The separate existence of XOMA-DE, which is
sometimes herein referred to as the "terminating corporation," shall cease at
said effective time in accordance with the provisions of the General Corporation
Law of the State of Delaware.
2. Effective Time. In the event that this Agreement shall have been fully
approved and adopted on behalf of the terminating corporation in accordance with
the provisions of the General Corporation Law of the State of Delaware and on
behalf of the surviving corporation in accordance with the provisions of the
Arizona Business Corporation Act and as soon as practicable following the
satisfaction or waiver of the other conditions set forth in Section 10, the said
corporations agree that they will cause to be executed and filed and recorded
any document or documents prescribed by the laws of the State of Delaware
(including without limitation a Certificate of Merger) and by the laws of the
State of Arizona (including without limitation a Certificate and Articles of
Merger), and that they will cause to be performed all necessary acts within the
State of Delaware and the State of Arizona and elsewhere to effectuate the
merger herein provided for. The merger shall become effective immediately upon
the filing of the later to be filed of the appropriate certificates of merger
with the Secretary of State of the State of Delaware and the Secretary of State
of the State of Arizona, or at such later time as the parties shall agree should
be specified in such certificates of merger (the time the merger becomes
effective being herein referred to as the "effective time of the merger").
3. Articles of Incorporation. Annexed hereto as Exhibit A and made a part
hereof is a copy of the Amended and Restated Articles of Incorporation of the
surviving corporation as the same shall be in force and effect as of the
effective time in the State of Arizona of the merger herein provided for; and
said Articles of Incorporation shall continue to be the Articles of
Incorporation of said surviving corporation until amended and changed pursuant
to the provisions of the Arizona Business Corporation Act.
4. By-laws. The present by-laws of the terminating corporation will be the
by-laws of the surviving corporation and will continue in full force and effect
until changed, altered or amended as therein provided and in the manner
prescribed by the provisions of the Arizona Business Corporation Act.
5. Directors and Officers. The directors and officers in office of the
terminating corporation at the effective time of the merger shall be the members
of the first Board of Directors and the first officers of the surviving
corporation, all of whom shall hold their directorships and offices until the
election and qualification of their respective successors or until their tenure
is otherwise terminated in accordance with the by-laws of the surviving
corporation.
6. Conversion of Shares. (a) Each issued share of the terminating
corporation (other than shares to be cancelled in accordance with Section 6(b))
shall, at the effective time of the merger, be converted into one share of the
surviving corporation, as follows:
Title of Shares of XOMA-DE Title of Shares of XOMA-AZ
Common Stock Common Stock
Series A Cumulative Preferred Stock Preferred Stock, Series A
Convertible Preferred Stock, Series E Preferred Stock, Series B
Convertible Preferred Stock, Series H Preferred Stock, Series C
-2-
<PAGE>
(b) The issued shares of XOMA-AZ prior to the merger shall not be converted
or exchanged in any manner, but each said share which is issued as of the
effective date of the merger shall cease to be outstanding.
7. Exchange of Shares. (a) Following the effective time of the merger, each
holder of an outstanding certificate or certificates theretofore representing
XOMA-DE Common Shares or XOMA-DE Preferred Shares may, but shall not be required
to, surrender the same to the surviving corporation for cancellation and
exchange or transfer, and each such holder or transferee will be entitled to
receive certificates representing the same number of shares of common stock or
preferred stock, as the case may be (and in the latter case, of the appropriate
series) of the surviving corporation as the XOMA-DE Common Shares or XOMA-DE
Preferred Shares previously represented by the stock certificates surrendered.
If any certificate representing common or preferred stock of the surviving
corporation is to be issued in a name other than that in which the certificate
theretofore representing XOMA-DE Common Shares or XOMA-DE Preferred Shares, as
the case may be, surrendered is registered, it shall be a condition to such
issuance that the certificate surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
issuance shall either: (i) pay the surviving corporation or its agents any taxes
or other governmental charges required by reason of the issuance of such new
certificates in a name other than that of the registered holder of the
certificate so surrendered; or (ii) establish to the satisfaction of the
surviving corporation or its agents that such taxes or governmental charges have
been paid. Until so surrendered for cancellation and exchange or transfer, all
outstanding certificates representing XOMA-DE Common Shares or XOMA-DE Preferred
Shares shall represent the ownership of the same number of shares of common
stock or preferred stock, as the case may be (and in the latter case, of the
appropriate series) of the surviving corporation as though such surrender for
cancellation and exchange or transfer had taken place.
(b) All shares of common stock and preferred stock of the surviving
corporation issued upon the surrender for exchange of certificates in accordance
with the terms of this Section 7 shall be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to the XOMA-DE Common Shares or
XOMA-DE Preferred Shares, as the case may be, theretofore represented by such
certificates, subject, however, to the surviving corporation's obligation to pay
any dividends or make any other distributions with a record date prior to the
effective time of the merger which may have been declared or made by XOMA-DE on
such shares of XOMA-DE Preferred Stock prior to the date of this Agreement and
which remain unpaid at the effective time of the merger, and there shall be no
further registration of transfers on the stock transfer books of the surviving
corporation of the XOMA-DE Common Shares or XOMA-DE Preferred Shares which were
outstanding immediately prior to the effective time of the merger. If, after the
effective time of the merger, certificates are presented to the surviving
corporation they shall be cancelled and exchanged as provided in this Section 7,
except as otherwise provided by law.
8. Rights Agreement. (a) At the effective time of the merger, the
Stockholder Rights Agreement dated as of October 27, 1993 of XOMA-DE shall be
deemed to have been assumed by and assigned to the surviving corporation and, to
the extent that such stockholder rights agreement provides for the issuance of
Series A Cumulative Preferred Stock of XOMA-DE and/or rights to acquire same,
shall be deemed to have been amended to provide for the issuance of Preferred
Stock, Series A of the surviving corporation and/or rights to acquire same on
the same terms and conditions, and in the same number, as provided for in such
agreement.
(b) Following the effective time of the merger, such agreement shall
continue in effect as an agreement of the surviving corporation, on the same
terms and conditions, as amended as provided in Section 8(a).
(c) At the effective time of the merger, each outstanding right to purchase
Series A Cumulative Preferred Stock of XOMA-DE (a "Right") shall be deemed to
constitute a right to acquire, on the same terms and conditions as were
applicable under such Right, the same number of shares of Preferred Stock,
Series A of the
-3-
<PAGE>
surviving corporation as the holder of such Right would have been entitled to
receive pursuant to the merger had such holder exercised such right in full
immediately prior to the effective time of the merger (not taking into account
whether or not such right was in fact exercisable).
(d) Following the effective time of the merger, each such Right shall
continue in effect on the same terms and conditions. The surviving corporation
shall comply with the terms of all such Rights. The surviving corporation shall
take all corporate action necessary to reserve for issuance a sufficient number
of shares of Preferred Stock, Series A of the surviving corporation for delivery
pursuant to the terms set forth in this Section 8.
9. Stock Options and Warrants. (a) At the effective time of the merger,
each outstanding option to purchase XOMA-DE Common Shares (a "Stock Option"),
whether vested or unvested, and each outstanding warrant to purchase XOMA-DE
Common Shares (a "Warrant") shall be deemed to constitute an option to acquire
or warrant to purchase, as the case may be, on the same terms and conditions as
were applicable under such Stock Option or Warrant, the same number of shares of
common stock of the surviving corporation as the holder of such Stock Option or
Warrant would have been entitled to receive pursuant to the merger had such
holder exercised such option or warrant in full immediately prior to the
effective time of the merger (not taking into account whether or not such option
or warrant was in fact exercisable). In the case of any Stock Option to which
Section 421 of the Internal Revenue Code of 1986 (the "Code") applies by reason
of its qualification under any of Sections 422-423 of the Code ("qualified stock
options"), the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall comply with
Section 424(a) of the Code.
(b) Following the effective time of the merger, each such Stock Option and
Warrant shall continue in effect on the same terms and conditions. The surviving
corporation shall comply with the terms of all such Stock Options and Warrants
and will ensure, to the extent required by, and subject to the provisions of,
any plan governing such Stock Options that Stock Options which qualified as
qualified stock options prior to the effective time of the merger continue to
qualify as qualified stock options after the effective time of the merger. The
surviving corporation shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of common stock of the surviving
corporation for delivery pursuant to the terms set forth in this Section 9.
10. Existing Plans. (a) At the effective time of the merger, each
incentive, compensation or benefit plan of XOMA-DE shall be deemed to have been
assumed by and assigned to the surviving corporation and, to the extent that any
such plan provides for the issuance of XOMA-DE Common Shares and/or options to
acquire same, shall be deemed to have been amended to provide for the issuance
of common stock of the surviving corporation and/or options to acquire same on
the same terms and conditions, and in the same number, as provided for in the
corresponding plan of XOMA-DE.
(b) Following the effective time of the merger, each such plan shall
continue in effect as a plan of the surviving corporation, on the same terms and
conditions, as amended as provided in Section 10(a).
11. Conditions. The respective obligation of each party to effect the
merger is subject to the satisfaction or waiver of the following conditions:
(a) Stockholder Approval. The affirmative vote of the holders of a majority
of the outstanding XOMA-DE Common Shares shall have been obtained.
(b) Third Party Consents. All requisite third party consents shall have
been obtained.
-4-
<PAGE>
12. Termination. This Agreement may be terminated at any time prior to the
effective time of the merger, whether before or after approval by the
stockholders of XOMA-DE of matters presented in connection with the merger, by
action of the Board of Directors of XOMA-DE. In the event of termination of this
Agreement, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of XOMA-DE or XOMA-AZ.
13. Amendment. This Agreement may be amended by the parties at any time
before or after any required approval of matters presented in connection with
the merger by the stockholders of XOMA-DE, provided, however, that after any
such approval, there shall be made no amendment that by law requires further
approval by such stockholders without the further approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
14. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
IN WITNESS WHEREOF, this Agreement is hereby executed upon behalf of each
of the constituent corporations parties thereto.
Executed as of November 25, 1998.
XOMA CORPORATION
(a Delaware corporation)
By: /S/ JOHN L. CASTELLO
------------------------------------
John L. Castello
Chairman of the Board, President
and Chief Executive Officer
XOMA ARIZONA, INC.
(an Arizona corporation)
By: /S/ PETER B. DAVIS
------------------------------------
Peter B. Davis
Vice President, Finance
and Chief Financial Officer
-5-
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF XOMA ARIZONA, INC.
I.
NAME
The name of the Corporation is XOMA Corporation.
II.
ADDRESS
The address of its registered office in the State of Arizona is CT
Corporation System, 3225 North Central Avenue, Phoenix, AZ. The name of its
registered agent at such address is CT Corporation System.
III.
BUSINESS
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the Arizona Business Corporation Act. The Corporation is to have perpetual
existence.
IV.
STOCK STRUCTURE
The Corporation shall be authorized to issue two classes of stock to be
designated, respectively, "preferred stock" and "common stock"; the total number
of shares of both classes of stock authorized to be issued by the Corporation
shall have no preemptive or preferential rights of subscription concerning
further issuance or authorization of any of the Corporation's shares.
A. Common Stock.
The total number of shares of common stock authorized to be issued by the
Corporation shall be Seventy Million (70,000,000) shares and each such share of
common stock shall have a par value of $.0005. The common stock may be issued
from time to time in one or more series.
B. Preferred Stock.
The total number of shares of preferred stock authorized to be issued by
the Corporation shall be One Million (1,000,000) shares and each such share of
preferred stock shall have a par value of $.05. The number of authorized shares
of preferred stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the shares of preferred stock and common stock then outstanding,
voting as a single class.
<PAGE>
V.
RIGHTS, PREFERENCES, PRIVILEGES AND
RESTRICTIONS OF PREFERRED STOCK
The preferred stock may be issued from time to time in one or more series
consisting of such number of shares (which number may be increased or decreased,
but not below the number of shares thereof then outstanding) and with such
distinctive serial designations as shall be stated and expressed in the
resolution or resolutions creating such series adopted by the Board of
Directors; and such series (a) may have such voting powers, full or limited, or
may be without voting powers; (b) may be redeemable for cash, property or
rights, including securities of any other corporation, at the option of either
the holder or the Corporation or upon the happening of a specified event, at
such time or times, such price or prices, or such rate or rates, and with such
adjustments; (c) may be entitled to receive dividends (which may be cumulative
or non-cumulative) at such rate or rates, on such conditions, and at such times,
and payable in preference and priority to the common stock and on a par with, or
in such relation to, the dividends payable on any other class or classes or
series of stock; (d) may have such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation, including the right to receive
such distribution in preference to the common stock, and on a par with, or in
such relation to, the distribution to any other class or classes or series of
stock; (e) may be made convertible into, or exchangeable for, at the option of
either the holder or the Corporation or upon the happening of a specified event,
shares or any other class or classes or any other series or the same or any
other class or classes of stock of the Corporation, at such price or prices or
at such rate or rates of exchange, and with such adjustments; and (f) may have
such other powers, preferences and relative, participating, optional or special
rights and qualifications, limitations or restrictions thereof, all as shall
hereafter be stated and expressed in the resolution or resolutions providing for
the creation of each such series of preferred stock from time to time adopted by
the Board of Directors pursuant to authority so to do which is hereby expressly
vested in the Board of Directors.
Without limiting the generality of the foregoing, the following series of
preferred stock shall have the rights, preferences, privileges and restrictions
set forth below:
(a) Preferred Stock, Series A:
Section 1. Designation. The series of preferred stock established hereby
shall be designated the "Preferred Stock, Series A" (and shall be referred to
herein as the "Series A Preferred Stock") and the authorized number of shares of
Series A Preferred Stock shall be 650,000 shares. Such number of shares may be
increased or decreased, from time to time, by resolution of the Board of
Directors; provided that no decrease shall reduce the number of shares of Series
A Preferred Stock to a number less than the total of the number of such shares
then outstanding plus the number of such shares issuable upon the exercise of
outstanding rights, options or warrants or upon the conversion of outstanding
securities issued by the Corporation.
Section 2. Dividends and Distributions.
(A) (i) Subject to the rights of the holders of any shares of any series of
preferred stock (or any similar stock) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, the holders of shares of Series A
Preferred Stock, in preference to the holders of shares of common stock and of
any other junior stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of March, June, September
and December in each year (each such date being referred to herein as a
"Dividend Payment Date"), commencing on the first Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b)
-2-
<PAGE>
subject to the provisions for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, plus 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of common stock or a
subdivision of the outstanding shares of common stock (by reclassification or
otherwise), declared on the common stock since the immediately preceding
Dividend Payment Date, or, with respect to the first Dividend Payment Date,
since the first issuance of any share or fraction of a share of Series A
Preferred Stock. The multiple of cash and non-cash dividends declared on the
common stock to which holders of the Series A Preferred Stock are entitled,
which shall be 100 initially but which shall be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Dividend Multiple." In
the event the Corporation shall at any time after the date hereof (i) declare or
pay any dividend on common stock payable in shares of common stock, or (ii)
effect a subdivision or combination or consolidation of the outstanding shares
of common stock (by reclassification or otherwise than by payment of a dividend
in shares of common stock) into a greater or lesser number of shares of common
stock, then in each such case the Dividend Multiple thereafter applicable to the
determination of the amount of dividends which holders of shares of Series A
Preferred Stock shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied by a fraction, the
numerator of which is the number of shares of common stock outstanding
immediately after such event and the denominator of which is the number of
shares of common stock that were outstanding immediately prior to such event.
(ii) Notwithstanding anything else contained in this paragraph (A), the
Corporation shall, out of funds legally available for that purpose, declare a
dividend or distribution on the Series A Preferred Stock as provided in this
paragraph (A) immediately after it declares a dividend or distribution on the
common stock (other than a dividend payable in shares of common stock); provided
that, in the event no dividend or distribution shall have been declared on the
common stock during the period between any Dividend Payment Date and the next
subsequent Dividend Payment Date, a dividend of $1.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Dividend
Payment Date.
(B) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Dividend Payment Date next preceding the
date of issue of such shares of Series A Preferred Stock, unless the date of
issue of such shares is prior to the record date for the first Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and before
such Dividend Payment Date, in either of which events such dividends shall begin
to accrue and be cumulative from such Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix in accordance with applicable law a record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than such number of days prior to the date fixed for the
payment thereof as may be allowed by applicable law.
Section 3. Voting Rights. In addition to any other voting rights required
by law, the holders of shares of Series A Preferred Stock shall have the
following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Corporation. The
number of votes which a holder of a share of Series A Preferred Stock is
entitled to cast, which shall initially be 100 but which may be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the "Vote
Multiple." In the event the Corporation shall at any time after the date hereof
(i) declare or pay any dividend on common stock payable in shares of common
stock, or (ii) effect a subdivision or
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combination or consolidation of the outstanding shares of common stock (by
reclassification or otherwise than by payment of a dividend in shares of common
stock) into a greater or lesser number of shares of common stock, then in each
such case the Vote Multiple thereafter applicable to the determination of the
number of votes per share to which holders of shares of Series A Preferred Stock
shall be entitled shall be the vote multiple immediately prior to such event
multiplied by a fraction, the numerator of which is the number of shares of
common stock outstanding immediately after such event and the denominator of
which is the number of shares of common stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Preferred Stock and the holders of shares of common stock and the
holders of shares of any other capital stock of this Corporation having general
voting rights, shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(C) Except as otherwise required by applicable law or as set forth herein,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of common stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever dividends or distributions payable on the Series A Preferred
Stock as provided in Section 2 are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) except as permitted in subparagraph (A)(iv) of this Section 4,
redeem, purchase or otherwise acquire for consideration shares of any stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment
among the respective series or classes;
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provided, however, that the foregoing restrictions shall not apply to the
repurchase of shares of common stock held by employees, officers, directors, or
consultants of the Corporation (or their permitted transferees) that are subject
to restrictive stock purchase agreements under which the Corporation has the
option or obligation to repurchase such shares upon the occurrence of certain
events, such as termination of employment.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distributions shall be made (x) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (1) $100.00 per share or
(2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be distributed
per share to holders of common stock, or (y) to the holders of stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all other such parity stock in proportion to the
total amount to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time after the date hereof (i) declare or pay any dividend on common stock
payable in shares of common stock, or (ii) effect a subdivision or combination
or consolidation of the outstanding shares of common stock (by reclassification
or otherwise than by payment of a dividend in shares of common stock) into a
greater or lesser number of shares of common stock, then in each such case the
aggregate amount per share to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under clause (x) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of common stock outstanding
immediately after such event and the denominator of which is the number of
shares of common stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of common stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of common stock is changed or exchanged.
In the event the Corporation shall at any time after the date hereof (i) declare
or pay any dividend on common stock payable in shares of common stock, or (ii)
effect a subdivision or combination or consolidation of the outstanding shares
of common stock (by reclassification or otherwise than by payment of a dividend
in shares of common stock) into a greater or lesser number of shares of common
stock, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Preferred Stock
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of common stock outstanding immediately after such
event and
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the denominator of which is the number of shares of common stock that were
outstanding immediately prior to such event.
Section 8. Redemption. The shares of Series A Preferred Stock shall not be
redeemable.
Section 9. Ranking. Unless otherwise provided in a certificate of
designation of preferences and rights of a class of stock relating to a
subsequently designated series of preferred stock of the Corporation, the Series
A Preferred Stock shall rank junior to any other series of the Corporation's
preferred stock subsequently issued, as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up and shall rank
senior to the common stock.
Section 10. Amendment. The provisions of the Amended and Restated Articles
of Incorporation, of the Corporation shall not be amended, altered or repealed
in any manner which would materially alter or change the powers, preferences or
special rights of Series A Preferred Stock so as to effect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares of Series A Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share (which fractions shall be integral multiples of one
one-hundredth of a share) which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
(b) Preferred Stock, Series B:
Section 1. Designation and Amount. Seven Thousand Five Hundred (7,500)
shares of preferred stock are designated "Preferred Stock, Series B" with the
powers, preferences, rights, qualifications, limitations and restrictions
specified herein (the "Series B Preferred Stock"). Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided, that
no decrease shall reduce the number of shares of Series B Preferred Stock to a
number less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities (including
indebtedness) issued by the Corporation convertible into Series B Preferred
Stock.
Section 2. Dividends. The Corporation shall not be required to pay, and the
holders of the Series B Preferred Stock shall not be entitled to receive, any
dividends on shares of the Series B Preferred Stock.
Section 3. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
before any payment or distribution shall be made to the holders of shares of the
common stock of the Corporation, the holders of shares of Series B Preferred
Stock shall be entitled to receive $10,000.00 per share of Series B Preferred
Stock then held by such holders, plus an amount equal to declared and unpaid
dividends and distributions thereon. After payment of the full liquidation
preference of the Series B Preferred Stock set forth in the preceding sentence,
the holders of the Series B Preferred Stock shall not be entitled to any further
payments or distribution from the assets of the Corporation.
Section 4. Voting Rights. The holders of shares of Series B Preferred Stock
shall not have any voting rights, except as required under the Arizona Business
Corporation Act.
Section 5. Redemption.
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(A) General. The Corporation at its option, in accordance with the terms
and provisions of this Section 5, may, at any time and from time to time, redeem
any or all shares of Series B Preferred Stock at a redemption price per share
equal to a cash amount determined by multiplying the Conversion Price (as
defined below) by the number of shares of Common Stock into which each such
share of Series B Preferred Stock would be convertible pursuant to the
provisions of Section 6 hereof. If fewer than all the outstanding shares of
Series B Preferred Stock are to be redeemed, the shares to be redeemed shall be
selected pro rata as nearly as practicable or by lot, or by such other method as
the Board of Directors of the Corporation may determine to be fair and
appropriate.
(B) Notice of Redemption. The Corporation will provide notice of any
redemption of shares of Series B Preferred Stock to the holders of record of the
Series B Preferred Stock to be redeemed not less than five (5) nor more than
sixty (60) days prior to the date fixed for such redemption. Such notice shall
be provided by first-class mail, postage prepaid, to each holder of record of
the Series B Preferred Stock to be redeemed, at such holder's address as it
appears on the stock transfer books of the Corporation. Each such notice shall
state, as appropriate, the following:
a. the redemption date;
b. the number of shares of Series B Preferred Stock to be redeemed
and, if fewer than all the shares held by any holder are to be redeemed,
the number of such shares to be redeemed from such holder;
c. the redemption price;
d. the place or places where certificates for such shares are to be
surrendered for redemption;
e. the then effective Conversion Price (as determined under Section
6); and
f. that the right of holders to convert shares of Series B Preferred
Stock to be redeemed will terminate at the close of business on the
business day next preceding the date fixed for redemption (unless the
Corporation shall default in the payment of the redemption price).
Any notice that is mailed as set forth above shall be conclusively presumed
to have been duly given, whether or not the holder of shares of Series B
Preferred Stock receives such notice, and failure to give such notice by mail,
or any defect in such notice, to the holders of any shares designated for
redemption shall not affect the validity of the proceedings for the redemption
of any other shares of Series B Preferred Stock.
(C) Mechanics of Redemption. Upon surrender in accordance with the
aforesaid notice of the certificate for any shares so redeemed (duly endorsed or
accompanied by appropriate instruments of transfer), the holders of record of
such shares shall be entitled to receive the redemption price, without interest.
In case fewer than all the shares represented by such certificate are redeemed,
a new certificate representing the unredeemed shares shall be issued without
cost to the holder thereof. Upon surrender of any shares so redeemed in
accordance with this Section 5(C), the Corporation shall pay the full redemption
amounts with respect to shares as provided herein.
(D) Rights After Redemption. Notwithstanding that any certificates for
shares to be redeemed have not been surrendered in accordance with paragraph (C)
of this Section 5, from and after the date of redemption designated in the
notice of redemption (i) the shares represented thereby shall be deemed to be no
longer out-
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standing, and (ii) all rights of the holders of such shares of Series B
Preferred Stock shall cease and terminate, except only the right to receive the
full redemption amounts as provided herein without interest.
Section 6. Conversion.
(A) Right to Convert. Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, into that number of shares of
the common stock of the Corporation (herein, the "Common Stock") as determined
by dividing $10,000.00 by the Conversion Price (determined as provided below).
The "Conversion Price" for any shares of Series B Preferred Stock issued in
connection with a conversion pursuant to clauses (i) through (iii) of Section
4(a) of the Convertible Subordinated Note Agreement, dated as of April 22, 1996,
between the Corporation and Genentech, Inc., as amended (the "Note Agreement"),
shall be an amount per share equal to the Current Market Price (as defined
below) of the Common Stock determined as of the first occurring Conversion Date
(as such term is defined in Section 4(a) of the Note Agreement) (herein, the
"Initial Issue Date"). The "Conversion Price" for any shares of Series B
Preferred Stock issued in connection with either a conversion pursuant to clause
(iv) of Section 4(a) of the Note Agreement or a prepayment pursuant to Section
3(d) of the Note Agreement shall be an amount per share equal to the Current
Market Price of the Common Stock determined as of the date of the issuance of
such shares (herein, the "Prepayment Issue Date"). The number of shares of
Common Stock into which a share of Series B Preferred Stock is convertible is
hereinafter referred to as the "Conversion Rate" of such series. The Conversion
Price shall be subject to adjustment from time to time after the Initial Date or
applicable Prepayment Issue Date, as the case may be, as set forth in this
Section 6.
For purposes of this paragraph (A), "Current Market Price" shall mean the
average daily Closing Prices (as defined below) per share of Common Stock for
the fifteen (15) consecutive trading days immediately prior to the Initial Issue
Date or applicable Prepayment Issue Date, as the case may be. "Closing Price"
with respect to any securities on any day shall mean the closing sale price
regular way on such day or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices, regular way, in each case
on the New York Stock Exchange, or, if such security is not listed or admitted
to trading on such Exchange, on the principal national security exchange or
quotation system on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the average of the closing bid and
asked prices of such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or, if not so available, in such manner as
furnished by any New York Stock Exchange member firm selected from time to time
by the Board of Directors of the Corporation for that purpose, or a price
determined in good faith by the Board of Directors of the Corporation or, to the
extent permitted by applicable law, a duly authorized committee thereof, whose
determination shall be conclusive. If any shares of Series B Preferred Stock
shall be called for redemption, the right to convert the shares designated for
redemption shall terminate at the close of business on the business day next
preceding the date fixed for redemption unless the Corporation defaults in the
payment of the redemption price. In the event of a default in the payment of the
redemption price, the right to convert the shares designated for redemption
shall terminate at the close of business on the business day next preceding the
date that such default is cured. The shares of Common Stock issuable upon
conversion of the shares of Series B Preferred Stock, when the same shall be
issued in accordance with the terms hereof, are hereby declared to be and shall
be fully paid and non-assessable shares of Common Stock in the hands of the
holders thereof.
(B) Automatic Conversion. Each share of Series B Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the transfer of ownership by the initial holder
to any third party which is not an Affiliate (as such term is defined below) of
such holder. For purposes of this Article V(b), the term "Affiliate" means, when
used with respect to any specified person, any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control
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with such specified person. For the purposes of this definition, "control," when
used with respect to any person, means the power to direct the management and
policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise, and the terms "affiliated,"
"controlling" and "controlled" have meanings correlative to the foregoing.
(C) Mechanics of Conversion. Each holder of Series B Preferred Stock who
desires to convert the same into shares of Common Stock pursuant to this Section
6 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or any transfer agent for the Series B Preferred
Stock, and shall give written notice to the Corporation at such office that such
holder elects to convert the same. Such notice shall state the number of shares
of Series B Preferred Stock being converted. Thereupon, the Corporation shall
promptly issue and deliver at such office to such holder a certificate or
certificates for the number of shares of Common Stock to which such holder is
entitled and shall promptly pay in cash or, to the extent sufficient funds are
not then legally available therefor, in Common Stock (at the fair market value
of the Common Stock as of the date of such conversion as determined by the Board
of Directors of the Corporation), any declared and unpaid dividends on the
shares of Series B Preferred Stock being converted. Such conversion shall be
deemed to have been made at the close of business on the date of such surrender
of the certificates representing the shares of Series B Preferred Stock to be
converted, and the person entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock on such date.
(D) Adjustment for Subdivisions and Combinations. If the Corporation shall
at any time or from time to time after the Initial Issue Date or applicable
Prepayment Issue Date, as the case may be, effect a subdivision of the
outstanding Common Stock, the Conversion Price in effect immediately before that
subdivision shall be proportionately decreased. Conversely, if the Corporation
shall at any time or from time to time after the Initial Issue Date or
applicable Prepayment Issue Date, as the case may be, combine the outstanding
shares of Common Stock into a smaller number of shares, the Conversion Price in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this paragraph (D) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(E) Adjustment for Certain Dividends and Distributions. If the Corporation
at any time or from time to time after the Initial Issue Date or applicable
Prepayment Issue Date, as the case may be, makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, in each such
event (without duplication for related events) the Conversion Price that is then
in effect shall be decreased as of the time of such issuance or, in the event
such record date is fixed, as of the close of business on such record date, by
multiplying the Conversion Price then in effect by a fraction (1) the numerator
of which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date, and (2) the denominator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of shares
of Common Stock issuable in payment of such dividend or distribution; provided,
however, that if such record date is fixed and such dividend is not fully paid
or if such distribution is not fully made on the date fixed therefor, the
Conversion Price shall be recomputed accordingly as of the close of business on
such record date and thereafter the Conversion Price shall be adjusted pursuant
to this paragraph (E) to reflect the actual payment of such dividend or
distribution.
(F) Adjustment for Other Dividends and Distributions. If the Corporation at
any time or from time to time after the Initial Issue Date or applicable
Prepayment Issue Date, as the case may be, makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation other than shares of
Common Stock, in each such event provision shall be made so that the holders of
the Series B Preferred Stock shall receive upon conversion thereof, in ad-
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dition to the number of shares of Common Stock receivable thereupon, the amount
of other securities of the Corporation which they would have received had their
Series B Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such event to
and including the conversion date, retained such securities receivable by them
as aforesaid during such period, subject to all other adjustments called for
during such period under this Section 6 with respect to the rights of the
holders of the Series B Preferred Stock or with respect to such other securities
by their terms.
(G) Adjustment for Recapitalizations, etc. If at any time or from time to
time after the Initial Issue Date or applicable Prepayment Issue Date, as the
case may be, the Common Stock issuable upon the conversion of the Series B
Preferred Stock is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 6 or in Section 3), in any such event each holder of
Series B Preferred Stock shall have the right thereafter to convert such stock
into the kind and amount of stock and other securities and property receivable
upon such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series B
Preferred Stock could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(H) Compliance with Laws. Notwithstanding any provision of this Section 6
to the contrary, no conversion of any share of Series B Preferred Stock shall be
effective unless such conversion is permitted under then applicable laws.
Section 7. Reacquired Shares. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
subject to the conditions and restrictions on issuance set forth herein, or in
any Certificate of Designation creating a series of preferred stock or any
similar stock or as otherwise required by law.
Section 8. Exclusion of Other Rights. Except as may otherwise be required
by the Arizona Business Corporation Act, shares of the Series B Preferred Stock
shall not have any preferences or relative, participating, optional or other
special rights, other than those specifically set forth in these Amended and
Restated Articles of Incorporation, as they may be amended from time to time. No
shares of Series B Preferred Stock shall have any preemptive or subscription
rights whatsoever as to any securities of the Corporation.
Section 9. Notice. All notices and other communications provided for or
permitted to be given to the Corporation hereunder shall be made by hand
delivery, next day air courier or certified first-class mail to the Corporation
at its principal executive office (currently located on the date of the adoption
of these resolutions at 2910 Seventh Street, Berkeley, California 94710,
Attention: General Counsel).
Section 10. Transferability; Registration; Rights of Transferees.
(A) Transferability. The Series B Preferred Stock may not be sold,
assigned, conveyed, transferred, pledged, hypothecated or otherwise disposed of
other than as set forth in, and in accordance with, that certain Common Stock
and Convertible Note Purchase Agreement, dated as of April 22, 1996, between the
Corporation and Genentech, Inc.
(B) Transfer Mechanics; Registration. The Series B Preferred Stock
certificate representing shares of Series B Preferred Stock to be transferred
shall be duly endorsed by the transferring holder or by his duly
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authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of a transfer by
an attorney, the original power of attorney, duly approved, or a copy thereof,
duly certified, shall be deposited and remain with the Corporation. In case of a
transfer by executors, administrators, guardians or other legal representatives,
duly authenticated evidence of their authority shall be produced, and may be
required to be deposited and to remain with the Corporation in its discretion.
Upon any registration of a transfer, the Corporation shall deliver new Series B
Preferred Stock certificates to the persons entitled to the shares of Series B
Preferred Stock represented thereby. The Series B Preferred Stock certificates
may be exchanged at the option of the holder thereof, when surrendered at the
offices of the Corporation, for other Series B Preferred Stock certificates of
different denominations, of like tenor and representing in the aggregate a like
number of shares of Series B Preferred Stock. Any Series B Preferred Stock
certificate so surrendered shall be promptly canceled by the Corporation and
retired. Each Series B Preferred Stock certificate issued in exchange as
provided above shall be substantially in the form of the Series B Preferred
Stock certificate being exchanged and shall be subject to all of the terms and
provisions hereof.
(C) Required Legend(s). Each of the Series B Preferred Stock certificates
shall contain the legend(s) required by that certain Common Stock and
Convertible Note Purchase Agreement, dated as of April 22, 1996, between the
Corporation and Genentech, Inc.
Section 11. Amendments. This Article VB(b) may be amended without notice to
or the consent of any holder of Series B Preferred Stock to cure any ambiguity,
defect or inconsistency, provided that such amendment does not adversely affect
the rights of any holder of Series B Preferred Stock. Any provisions of this
Article VB(b) may be amended by the Corporation with the written consent of
holders of Series B Preferred Stock representing a majority of the outstanding
shares of Series B Preferred Stock.
(c) Preferred Stock, Series C:
Section 1. Designation, Amount and Par Value. The series of preferred stock
shall be designated as Preferred Stock, Series C (the "Series C 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 Series C Preferred Stock shall have a par value of
$.05 per share and a stated value of $10,000 per share (the "Stated Value").
Section 2. Dividends. (a) Holders of Series C Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors out of funds
legally available therefor, and the Corporation 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 forth herein) the option of the
Corporation. Dividends on the Series C Preferred Stock shall be calculated on
the basis of a 360-day year, shall accrue (or be deemed to have accrued) 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 Corporation legally
available for the payment of dividends. Accrued dividends on the Series C
Preferred Stock shall be paid on the date on which such Series C Preferred Stock
is converted; provided, that the Corporation shall have the option to pay
dividends more frequently as and when declared by the Board of Directors. The
party that holds the Series C 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 Series C 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
Corporation pays less than the total amount of dividends then accrued on account
of the Series C Preferred Stock, such payment shall be distributed ratably among
the holders of the Series C Preferred Stock
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based upon the number of shares held by each holder. Payment of dividends on the
Series C Preferred Stock is further subject to the provisions of Section
5(c)(i). The Corporation 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 Series C 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 Series C Preferred Stock are
outstanding. Provided that the Corporation is in compliance with its obligations
under this Article V(c), the Purchase Agreement (as defined in Section 7) and
the Registration Rights Agreement (as defined in Section 7), notwithstanding any
other provision of this Section 2, the Corporation may elect by written notice
mailed to the holders of the Series C Preferred Stock at their address appearing
on the records of the Corporation not later than the payment date for such
dividend, not to declare or make payment of the amount of any semi-annual
dividend to the holders of shares of Series C 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 Series C Preferred Stock.
(b) Notwithstanding anything to the contrary contained herein, the
Corporation may not issue shares of Common Stock in payment of dividends (and
must deliver cash in respect thereof) on the Series C 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 volume
restrictions pursuant to Rule 144 promulgated under the Securities Act of
1933, as amended (the "Securities Act"), as determined by counsel to the
Corporation (which may be in-house counsel) pursuant to a written opinion
letter, addressed to the Corporation'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 Corporation 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 Series C Preferred Stock shall remain outstanding,
neither the Corporation nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as defined in
Section 7), nor shall the Corporation 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 Series
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C Preferred Stock, except for repurchases effected by the Corporation 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 Series C Preferred Stock shall have no voting
rights. However, so long as any shares of Series C Preferred Stock are
outstanding, the Corporation shall not and shall cause its subsidiary not to,
without the affirmative vote of the holders all of the shares of the Series C
Preferred Stock then outstanding, (a) amend its articles 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 Article V(c) 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 Corporation 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 Series C Preferred Stock; or
(e) enter into any agreement with respect to any of the foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary (a "Liquidation"), the holders
of Series C Preferred Stock shall be entitled to receive out of the assets of
the Corporation, whether such assets are capital or surplus, for each share of
Series C 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 Corporation shall be insufficient to pay in full such amounts,
then the entire assets to be distributed to the holders of Series C Preferred
Stock shall be distributed among the holders of Series C 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 Corporation or the
effectuation by the Corporation of a transaction or series of related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, or a consolidation or merger of the Corporation 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 Corporation 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 Series C Preferred Stock.
Section 5. Conversion. (a)(i) Each share of Series C Preferred Stock (in
minimum amounts of $100,000 or such lesser amounts as any converting holder of
Series C 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) 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 Series C Preferred Stock to be converted
to the Corporation, together with the form of conversion notice attached hereto
as Exhibit 1 (the "Holder Conversion Notice"). Each Holder Conversion Notice
shall specify the number of shares of Series C 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 paragraph (i) of this
Section 5. 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 Series C
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 Corporation shall promptly deliver to such
holder (in the manner and within the time set forth in paragraph (b) of this
Section 5) a certificate for such number of shares as have not been converted.
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(ii) On or after the third anniversary of the Original Issue Date, the
Corporation may require the conversion of all or a portion of the then
outstanding and unconverted shares of Series C Preferred Stock at the Conversion
Ratio (subject to reduction pursuant to subparagraph (a)(iii) of this Section 5)
by delivering to the holder of such shares to be converted a notice in the form
attached hereto as Exhibit 2 (the "Corporation Conversion Notice"); provided,
that, no such conversion is permitted unless at the time of the delivery of the
Corporation Conversion Notice and on the Corporation 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 Corporation is in compliance
with all of its obligations under this Article V(c), the Purchase Agreement and
the Registration Rights Agreement. Each Corporation Conversion Notice shall
specify the number of shares of Series C 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 Corporation delivers such Corporation Conversion Notice by
facsimile (the "Corporation Conversion Date"). If no Corporation Conversion Date
is specified in a Corporation Conversion Notice, the Corporation Conversion Date
shall be the date that the Corporation Conversion Notice is deemed delivered
pursuant to paragraph (i) of this Section 5. A Holder Conversion Date and a
Corporation Conversion Date are sometimes referred to herein as the "Conversion
Date" and a Holder Conversion Notice and a Corporation Conversion Notice are
sometimes referred to as a "Conversion Notice." Any conversion pursuant to this
subparagraph (a)(ii) shall be subject to paragraph (b) of this Section 5 with
respect to consequences of the Corporation's failure to deliver shares of Common
Stock in respect of a conversion under this Section. If the Corporation is
converting less than all shares of Series C Preferred Stock represented by the
certificate or certificates tendered by the holder in response to a Corporation
Conversion Notice, or if a conversion hereunder cannot be effected in full for
any reason, the Corporation shall promptly deliver to such tendering holder (in
the manner and within the time set forth in paragraph (b) of this Section 5) 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 Corporation'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 Series C Preferred Stock,
together with any shares of Common Stock previously issued upon conversion of
Series C Preferred Stock, the Convertible Preferred Stock, Series G of
XOMA-Delaware (as defined in Section 7) or the Convertible Preferred Stock,
Series H of XOMA-Delaware and in respect of payment of dividends hereunder or
thereunder, 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
Corporation has not previously obtained Shareholder Approval (as defined below),
then the Corporation shall issue to any holder so requesting conversion of
Series C Preferred Stock its pro rata portion of the Issuable Maximum in the
same ratio that the number of shares of Series C Preferred Stock held by any
such holder bears to all shares of Series C 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 holder's pro rata
portion of the Issuable Maximum (the "Surplus Amount"), the Corporation 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 Corporation's Board of Directors or (2) redeem, from funds
legally available therefor at the time of such redemption, such holder's Surplus
Amount of the Series C Preferred Stock subject to such Conversion Notice at a
price per share equal to the product of (i)
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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
Corporation of such redemption price, whichever is greater, and (ii) the
Conversion Ratio calculated on the Conversion Date; provided, however, that if
the Corporation has elected to obtain Shareholder Approval under clause (1)
above, the holders of a majority of the outstanding shares of Series C Preferred
Stock may request, in lieu of such meeting, that the Corporation redeem each
holder's Surplus Amount as set forth herein and provided, further that if the
Corporation fails for any reason to obtain such Shareholder Approval within the
time period set forth in clause (1) above, the Corporation shall be obligated to
redeem the Series C Preferred Stock not converted as a result of the provisions
of this Section 5 in accordance with the provisions of clause (2) above, and in
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
Corporation redeem shares of Series C Preferred Stock pursuant to this Section 5
and the Corporation fails for any reason to pay the redemption price under
clause (2) above within seven days after the Conversion Date, the Corporation
will pay interest on such redemption price at a rate of 15% per annum to the
converting holder of Series C 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 Corporation held in accordance with the Corporation's Articles of
Incorporation and by-laws, of the issuance by the Corporation of shares of
Common Stock exceeding the Issuable Maximum as a consequence of the conversion
of Series C 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 Corporation of a
properly completed and duly executed Conversion Notice and an original share
certificate representing the shares of Series C Preferred Stock to be converted,
the Corporation 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
Series C Preferred Stock (subject to reduction pursuant to subparagraph (a)(iii)
of this Section 5 and Section 3.8 of the Purchase Agreement), (ii) one or more
certificates representing the number of shares of Series C Preferred Stock not
converted, (iii) a bank check in the amount of accrued and unpaid dividends (if
the Corporation has elected to pay accrued dividends in cash) and (iv) if the
Corporation 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 Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon conversion of any shares of Series C Preferred Stock until
certificates evidencing such shares of Series C Preferred Stock are delivered
for conversion to the Corporation, or the holder of such Series C Preferred
Stock notifies the Corporation that such certificates have been lost, stolen or
destroyed and provides a bond (or other adequate security) reasonably
satisfactory to the Corporation to indemnify the Corporation 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 Corporation of
a properly completed and duly executed Conversion Notice and an original share
certificate representing the shares of Series C Preferred Stock to be converted,
the holder shall be entitled by written notice to the Corporation at any time on
or before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Corporation shall immediately return the
certificates representing the shares of Series C Preferred Stock tendered for
conversion. If the
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Corporation 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
Corporation of a properly completed and duly executed Conversion Notice and an
original share certificate representing the shares of Series C Preferred Stock
to be converted, the Corporation 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 Corporation fails to
deliver to the holder such certificate or certificates pursuant to this Section
prior to the 11th day after receipt by the Corporation of a properly completed
and duly executed Conversion Notice and an original share certificate
representing the shares of Series C Preferred Stock to be converted, the
Corporation shall, at the holder's option (i) redeem, from funds legally
available therefor at the time of such redemption, such number of shares of
Series C Preferred Stock then held by such holder, as requested by such holder,
and (ii) pay all accrued but unpaid dividends on account of the Series C
Preferred Stock for which the Corporation 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 Series C 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 Corporation 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 Corporation redeem shares of Series C Preferred Stock
pursuant to this Section and the Corporation fails for any reason to pay the
redemption price under (2) above within seven days after such notice is deemed
delivered pursuant to paragraph (i) of this Section 5, the Corporation 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 Corporation's failure to deliver
certificates representing shares of Common Stock 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 Corporation 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).
(c) (i) The conversion price for each share of Series C Preferred Stock
(the "Conversion Price") in effect on any Conversion Date shall be 88% (the
"Maximum Conversion Price") 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 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 (b) 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 (c) if the conversion rights of the holders of
Series C 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 Corporation'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 Corporation's board of directors pending any release
of material non-public information) or (d) if the Corporation 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
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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 Corporation (any such failure being referred to as an "Event,"
and for purposes of clause (a) the date which such 10 Trading Day period is
exceeded, or for purposes of clause (b) the date on which such five (5) Trading
Day period is exceeded, or for purposes of clause (c) the date on which such
Event occurs, or for purposes of clause (d) 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 Corporation
shall pay to the holders of the Series C Preferred Stock $25,000 (each holder
being entitled to receive such portion of such amount as equals its pro rata
portion of the Series C 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
Corporation's obligations under the Registration Rights Agreement.
(ii) If the Corporation, at any time while any shares of Series C 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 Corporation, the 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
subparagraph (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 Corporation, at any time while any shares of Series C
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 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
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 Maximum Conversion Price pursuant to this
(c)(iii), if any such right or warrant shall expire and shall not have been
exercised, the 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
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 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.
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(iv) If the Corporation, at any time while shares of Series C Preferred
Stock are outstanding, shall distribute to all holders of Common Stock (and not
to holders of Series C Preferred Stock) evidences of its indebtedness or assets
or rights or warrants to subscribe for or purchase any security (excluding those
referred to in subparagraphs (c)(ii) and (iii) of this Section 5), then in each
such case the Maximum Conversion Price at which each share of Series C 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 Corporation, 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
Corporation) (an "Appraiser") selected in good faith by the holders of a
majority in interest of the shares of Series C Preferred Stock then outstanding;
and provided, further, that the Corporation, 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 Series C 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 Maximum Conversion Price is adjusted pursuant to
subparagraphs (c)(ii), (iii) or (iv) of this Section 5, the Corporation shall
promptly mail to each holder of Series C 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 Corporation with or into another person pursuant
to which (i) a majority of the Corporation'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 Corporation, the sale or
transfer of all or substantially all of the assets of the Corporation or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the holders of the Series C 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 Series C 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 Corporation into which such shares of Series C
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 Corporation to redeem, from funds legally
available therefor at the time of such redemption, its shares of Series C
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 Corporation of the redemption price hereunder, whichever is
greater, and (ii) the Conversion Ratio calculated on the date of the
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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 paragraph (b) of Section 6 below. 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 Series C Preferred Stock the
right to receive the securities, cash or property set forth in this subparagraph
(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 Corporation shall declare a dividend (or any other
distribution) on its Common Stock; or B. the Corporation shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; or C. the
Corporation 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 D. the approval of any stockholders of the
Corporation shall be required in connection with any reclassification of the
Common Stock of the Corporation, any consolidation or merger to which the
Corporation is a party, any sale or transfer of all or substantially all of the
assets of the Corporation, of any compulsory share of exchange whereby the
Common Stock is converted into other securities, cash or property; or E. the
Corporation shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation; then the
Corporation shall cause to be filed at each office or agency maintained for the
purpose of conversion of Series C Preferred Stock, and shall cause to be mailed
to the holders of Series C Preferred Stock at their last addresses as they shall
appear upon the stock books of the Corporation, 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 Series C 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 Corporation (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 Corporation, 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 Series C 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 (5) Trading Days
immediately preceding (but not including) the Announcement Date and (y) the
Conversion Price in effect on the Conversion Date for such Series C Preferred
Stock. "Abandonment Date" means with 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 Corporation (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.
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<PAGE>
(d) If at any time conditions shall arise by reason of action taken by the
Corporation 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 Series C Preferred Stock (different than or
distinguished from the effect generally on rights of holders of any class of the
Corporation's capital stock) or if at any time any such conditions are expected
to arise by reason of any action contemplated by the Corporation, the
Corporation 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 Series C Preferred Stock at least 15 Trading Days prior to the
effective date of such action, and an Appraiser selected by the holders of a
majority in interest of the Series C 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 Series C 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
Series C Preferred Stock; provided, however, that the Corporation, 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 Corporation 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 Series C Preferred Stock and payment of dividends
on Series C Preferred Stock, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
holders of Series C Preferred Stock, not less than such number of shares of
Common Stock as shall (subject to any additional requirements of the Corporation
as to reservation of such shares set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of paragraph (c)
of this Section 5) upon the conversion of all outstanding shares of Series C
Preferred Stock and payment of dividends hereunder. The Corporation 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 Corporation 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.
(g) The issuance of certificates for shares of Common Stock on conversion
of Series C 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 Corporation 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 Series C Preferred Stock
so converted and the Corporation 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 Corporation the amount of such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
(h) Shares of Series C 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 Series C Preferred Stock hereunder, including,
without limitation, any Conversion Notice, shall be in writing
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<PAGE>
and delivered personally, by facsimile or sent by a nationally recognized
overnight courier service, addressed to the attention of the Legal Department of
the Corporation at the facsimile telephone number or address of the principal
place of business of the Corporation as set forth in the Purchase Agreement. Any
and all notices or other communications or deliveries to be provided by the
Corporation hereunder shall be in writing and delivered personally, by facsimile
or sent by a nationally recognized overnight courier service, addressed to each
holder of Series C Preferred Stock at the facsimile telephone number or address
of such holder appearing on the books of the Corporation, 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
Series C Preferred Stock on the third anniversary of the Original Issue Date
may, at the Corporation's option, be converted pursuant to subparagraph (a)(ii)
of Section 5 above or redeemed by the Corporation pursuant to this paragraph
(a), from funds legally available therefor at a price per share of Series C
Preferred Stock equal to 112% of the aggregate Stated Value of the outstanding
Series C Preferred Stock plus accrued dividends. Thereafter, all shares of
Series C 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 paragraph (a)
of this Section 6 shall not be paid by the Corporation 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 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 Series C Preferred Stock subject to
such redemption may elect, by written notice to the Corporation 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 above of all of the
shares of Series C 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 Corporation 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 Corporation 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 Corporation's common
stock, $.0005 par value per share, 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 Corporation which are junior in rights and liquidation preference to the
Series C Preferred Stock. "Original Issue Date" shall mean the
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date of the first issuance of any shares of Convertible Preferred Stock, Series
H of XOMA-Delaware regardless of the number of transfers of any particular
shares of such Convertible Preferred Stock, Series H of XOMA-Delaware or Series
C Preferred Stock and regardless of the number of certificates which may be
issued to evidence such Convertible Preferred Stock, Series H of XOMA-Delaware
or such Series C 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 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 Series C Preferred Stock; provided, however,
that the Corporation, 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, an
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, as amended by
the First Amendment to Convertible Preferred Stock Purchase Agreement, dated as
of January 1, 1998, and as further amended by the Second Amendment to
Convertible Preferred Stock Purchase Agreement, dated as of June 26, 1998, among
the Corporation and the original holders of the Convertible Preferred Stock,
Series G of XOMA-Delaware. "Registration Rights Agreement" means the
Registration Rights Agreement, dated as of August 13, 1997, by and among the
Corporation and the original holders of the Convertible Preferred Stock, Series
G of XOMA-Delaware. "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. "XOMA-Delaware" means XOMA Corporation, a
Delaware corporation.
VI.
LIMITATION ON DIRECTOR LIABILITY
A Director of the Corporation shall not be personally liable to this
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to this Corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 10-202 of the Arizona Business Corporation
Act, or (iv) for any transaction from which the Director derived any improper
personal benefit. If the Arizona Business Corporation Act is hereafter amended
to authorize, with the approval of a corporation's shareholders, further
reductions in the liability of the corporation's directors for breach of
fidu-
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ciary duty, then a Director of this Corporation shall not be liable for any such
breach to the fullest extent permitted by the Arizona Business Corporation Act
as so amended. Any repeal or modification of the foregoing provisions of this
Article VI by the shareholders of this Corporation shall not adversely affect
any right or protection of a Director of this Corporation existing at the time
of such repeal or modification.
VII.
BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, or repeal the
bylaws of the Corporation.
Elections of directors need not be by written ballot unless the bylaws of
the Corporation shall so provide.
Meetings of shareholders may be held within or without the State of
Arizona, as the bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Arizona at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the Corporation.
VIII.
AMENDMENT OF ARTICLES OF INCORPORATION
Subject to the provision of Section 10-101 of the Arizona Business
Corporation Act, the Corporation reserves the right to amend, alter, change, or
repeal any provision contained in these Articles in the manner now or hereafter
prescribed by statute, and all rights conferred upon shareholders herein are
granted subject to this reservation.
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<PAGE>
IN WITNESS WHEREOF, XOMA ARIZONA, INC. has caused this Certificate to be
signed by Peter Davis, its Vice President, Finance and Chief Financial Officer,
this day of December, 1998.
XOMA ARIZONA, INC.
By:
---------------------------------
Peter B. Davis
Vice President, Finance and Chief
Financial Officer
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<PAGE>
EXHIBIT 1
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 Preferred
Stock, Series C 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>
EXHIBIT 2
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 Convertible Preferred Stock,
Series C (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
XOMA CORPORATION
___________________________________________________
Signature
EXHIBIT 4.2
RESOLUTIONS
REGARDING
PREFERENCES AND RIGHTS OF
SERIES A PREFERENCE SHARES
RESOLVED, that upon the effectiveness of the registration of a Memorandum
of Continuance with the Registrar of Companies of Bermuda (the "Effective
Time"), which will result in the Company becoming a Bermuda company pursuant to
a continuation procedure under Bermuda and Arizona law, there is hereby created
a series of preference shares of the Company; which series shall have the
following powers, preferences, and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, in
addition to those set forth in the memorandum of continuance and bye-laws of the
Company:
1. Designation. The series of preference shares established hereby shall be
designated the "Series A Preference Shares" (and shall be referred to herein as
the "Series A Preference Shares") and the authorized number of Series A
Preference Shares shall be 650,000 shares. Such number of shares may be
increased or decreased, from time to time, by resolution of the Board of
Directors; provided that no decrease shall reduce the number of Series A
Preference Shares to a number less than the total of the number of such shares
then outstanding plus the number of such shares issuable upon the exercise of
outstanding rights, options or warrants or upon the conversion of outstanding
securities issued by the Company.
2. Dividends and Distributions.
(A)(i) Subject to the rights of the holders of any shares of any series of
preference shares (or any similar shares) ranking prior and superior to the
Series A Preference Shares with respect to dividends, the holders of Series A
Preference Shares, in preference to the holders of Common Shares and of any
other junior shares, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March, June, September and
December in each year (each such date being referred to herein as a "Dividend
Payment Date"), commencing on the first Dividend Payment Date after the first
issuance of a Series A Preference Share or fraction thereof, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) U.S. $1.00 or
(b) subject to the provisions for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, plus 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in Common Shares or a subdivision of
the outstanding Common Shares (by reclassification or otherwise), declared on
the Common Shares since the immediately preceding Dividend Payment Date, or,
with respect to the first Dividend Payment Date, since the first issuance of any
Series A Preference Share or fraction thereof. The multiple of cash and non-cash
dividends declared on the Common Shares to which holders of the Series A
Preference Shares are entitled, which shall be 100 initially but which shall be
adjusted from time to time as hereinafter provided, is hereinafter referred to
as the "Dividend Multiple." In the event the Company shall at any time after the
date hereof (i) declare or pay any dividend on Common Shares payable in Common
Shares, or (ii) effect a subdivision or combination or consolidation of the
outstanding Common Shares (by reclassification or otherwise than by payment of a
dividend in Common Shares) into a greater or lesser number of Common Shares,
then in each such case the Dividend Multiple thereafter applicable to the
determination of the amount of dividends which holders of Series A Preference
Shares shall be entitled to receive shall be the Dividend Multiple applicable
immediately prior to such event multiplied by a fraction, the numerator of which
is the number of Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares that were outstanding
immediately prior to such event.
<PAGE>
(ii) Notwithstanding anything else contained in this paragraph (A), the
Company shall, out of funds legally available for that purpose, declare a
dividend or distribution on the Series A Preference Shares as provided in this
paragraph (A) immediately after it declares a dividend or distribution on the
Common Shares (other than a dividend payable in Common Shares); provided that,
in the event no dividend or distribution shall have been declared on the Common
Shares during the period between any Dividend Payment Date and the next
subsequent Dividend Payment Date, a dividend of U.S. $1.00 per Series A
Preference Share shall nevertheless be payable on such subsequent Dividend
Payment Date.
(B) Dividends shall begin to accrue and be cumulative on outstanding Series
A Preference Shares from the Dividend Payment Date next preceding the date of
issue of such Series A Preference Shares, unless the date of issue of such
shares is prior to the record date for the first Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of
such shares, or unless the date of issue is a Dividend Payment Date or is a date
after the record date for the determination of holders of Series A Preference
Shares entitled to receive a quarterly dividend and before such Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the Series A Preference Shares in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix in accordance
with applicable law a record date for the determination of holders of Series A
Preference Shares entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than such number of days
prior to the date fixed for the payment thereof as may be allowed by applicable
law.
3. Voting Rights. In addition to any other voting rights required by law,
the holders of Series A Preference Shares shall have the following voting
rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
Series A Preference Share shall entitle the holder thereof to 100 votes on all
matters submitted to a vote of the shareholders of the Company. The number of
votes which a holder of a Series A Preference Share is entitled to cast, which
shall initially be 100 but which may be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Vote Multiple." In the
event the Company shall at any time after the date hereof (i) declare or pay any
dividend on Common Shares payable in shares, or (ii) effect a subdivision or
combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in Common Shares)
into a greater or lesser number of Common Shares, then in each such case the
Vote Multiple thereafter applicable to the determination of the number of votes
per share to which holders of Series A Preference Shares shall be entitled shall
be the vote multiple immediately prior to such event multiplied by a fraction,
the numerator of which is the number of Common Shares outstanding immediately
after such event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of Series A
Preference Shares and the holders of Common Shares and the holders of any other
shares of the Company having general voting rights, shall vote together as one
class on all matters submitted to a vote of shareholders of the Company.
(C) Except as otherwise required by applicable law or as set forth herein,
holders of Series A Preference Shares shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Shares as set forth herein) for taking any corporate
action.
4. Certain Restrictions.
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<PAGE>
(A) Whenever dividends or distributions payable on the Series A Preference
Shares as provided in Paragraph 2 are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not declared, on
Series A Preference Shares outstanding shall have been paid in full, the Company
shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preference Shares;
(ii) declare or pay dividends on or make any other distributions on
any shares ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preference Shares, except
dividends paid ratably on the Series A Preference Shares and all such
parity shares on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) except as permitted in subparagraph 4(A)(iv) below, redeem,
purchase or otherwise acquire for consideration any shares ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Preference Shares, provided that the Company may at
any time redeem, purchase or otherwise acquire any such parity shares in
exchange for any shares of the Company ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A
Preference Shares; or
(iv) purchase or otherwise acquire for consideration any Series A
Preference Shares, or any shares ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preference Shares, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes; provided, however, that the foregoing
restrictions shall not apply to the repurchase of Common Shares held by
employees, officers, directors, or consultants of the Company (or their
permitted transferees) that are subject to restrictive stock purchase
agreements under which the Company has the option or obligation to
repurchase such shares upon the occurrence of certain events, such as
termination of employment.
(B) The Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of the Company unless the
Company could, under subparagraph (A) of this Paragraph 4, purchase or otherwise
acquire such shares at such time and in such manner.
5. Reacquired Shares. Any Series A Preference Shares purchased or otherwise
acquired by the Company in any manner whatsoever shall be canceled upon the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued preference shares and may be reissued as part of a new
series of preference shares to be created by resolution or resolutions of the
Board of Directors, subject to the conditions and restrictions on issuance set
forth herein.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation (voluntary
or otherwise), dissolution or winding up of the Company, no distributions shall
be made (x) to the holders of shares ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preference Shares
unless, prior thereto, the holders of Series A Preference Shares shall have
received an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, plus an amount
equal to the greater of (1) U.S. $100.00 per share or (2) an aggregate amount
per share, subject to the
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<PAGE>
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of Common Shares, or (y) to the
holders of shares ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preference Shares,
except distributions made ratably on the Series A Preference Shares and all
other such parity shares in proportion to the total amount to which the holders
of all such shares are entitled upon such liquidation, dissolution or winding
up. In the event the Company shall at any time after the date hereof (i) declare
or pay any dividend on Common Shares payable in Common Shares, or (ii) effect a
subdivision or combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in Common Shares)
into a greater or lesser number of Common Shares, then in each such case the
aggregate amount per share to which holders of Series A Preference Shares were
entitled immediately prior to such event under clause (x) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
7. Consolidation, Amalgamation, Merger, etc. In case the Company shall
enter into any consolidation, amalgamation, merger, combination or other
transaction in which the Common Shares are exchanged for or changed into other
shares or securities, cash and/or any other property, then in any such case the
Series A Preference Shares shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of shares,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each Common Share is changed or exchanged. In the
event the Company shall at any time after the date hereof (i) declare or pay any
dividend on Common Shares payable in Common Shares, or (ii) effect a subdivision
or combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in Common Shares)
into a greater or lesser number of Common Shares, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of Series A Preference Shares shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
8. Redemption. The Series A Preference Shares shall not be redeemable.
9. Ranking. Unless otherwise provided in the Resolutions Regarding
Preferences and Rights relating to a subsequently designated series of
preference shares of the Company, the Series A Preference Shares shall rank
junior to any other series of the Company's preference shares subsequently
issued, as to the payment of dividends and the distribution of assets on
liquidation, dissolution or winding up and shall rank senior to the Common
Shares.
10. Amendment. The provisions of the memorandum of continuance or bye-laws
of the Company or of these resolutions shall not be amended, altered or repealed
in any manner which would materially alter or change the powers, preferences or
special rights of the Series A Preference Shares so as to effect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding Series A Preference Shares, voting separately as a class.
11. Fractional Shares. Series A Preference Shares may be issued in
fractions of a share (which fractions shall be integral multiples of one
one-hundredth of a share) which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preference Shares.
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EXHIBIT 4.3
RESOLUTIONS
REGARDING
PREFERENCES AND RIGHTS OF
SERIES B PREFERENCE SHARES
RESOLVED, that upon the effectiveness of the registration of a Memorandum
of Continuance with the Registrar of Companies of Bermuda (the "Effective
Time"), which will result in the Company becoming a Bermuda company pursuant to
a continuation procedure under Bermuda and Arizona law, there is hereby created
a series of preference shares of the Company; which series shall have the
following powers, preferences, and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, in
addition to those set forth in the Memorandum of Continuance and bye-laws of the
Company:
Section 1. Designation and Amount. Seven Thousand Five Hundred (7,500)
preferred shares, US$.05 par value, are designated "Series B Preference Shares"
with the powers, preferences, rights, qualifications, limitations and
restrictions specified herein (the "Series B Preference Shares" and each a
"Series B Preference Share"). Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of Series B Preference Shares to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities (including indebtedness) issued by
the Company convertible into Series B Preference Shares.
Section 2. Dividends. The Company shall not be required to pay, and the
holders of the Series B Preference Shares shall not be entitled to receive, any
dividends on the Series B Preference Shares.
Section 3. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary,
before any payment or distribution shall be made to the holders of the common
shares of the Company, the holders of Series B Preference Shares shall be
entitled to receive U.S.$10,000.00 per Series B Preference Share then held by
such holders, plus an amount equal to declared and unpaid dividends and
distributions thereon. After payment of the full liquidation preference of the
Series B Preference Shares set forth in the preceding sentence, the holders of
the Series B Preference Shares shall not be entitled to any further payments or
distribution from the assets of the Company.
Section 4. Voting Rights. The holders of Series B Preference Shares shall
not have any voting rights, except as required under Bermuda law.
Section 5. Redemption.
(A) General. Subject to the Companies Act 1981 (the "Act"), the Company at
its option, in accordance with the terms and provisions of this Section 5, may,
at any time and from time to time, redeem any or all Series B Preference Shares
at a redemption price per share equal to a cash amount determined by multiplying
the Conversion Price (as defined below) by the number of Common Shares into
which each such Series B Preference Shares would be convertible pursuant to the
provisions of Section 6 hereof. If fewer than all the outstanding Series B
Preference Shares are to be redeemed, the shares to be redeemed shall be
selected pro rata as nearly as practicable or by lot, or by such other method as
the Board of Directors of the Company may determine to be fair and appropriate.
<PAGE>
(B) Notice of Redemption. The Company will provide notice of any redemption
of Series B Preference Shares to the holders of record of the Series B
Preference Shares to be redeemed not less than five (5) nor more than sixty (60)
days prior to the date fixed for such redemption. Such notice shall be provided
by first-class mail, postage prepaid, to each holder of record of the Series B
Preference Shares to be redeemed, at such holder's address as it appears on the
register of members of the Company. Each such notice shall state, as
appropriate, the following:
a. the redemption date;
b. the number of Series B Preference Shares to be redeemed and, if
fewer than all the shares held by any holder are to be redeemed, the number
of such shares to be redeemed from such holder;
c. the redemption price;
d. the place or places where certificates for such shares are to be
surrendered for redemption;
e. the then effective Conversion Price (as determined under Section
6); and
f. that the right of holders to convert Series B Preference Shares to
be redeemed will terminate at the close of business on the business day
next preceding the date fixed for redemption (unless the Company shall
default in the payment of the redemption price).
Any notice that is mailed as set forth above shall be conclusively presumed
to have been duly given, whether or not the holder of Series B Preference Shares
receives such notice, and failure to give such notice by mail, or any defect in
such notice, to the holders of any shares designated for redemption shall not
affect the validity of the proceedings for the redemption of any other Series B
Preference Shares.
(C) Mechanics of Redemption. Upon surrender in accordance with the
aforesaid notice of the certificate for any shares so redeemed (duly endorsed or
accompanied by appropriate instruments of transfer), the holders of record of
such shares shall be entitled to receive the redemption price, without interest.
In case fewer than all the shares represented by such certificate are redeemed,
a new certificate representing the unredeemed shares shall be issued without
cost to the holder thereof. Upon surrender of any shares so redeemed in
accordance with this Section 5(C), the Company shall pay the full redemption
amounts with respect to shares as provided herein.
(D) Rights After Redemption. Notwithstanding that any certificates for
shares to be redeemed have not been surrendered in accordance with paragraph (C)
of this Section 5, from and after the date of redemption designated in the
notice of redemption (i) the shares represented thereby shall be deemed to be no
longer outstanding, and (ii) all rights of the holders of such Series B
Preference Shares shall cease and terminate, except only the right to receive
the full redemption amounts as provided herein without interest.
Section 6. Conversion.
(A) Right to Convert. Each Series B Preference Share shall be convertible
(which conversion may include, inter alia, bonus issues, sub-divisions and/or
consolidations of shares), at the option of the holder thereof, into that number
of common shares, par value US$.0005 per share, of the Company (herein, the
"Common Shares" and each a "Common Share") as determined by dividing
U.S.$10,000.00 by the Conversion Price (determined as provided below). The
"Conversion Price" for any Series B Preference Shares issued
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<PAGE>
in connection with a conversion pursuant to clauses (i) through (iii) of Section
4(a) of the Convertible Subordinated Note Agreement, dated as of April 22, 1996,
between the Company (as successor to XOMA Corporation) and Genentech, Inc., as
amended (the "Note Agreement"), shall be an amount per share equal to the
Current Market Price (as defined below) of the Common Shares determined as of
the first occurring Conversion Date (as such term is defined in Section 4(a) of
the Note Agreement) (herein, the "Initial Issue Date"). The "Conversion Price"
for any Series B Preference Shares issued in connection with either a conversion
pursuant to clause (iv) of Section 4(a) of the Note Agreement or a prepayment
pursuant to Section 3(d) of the Note Agreement shall be an amount per share
equal to the Current Market Price of the Common Shares determined as of the date
of the issuance of such shares (herein, the "Prepayment Issue Date"). The number
of Common Shares into which a Series B Preference Share is convertible is
hereinafter referred to as the "Conversion Rate" of such series. The Conversion
Price shall be subject to adjustment from time to time after the Initial Date or
applicable Prepayment Issue Date, as the case may be, as set forth in this
Section 6.
For purposes of this Section 6(A), "Current Market Price" shall mean the
average daily Closing Prices (as defined below) per Common Share for the fifteen
(15) consecutive trading days immediately prior to the Initial Issue Date or
applicable Prepayment Issue Date, as the case may be. "Closing Price" with
respect to any securities on any day shall mean the closing sale price regular
way on such day or, in case no such sale takes place on such day, the average of
the reported closing bid and asked prices, regular way, in each case on the New
York Stock Exchange, or, if such security is not listed or admitted to trading
on such exchange, on the principal national security exchange or quotation
system on which such security is quoted or listed or admitted to trading, or, if
not quoted or listed or admitted to trading on any national securities exchange
or quotation system, the average of the closing bid and asked prices of such
security on the over-the-counter market on the day in question as reported by
the National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or, if not so available, in such manner as furnished by any
New York Stock Exchange member firm selected from time to time by the Board of
Directors of the Company for that purpose, or a price determined in good faith
by the Board of Directors of the Company or, to the extent permitted by
applicable law, a duly authorized committee thereof, whose determination shall
be conclusive. If any Series B Preference Shares shall be called for redemption,
the right to convert the shares designated for redemption shall terminate at the
close of business on the business day next preceding the date fixed for
redemption unless the Company defaults in the payment of the redemption price.
In the event of a default in the payment of the redemption price, the right to
convert the shares designated for redemption shall terminate at the close of
business on the business day next preceding the date that such default is cured.
The Common Shares issuable upon conversion of the Series B Preference Shares,
when the same shall be issued in accordance with the terms hereof, are hereby
declared to be and shall be fully paid and non-assessable Common Shares in the
hands of the holders thereof.
(B) Automatic Conversion. Each Series B Preference Share shall
automatically be converted into Common Shares at its then effective Conversion
Rate immediately upon the transfer of ownership by the initial holder to any
third party which is not an Affiliate (as such term is defined below) of such
holder. "Affiliate" means, when used with respect to any specified person, any
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
(C) Mechanics of Conversion. Each holder of Series B Preference Shares who
desires to convert the same into Common Shares pursuant to this Section 6 shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Company or any transfer agent for the Series B Preference Shares, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall
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<PAGE>
state the number of Series B Preference Shares being converted. Thereupon, the
Company shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of Common Shares to which such holder
is entitled and shall promptly pay in cash or, to the extent sufficient funds
are not then legally available therefor, in Common Shares (at the fair market
value of the Common Shares as of the date of such conversion as determined by
the Board of Directors of the Company), any declared and unpaid dividends on the
Series B Preference Shares being converted. Such conversion shall be deemed to
have been made at the close of business on the date of such surrender of the
certificates representing the Series B Preference Shares to be converted, and
the person entitled to receive the Common Shares issuable upon such conversion
shall be treated for all purposes as the record holder of such Common Shares on
such date.
(D) Adjustment for Subdivisions and Combinations. If the Company shall at
any time or from time to time after the Initial Issue Date or applicable
Prepayment Issue Date, as the case may be, effect a subdivision of the
outstanding Common Shares, the Conversion Price in effect immediately before
that subdivision shall be proportionately decreased. Conversely, if the Company
shall at any time or from time to time after the Initial Issue Date or
applicable Prepayment Issue Date, as the case may be, combine the outstanding
Common Shares into a smaller number of shares, the Conversion Price in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this paragraph (D) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(E) Adjustment for Certain Dividends and Distributions. If the Company at
any time or from time to time after the Initial Issue Date or applicable
Prepayment Issue Date, as the case may be, makes, or fixes a record date for the
determination of holders of Common Shares entitled to receive, a dividend or
other distribution payable in additional Common Shares, in each such event
(without duplication for related events) the Conversion Price that is then in
effect shall be decreased as of the time of such issuance or, in the event such
record date is fixed, as of the close of business on such record date, by
multiplying the Conversion Price then in effect by a fraction (1) the numerator
of which is the total number of Common Shares issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date,
and (2) the denominator of which is the total number of Common Shares issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of Common Shares issuable in
payment of such dividend or distribution; provided, however, that if such record
date is fixed and such dividend is not fully paid or if such distribution is not
fully made on the date fixed therefor, the Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Conversion Price shall be adjusted pursuant to this paragraph (E) to reflect the
actual payment of such dividend or distribution.
(F) Adjustment for Other Dividends and Distributions. If the Company at any
time or from time to time after the Initial Issue Date or applicable Prepayment
Issue Date, as the case may be, makes, or fixes a record date for the
determination of holders of Common Shares entitled to receive, a dividend or
other distribution payable in securities of the Company other than Common
Shares, in each such event provision shall be made so that the holders of the
Series B Preference Shares shall receive upon conversion thereof, in addition to
the number of Common Shares receivable thereupon, the amount of other securities
of the Company which they would have received had their Series B Preference
Shares been converted into Common Shares on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period, subject to all other adjustments called for during such period
under this Section 6 with respect to the rights of the holders of the Series B
Preference Shares or with respect to such other securities by their terms.
(G) Adjustment for Recapitalizations, etc. If at any time or from time to
time after the Initial Issue Date or applicable Prepayment Issue Date, as the
case may be, the Common Shares issuable upon the conversion of the Series B
Preference Shares is changed into the same or a different number of shares of
any class or
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<PAGE>
classes of stock, whether by recapitalization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend or a
reorganization, amalgamation, merger, consolidation or sale of assets provided
for elsewhere in this Section 6 or in Section 3), in any such event each holder
of Series B Preference Shares shall have the right thereafter to convert such
stock into the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change by
holders of the maximum number of Common Shares into which such Series B
Preference Shares could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(H) Compliance with Laws. Notwithstanding any provision of this Section 6
to the contrary, no conversion of any Series B Preference Shares shall be
effective unless such conversion is permitted under then applicable laws.
Section 7. Reacquired Shares. Any Series B Preference Shares purchased or
otherwise acquired by the Company in any manner whatsoever shall be retired and
canceled promptly upon the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued preferred shares and may be reissued
as part of a new series of preferred shares subject to the conditions and
restrictions on issuance set forth herein, in the Company's Memorandum of
Continuance or bye-laws or in any resolutions creating a series of preference
shares or any similar shares or as otherwise required by law.
Section 8. Exclusion of Other Rights. Except as may otherwise be required
by Bermuda law, Series B Preference Shares shall not have any preferences or
relative, participating, optional or other special rights, other than those
specifically set forth herein (as may be amended from time to time) and in the
Company's Memorandum of Continuance or bye-laws. No Series B Preference Shares
shall have any preemptive or subscription rights whatsoever as to any securities
of the Company.
Section 9. Notice. All notices and other communications provided for or
permitted to be given to the Company hereunder shall be made by hand delivery,
next day air courier or certified first-class mail to the Company at its
principal executive office (currently located on the date of the adoption of
these resolutions at 2910 Seventh Street, Berkeley, California 94710, Attention:
General Counsel).
Section 10. Transferability; Registration; Rights of Transferees.
(A) Transferability. The Series B Preference Shares may not be sold,
assigned, conveyed, transferred, pledged, hypothecated or otherwise disposed of
other than as set forth in, and in accordance with, that certain Common Stock
and Convertible Note Purchase Agreement, dated as of April 22, 1996, between the
Company (as successor to XOMA Corporation) and Genentech, Inc.
(B) Transfer Mechanics; Registration. The Series B Preference Share
certificate representing Series B Preference Shares to be transferred shall be
duly endorsed by the transferring holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In all cases of a transfer by an attorney, the original
power of attorney, duly approved, or a copy thereof, duly certified, shall be
deposited and remain with the Company. In case of a transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited and to remain with the Company in its discretion. Upon any
registration of a transfer, the Company shall deliver new Series B Preference
Share certificates to the persons entitled to the Series B Preference Shares
represented thereby. The Series B Preference Share certificates may be exchanged
at the option of the holder thereof, when surrendered at the offices of the
Company, for other Series B Preference Share certificates of different
denominations, of like tenor and representing in the aggregate a like number of
Series B Preference Shares. Any Series B Preference Share certificate so
surrendered
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<PAGE>
shall be promptly canceled by the Company and retired. Each Series B Preference
Share certificate issued in exchange as provided above shall be substantially in
the form of the Series B Preference Share certificate being exchanged and shall
be subject to all of the terms and provisions hereof.
(C) Required Legend(s). Each of the Series B Preference Share certificates
shall contain the legend(s) required by that certain Common Stock and
Convertible Note Purchase Agreement, dated as of April 22, 1996, between the
Company (as successor to XOMA Corporation) and Genentech, Inc.
Section 11. Amendments. These resolutions may be amended without notice to
or the consent of any holder of Series B Preference Shares to cure any
ambiguity, defect or inconsistency, provided that such amendment does not vary
the rights of any holder of Series B Preference Shares. In any other case, any
provisions of these resolutions may be amended by the Company with the written
consent of holders of a majority of the outstanding Series B Preference Shares.
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EXHIBIT 4.4
RESOLUTIONS
REGARDING
PREFERENCES AND RIGHTS OF
SERIES C PREFERENCE SHARES
RESOLVED, that upon the effectiveness of the registration of a Memorandum
of Continuance with the Registrar of Companies of Bermuda (the "Effective
Time"), which will result in the Company becoming a Bermuda company pursuant to
a continuation procedure under Bermuda and Arizona law, each share of
Convertible Preferred Stock, Series C of the Company shall be converted into a
share of a series of preference shares of the Company; which series shall have
the following powers, preferences, and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, in addition to those set forth in the Memorandum of Continuance and
bye-laws of the Company:
Section 1. Designation, Amount and Par Value. The series of preferred
shares shall be designated as Series C Preference Shares (the "Series C
Preference Shares" and each a "Series C Preference Share"), 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 Series
C Preference Share shall have a par value of US$.05 per share and a stated value
of US$10,000 per share (the "Stated Value").
Section 2. Dividends.
(a) Holders of Series C Preference Shares ("Holders") 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 Common Shares (as defined in Section 7) at (subject to the
terms and conditions set forth herein) the option of the Company. Dividends on
the Series C Preference Shares shall be calculated on the basis of a 360-day
year, shall accrue (or be deemed to have accrued) 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 on the Series C Preference Shares shall be paid
on the date on which such Series C Preference Shares 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 Series C
Preference Shares 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 Series C Preference Shares 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 Series C Preference
Shares, such payment shall be distributed ratably among the holders of the
Series C Preference Shares based upon the number of shares held by each Holder.
Payment of dividends on the Series C Preference Shares 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 Common Shares, semi-annually
in arrears, applicable to such Series C Preference Share. 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 Series C Preference Shares are
outstanding. Provided that the Company is in compliance with its obligations
hereunder, the Purchase Agreement (as defined in Section 7) and the Registration
Rights Agreement (as defined in Section 7), notwithstanding any other provision
of this Section 2, the Company may elect by written notice mailed to the Holders
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
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<PAGE>
the amount of any semi-annual dividend to the Holders on the required date, in
which case the accrued and unpaid dividends shall be calculated and paid on the
Conversion Date for such Series C Preference Shares.
(b) Notwithstanding anything to the contrary contained herein, the Company
may not issue Common Shares in payment of dividends (and must deliver cash in
respect thereof) on the Series C Preference Shares if:
(i) the number of Common Shares at the time authorized, unissued and
unreserved for all purposes, is insufficient to pay such dividends in Common
Shares;
(ii) the Common Shares 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 shareholder thereunder and may not
be sold without volume restrictions pursuant to Rule 144 promulgated under the
U.S. 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 Common Shares 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 Shares are 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 U.S.
Securities Exchange Act of 1934, as amended, more than 4.999% of the issued and
outstanding Common Shares;
(v) the Company has failed to timely satisfy its obligations pursuant to
any Conversion Notice (as defined in Section 5(a)(ii)); or
(vi) the issuance of such shares would result in the recipient thereof
owning in excess of 19.99% of the issued and outstanding Common Shares.
(c) So long as any Series C Preference Shares 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 Series C Preference Shares, except for
repurchases effected by the Company on the open market, pursuant to a direct
share purchase plan.
Section 3. Voting Rights. Except as otherwise provided herein and as
otherwise required by law, the Series C Preference Shares shall have no voting
rights. However, so long as any Series C Preference Shares are outstanding, the
Company shall not and shall cause its subsidiary not to, without the affirmative
vote of the holders of all the Series C Preference Shares then outstanding, (a)
amend its memorandum of continuance, bye-laws 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 Shares except as permitted hereunder 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 its
Common Shares, except for repurchases effected by the Company on the open
market, pursuant to a direct share purchase plan; (d) authorize or create any
class of equity or equity equivalent security that ranks senior to the Series C
Preference Shares; or (e) enter into any agreement with respect to any of the
foregoing.
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<PAGE>
Section 4. Liquidation. Upon any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary (a "Liquidation"), the holders of
Series C Preference Shares shall be entitled to receive out of the assets of the
Company, whether such assets are capital or surplus, for each Series C
Preference Share 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 Series C Preference Shares shall be
distributed among the holders of Series C Preference Shares 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,
amalgamation 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 Series C Preference Shares.
Section 5. Conversion. (a) (i) Each Series C Preference Share (in minimum
amounts of $100,000 or such lesser amounts as any converting holder of Series C
Preference Shares then holds) shall be convertible (which conversion may
include, inter alia, bonus issues, subdivisions and/or consolidations of shares)
into Common Shares (subject to reduction pursuant to Section 5(a)(iii) and
Section 3.8 of the Purchase Agreement) 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 Series C Preference Shares to be
converted to the Company, together with the form of conversion notice attached
hereto as Exhibit 1 (the "Holder Conversion Notice"). Each Holder Conversion
Notice shall specify the number of Series C Preference Shares 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 paragraph (i) of this
Section 5. 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 Series C Preference
Shares 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 paragraph (b) of this
Section 5) 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 Series C Preference Shares at the Conversion Ratio (subject to
reduction pursuant to subparagraph (a)(iii) of this Section 5) by delivering to
the holder of such shares to be converted a notice in the form attached hereto
as Exhibit 2 (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 Company Conversion Date (as defined below), (a) an
Underlying Shares Registration Statement covering the resale of the Common
Shares issuable upon such conversion is effective, (b) the Common Shares
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 Shares are then listed
for trading and (c) the Company is in compliance with all of its obligations
hereunder, the Purchase Agreement and the Registration Rights Agreement. Each
Company Conversion Notice shall specify the number of Series C Preference Shares
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
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date that the Company Conversion Notice is deemed delivered pursuant to
paragraph (i) of this Section 5. 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 subparagraph
(a)(ii) shall be subject to paragraph (b) of this Section 5 with respect to
consequences of the Company's failure to deliver Common Shares in respect of a
conversion under this Section. If the Company is converting less than all Series
C Preference Shares 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
paragraph (b) of this Section 5) 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 Shares are 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 Shares are listed for
trading on such market or exchange, (B) the Conversion Price then in effect is
such that the aggregate number of Common Shares that would then be issuable upon
conversion of all outstanding Series C Preference Shares, together with any
Common Shares previously issued upon conversion of Series C Preference Shares,
the Preferred Stock, Series C of XOMA-Arizona (as defined in Section 7), the
Convertible Preferred Stock, Series G of XOMA-Delaware (as defined in Section 7)
or the Convertible Preferred Stock, Series H of XOMA-Delaware and in respect of
payment of dividends hereunder or thereunder, would equal or exceed 20% of the
number of Common Shares 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 Series C Preference Shares its pro rata portion of the Issuable
Maximum in the same ratio that the number of Series C Preference Shares held by
any such Holder bears to all Series C Preference Shares then outstanding and,
with respect to any Common Shares 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 Holder's 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 Shares 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) redeem, from funds legally available
therefor at the time of such redemption, such Holder's Surplus Amount of the
Series C Preference Shares 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
Series C Preference Shares 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 clause (1) above, the Company shall
be obligated to redeem the Series C Preference Shares not converted as a result
of the provisions of this Section 5 in accordance with the provisions of clause
(2) above, and in 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 Series C Preference Shares pursuant to this
Section 5 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, 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.
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"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 Memorandum of Continuance and
bye-laws, of the issuance by the Company of Common Shares exceeding the Issuable
Maximum as a consequence of the conversion of Series C Preference Shares into
Common Shares 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 Series C Preference Shares 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
Common Shares being acquired upon the conversion of Series C Preference Shares
(subject to reduction pursuant to subparagraph (a)(iii) of this Section 5 and
Section 3.8 of the Purchase Agreement), (ii) one or more certificates
representing the number of Series C Preference Shares 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 Common Shares, certificates, which shall be free of
restrictive legends and trading restrictions (other than those required by the
Purchase Agreement), representing such number of Common Shares 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 Common Shares issuable upon conversion of any Series C Preference
Shares until certificates evidencing such Series C Preference Shares are
delivered for conversion to the Company, or the holder of such Series C
Preference Shares notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate 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 Common Shares 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
Series C Preference Shares 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
Series C Preference Shares 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 Common Shares 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
Series C Preference Shares to be converted, the Company shall pay to such
Holder, in cash, as liquidated damages and not as a penalty, US$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 Series C Preference Shares 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 Series C Preference Shares then held by
such Holder, as requested by such Holder, and (ii) pay all accrued but unpaid
dividends on account of the Series C Preference Shares for which the Company
shall have failed to issue Common Share 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 Series C Preference Shares 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 Series C Preference
Shares pursuant to this Section and the
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Company fails for any reason to pay the redemption price under (2) above within
seven days after such notice is deemed delivered pursuant to paragraph (i) of
this Section 5, 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 Common Shares upon conversion
within the period specified herein (including, without limitation, damages
relating to any purchase of Common Shares by such Holder to make delivery on a
sale effected in anticipation of receiving certificates representing Common
Shares upon conversion, such damages to be in an amount equal to (A) the
aggregate amount paid by such Holder for the Common Shares so purchased minus
(B) the aggregate amount of net proceeds, if any, received by such Holder from
the sale of the Common Shares 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).
(c) (i) The conversion price for each Series C Preference Share (the
"Conversion Price") in effect on any Conversion Date shall be 88% (the "Maximum
Conversion Price") 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 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 (b) if trading
in the Common Shares 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 (c) if the conversion rights of the holders of
Series C Preference Shares 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 Shares 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 (d) 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 clause (a) the date which such 10 Trading Day
period is exceeded, or for purposes of clause (b) the date on which such five
(5) Trading Day period is exceeded, or for purposes of clause (c) the date on
which such Event occurs, or for purposes of clause (d) 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 Series C Preference
Shares US$25,000 (each Holder being entitled to receive such portion of such
amount as equals its pro rata portion of the Series C Preference Shares 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.
(ii) If the Company, at any time while any Series C Preference Shares are
outstanding, shall (a) pay a stock dividend or otherwise make a distribution or
distributions on shares of its Junior Securities
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payable in Common Shares, (b) subdivide outstanding Common Shares into a larger
number of shares, (c) combine outstanding Common Shares into a smaller number of
shares, or (d) issue by reclassification of Common Shares any shares of capital
stock of the Company, the Maximum Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of Common Shares outstanding
before such event and of which the denominator shall be the number of Common
Shares outstanding after such event. Any adjustment made pursuant to this
subparagraph (c)(ii) shall become effective immediately after the record date
for the determination of shareholders 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 Series C Preference Shares are
outstanding, shall issue rights or warrants to all holders of Common Shares
entitling them to subscribe for or purchase Common Shares at a price per share
less than the Per Share Market Value of Common Shares at the record date
mentioned below, the Maximum Conversion Price shall be multiplied by a fraction,
of which the denominator shall be the number of Common Shares outstanding on the
date of issuance of such rights or warrants plus the number of additional Common
Shares offered for subscription or purchase, and of which the numerator shall be
the number of Common Shares 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 effective immediately after the record date for the determination
of shareholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Shares the issuance of
which resulted in an adjustment in the Maximum Conversion Price pursuant to
subparagraph (c)(iii) of this Section 5, if any such right or warrant shall
expire and shall not have been exercised, the 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 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 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 Common Shares actually purchased
upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Series C Preference Shares are
outstanding, shall distribute to all holders of Common Shares (and not to
holders of Series C Preference Shares) evidences of its indebtedness or assets
or rights or warrants to subscribe for or purchase any security (excluding those
referred to in subparagraphs (c)(ii) and (iii) of this Section 5), then in each
such case the Maximum Conversion Price at which each Series C Preference Share
shall thereafter be convertible shall be determined by multiplying the
Conversion Price in effect immediately prior to the record date fixed for
determination of shareholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value of Common
Shares determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value of the Common Shares 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 Common Share 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 Series C Preference Shares 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 Series C Preference Shares of the portion
of assets or evidences of indebtedness so distributed or such subscription
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rights applicable to one Common Share. 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 Maximum Conversion Price is adjusted pursuant to
subparagraphs (c)(ii), (iii) or (iv) of this Section 5, the Company shall
promptly mail to each holder of Series C Preference Shares, 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 Shares, any
consolidation, amalgamation 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 resulting entity or (ii)
less than 65% of the outstanding shares of the capital stock of the resulting
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 Shares are converted into
other securities, cash or property, the holders of the Series C Preference
Shares 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 Shares
following such reclassification, consolidation, amalgamation, merger, sale,
transfer or share exchange, and the holders of the Series C Preference Shares
shall be entitled upon such event to receive such amount of securities, cash or
property as the Common Shares of the Company into which such Series C Preference
Shares could have been converted immediately prior to such reclassification,
consolidation, amalgamation, 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 Series C Preference Shares 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, amalgamation, 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, amalgamation,
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 paragraph (b) of Section 6 below. The terms of any such consolidation,
amalgamation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the holder of Series C Preference Shares the right
to receive the securities, cash or property set forth in this subparagraph
(c)(vii) upon any conversion or redemption following such consolidation,
amalgamation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassifications, consolidations, amalgamations,
mergers, sales, transfers or share exchanges.
(viii) If: A. the Company shall declare a dividend (or any other
distribution) on its Common Shares; or B. the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Shares; or C. the
Company shall authorize the granting to all holders of the Common Shares rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; or D. the approval of any shareholders of the Company
shall be required in connection with any reclassification of the Common Shares
of the Company, any consolidation, amalgamation or merger to which the Company
is a party, any sale or transfer of all or substantially all of the assets of
the Company, or any compulsory share exchange whereby the Common Shares are
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
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conversion of Series C Preference Shares, and shall cause to be mailed to the
holders of Series C Preference Shares at their last addresses as they shall
appear in the register of members 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 Shares 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,
amalgamation, 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 Shares of record shall be entitled to exchange their Common Shares for
securities, cash or other property deliverable upon such reclassification,
consolidation, amalgamation, 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 Series C
Preference Shares 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 Shares (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 Series C Preference Shares 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 (5) Trading Days immediately
preceding (but not including) the Announcement Date and (y) the Conversion Price
in effect on the Conversion Date for such Series C Preference Shares.
"Abandonment Date" means with 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 Series C Preference Shares (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 Series C
Preference Shares at least 15 Trading Days prior to the effective date of such
action, and an Appraiser selected by the holders of a majority in interest of
the Series C Preference Shares 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 Series C Preference Shares may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting the
rights of the holders of Series C Preference Shares; 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,
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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 Shares solely for the
purpose of issuance upon conversion of Series C Preference Shares and payment of
dividends on Series C Preference Shares, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Series C Preference Shares, not less than such number
of Common Shares 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 paragraph (c)
of this Section 5) upon the conversion of all outstanding Series C Preference
Shares and payment of dividends hereunder. All Common Shares 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
share certificates representing fractions of Common Shares, 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
US$.01.
(g) The issuance of certificates for Common Shares on conversion of Series
C Preference Shares 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 Series C Preference Shares 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) For each Series C Preference Share converted into Common Shares, both
the authorized but unissued Common Share capital shall decrease and the
authorized but unissued Preference Share capital of unspecified series shall
increase by a proportionate amount.
(i) Any and all notices or other communications or deliveries to be
provided by the holders of the Series C Preference Shares hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile or sent by a U.S. 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 U.S. nationally recognized overnight courier service, addressed to each holder
of Series C Preference Shares 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 U.S.
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
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<PAGE>
Section 6. Redemptions. (a) All outstanding and unconverted Series C
Preference Shares on the third anniversary of the Original Issue Date may, at
the Company's option, be converted pursuant to subparagraph (a)(ii) of Section 5
above or redeemed by the Company pursuant to this paragraph (a), from funds
legally available therefor at a price per Series C Preference Share equal to
112% of the aggregate Stated Value of the outstanding Series C Preference Shares
plus accrued dividends. Thereafter, all Series C Preference Shares shall cease
to be outstanding and shall have the status of authorized but unissued
preference shares. The entire redemption price shall be paid in cash.
(b) If any portion of the applicable redemption price under paragraph (a)
of this Section 6 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 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 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 above of all of the Series C Preference Shares 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 call by the Company for 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 Common Shares 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. All shares redeemed pursuant
to the Section 6 shall be redeemed upon payment of the redemption price.
Section 7. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Common Shares" means the Company's common shares, US$.0005 par value per
share, and shares 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 Common Shares in
accordance with the terms hereof, and of which the denominator is the Conversion
Price at such time.
"Junior Securities" means the Common Shares and all other equity securities
of the Company which are junior in rights and liquidation preference to the
Series C Preference Shares.
"Original Issue Date" shall mean the date of the first issuance of any
shares of Convertible Preferred Stock, Series H of XOMA-Delaware regardless of
the number of transfers of any particular shares of such Convertible Preferred
Stock, Series H of XOMA-Delaware, Preferred Stock, Series C of XOMA-Arizona or
Series C Preference Shares and regardless of the number of certificates which
may be issued to evidence such Convertible Preferred Stock, Series H of
XOMA-Delaware, Preferred Stock, Series C of XOMA-Arizona or such Series C
Preference Shares.
"Per Share Market Value" means on any particular date (a) the closing bid
price per Common Share on such date on the Nasdaq National Market or other stock
exchange or quotation system on which the Com-
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<PAGE>
mon Shares are 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 Shares are not listed then on the
Nasdaq National Market or any stock exchange or quotation system, the closing
bid price for a Common Share 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 functions of reporting prices) at the
close of business on such date, or (c) if the Common Shares are 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 Shares are not then publicly
traded the fair market value of a Common Share as determined by an Appraiser
selected in good faith by the holders of a majority in interest of the Series C
Preference Shares; 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, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Preference Shares" has the meaning set forth in Section 1 hereto.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of August 13, 1997, as amended by the First Amendment to
Convertible Preferred Stock Purchase Agreement, dated as of January 1, 1998, and
as further amended by the Second Amendment to Convertible Preferred Stock
Purchase Agreement, dated as of June 26, 1998, among the Company (as successor
to XOMA-Delaware) and the original holders of the Convertible Preferred Stock,
Series H of XOMA-Delaware.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of August 13, 1997, by and among the Company (as successor to
XOMA-Delaware) and the original holders of the Convertible Preferred Stock,
Series H of XOMA-Delaware.
"Registration Statement" has the meaning set forth in the Registration
Rights Agreement.
"Trading Day" means (a) a day on which the Common Shares are traded on the
Nasdaq National Market or other stock exchange or market on which the Common
Shares have been listed, or (b) if the Common Shares are not listed on the
Nasdaq National Market or any stock exchange or market, a day on which the
Common Shares are traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Shares are not quoted on the OTC Bulletin
Board, a day on which the Common Shares are 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 Shares are 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 Common Shares into which the Series
C Preference Shares are convertible in accordance with the terms hereof and the
Purchase Agreement.
"XOMA-Arizona" means XOMA Corporation, an Arizona corporation.
"XOMA-Delaware" means XOMA Corporation, a Delaware corporation.
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<PAGE>
EXHIBIT 1
NOTICE OF CONVERSION AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert Series C Preference Shares)
The undersigned hereby elects to convert the number of Series C Preference
Shares indicated below, into Common Shares, par value US$.0005 per share (the
"Common Shares"), of XOMA Ltd. (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 Series C Preference Shares to be Converted
- - ---------------------------------------------------
Number of Common Shares to be Issued
- - ---------------------------------------------------
Applicable Conversion Price
- - ---------------------------------------------------
Signature
- - ---------------------------------------------------
Name
- - ---------------------------------------------------
Address
<PAGE>
EXHIBIT 2
NOTICE OF CONVERSION AT THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of XOMA Ltd. (the "Company")
hereby notifies the addressee hereof that the Company hereby elects to exercise
its right to convert [___] of its Series C Preference Shares (the "Series C
Preference Shares") held by the Holder into Common Shares, par value US$.0005
per share (the "Common Shares") 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 Series C Preference Shares to be Converted
- - ---------------------------------------------------
Number of Common Shares to be Issued
- - ---------------------------------------------------
Applicable Conversion Price
- - ---------------------------------------------------
Name of Holder
- - ---------------------------------------------------
Address of Holder
XOMA LTD.
- - ---------------------------------------------------
Signature
