<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
XOMA LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[XOMA LOGO]
XOMA LTD.
2910 Seventh Street
Berkeley, California 94710
(510) 644-1170
April 21, 1999
To Our Shareholders:
You are cordially invited to attend the annual meeting of shareholders of
XOMA Ltd. on May 25, 1999 at 9:00 a.m. local time, which will be held at The
Claremont Hotel, Ashby and Domingo Avenues, Berkeley, California 94623.
Details of business to be conducted at the annual meeting are provided in
the enclosed Notice of Annual Meeting of Shareholders and Proxy Statement.
Also enclosed for your information is a copy of our Annual Report to
Shareholders for 1998. Some of our shareholders will be accessing these
materials and voting via the Internet and will not be receiving a paper proxy
card by mail.
We hope that you will attend the annual meeting. In any event, please
promptly sign, date and return the enclosed proxy in the accompanying reply
envelope or via the Internet.
Sincerely yours,
John L. Castello
Chairman of the Board,
President and Chief Executive
Officer
Enclosures
<PAGE>
XOMA LTD.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AT 9:00 A.M. ON MAY 25, 1999
----------------
To the Shareholders of XOMA Ltd.:
Notice is hereby given that the annual meeting of shareholders of XOMA Ltd.
(the "Company") will be held at The Claremont Hotel, Ashby and Domingo
Avenues, Berkeley, California 94623, on May 25, 1999, at 9:00 a.m. local time,
for the following purposes:
1. To elect directors;
2. To amend the Company's Bye-Laws to allow for shareholder voting by
telephonic, electronic or other means;
3. To approve the issuance of Common Shares upon conversion of the
Company's remaining outstanding Series C Preference Shares in compliance
with Rule 4460 of the Nasdaq Stock Market;
4. To ratify the appointment by the Company's Board of Directors of Ernst &
Young LLP to act as the Company's independent accountants for the 1999
fiscal year;
5. To receive the Company's audited financial statements for the 1998
fiscal year; and
6. To consider and transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 7, 1999, as
the record date for the determination of shareholders entitled to notice of,
and to vote at, this meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
Christopher J. Margolin
Secretary
April 21, 1999
Berkeley, California
YOUR VOTE IS IMPORTANT
- -------------------------------------------------------------------------------
You are cordially invited to attend the meeting in person. Whether or not
you plan to attend the meeting, please promptly mark, sign and date the
enclosed proxy and mail it in the accompanying postage pre-paid envelope or
via the Internet.
- -------------------------------------------------------------------------------
<PAGE>
XOMA LTD.
----------------
PROXY STATEMENT
----------------
To The Shareholders:
The enclosed proxy is solicited on behalf of the Board of Directors of XOMA
Ltd., a company organized under the laws of Bermuda ("XOMA" or the "Company"),
for use at the annual meeting of shareholders to be held at The Claremont
Hotel, Ashby and Domingo Avenues, Berkeley, California 94623, on May 25, 1999,
at 9:00 a.m. local time, or any adjournment or postponement thereof, at which
shareholders of record on April 7, 1999 will be entitled to vote. On April 7,
1999, the Company had issued and outstanding 50,231,987 common shares, par
value US$.0005 per share ("Common Shares"). Holders of Common Shares are
entitled to one vote for each share held.
All registered shareholders can vote by paper proxy. Shareholders whose
Common Shares are registered in the name of a bank or brokerage firm should
follow the instructions provided by their bank or brokerage firm on voting
their shares. Shareholders whose Common Shares are registered in the name of a
bank or brokerage firm participating in the ADP Investor Communication
Services online program may vote electronically through the Internet.
Instruction forms will be provided to shareholders whose bank or brokerage
firm is participating in ADP's program. Signing and returning the proxy card
or submitting the proxy via the Internet does not affect the right to vote in
person at the annual meeting.
In the case of registered shareholders, a proxy may be revoked at any time
prior to its exercise by (a) giving written notice of such revocation to the
Secretary of the Company at the Company's principal office, 2910 Seventh
Street, Berkeley, California 94710, (b) appearing and voting in person at the
annual meeting or (c) properly completing and executing a later-dated proxy
and delivering it to the Company at or before the annual meeting. Presence
without voting at the annual meeting will not automatically revoke a proxy,
and any revocation during the meeting will not affect votes previously taken.
Shareholders whose Common Shares are registered in the name of a bank or
brokerage firm should follow the instructions provided by their bank or
brokerage firm in revoking their previously voted shares. Abstentions and
broker non-votes are each included in the number of shares present for
purposes of establishing a quorum but will not be counted for purposes of
determining whether a proposal presented to shareholders has been approved.
The Company will bear the entire cost of solicitation, including
preparation, assembly, printing, and mailing of this proxy statement, the
proxy card, and any additional material furnished to shareholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding in their names shares that are beneficially owned by others
to forward to such beneficial owners. The solicitation of proxies may be
supplemented by one or more of telephone, telegram, or personal solicitation
by directors, officers, or employees of the Company for no additional
compensation. Except as described above, the Company does not intend to
solicit proxies other than by mail and via the Internet. Shareholders voting
via the Internet should understand that there may be costs associated with
electronic access, such as usage charges from Internet access providers and
telephone companies, that must be borne by the shareholder.
The Company intends to mail this proxy statement and make it available on
the Internet on or about April 21, 1999.
<PAGE>
SHARE OWNERSHIP
The following table sets forth as of April 7, 1999, certain information
regarding all shareholders known by the Company to be the beneficial owners of
more than 5% of the Company's outstanding Common Shares and regarding each
director, each executive officer named on the following compensation tables
and all directors and current executive officers as a group, together with the
approximate percentages of outstanding Common Shares owned by each of them.
Unless otherwise indicated, each of the shareholders has sole voting and
investment power with respect to the shares beneficially owned, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
Number of Percentage of
Common Shares Common Shares
Name of Beneficial Owner Beneficially Owned Beneficially Owned
------------------------ ------------------ ------------------
<S> <C> <C>
James G. Andress(1)..................... 16,500 *
William K. Bowes, Jr.(2)................ 52,569 *
John L. Castello(3)..................... 733,000 1.5
Peter B. Davis(4)....................... 147,932 *
Clarence L. Dellio(5)................... 203,105 *
Arthur Kornberg, M.D.(6)................ 32,500 *
Christopher J. Margolin(7).............. 152,922 *
Steven C. Mendell(8).................... 253,500 *
Patrick J. Scannon, M.D., Ph.D.(9)...... 487,918 1.0
W. Denman Van Ness(10).................. 55,431 *
All executive officers and directors as
a group (10 persons)(11)............... 2,135,377 4.3
</TABLE>
- --------
* Indicates less than 1%.
(1) Represents 16,500 shares issuable upon the exercise of options
exercisable as of 60 days after the record date.
(2) Includes 22,500 shares issuable upon the exercise of options exercisable
as of 60 days after the record date.
(3) Includes 667,000 shares issuable upon the exercise of options exercisable
as of 60 days after the record date. Does not include 7,000 shares owned
by Mr. Castello's sons. Mr. Castello disclaims beneficial ownership of
such shares. Does not include 7,026 shares which have vested pursuant to
the Company's Deferred Savings Plan.
(4) Includes 124,833 shares issuable upon the exercise of options exercisable
as of 60 days after the record date. Does not include 4,995 shares which
have vested pursuant to the Company's Deferred Savings Plan.
(5) Includes 170,305 shares issuable upon the exercise of options exercisable
as of 60 days after the record date. Does not include 7,657 shares which
have vested pursuant to the Company's Deferred Savings Plan.
(6) Includes 22,500 shares issuable upon the exercise of options exercisable
as of 60 days after the record date.
(7) Includes 143,833 shares issuable upon the exercise of options exercisable
as of 60 days after the record date. Does not include 7,193 shares which
have vested pursuant to the Company's Deferred Savings Plan.
(8) Includes 211,500 shares issuable upon the exercise of options exercisable
as of 60 days after the record date. Does not include 631 shares which
have vested pursuant to the Company's Deferred Savings Plan and are now
held in a rollover IRA account.
(9) Includes 400,000 shares issuable upon the exercise of options exercisable
as of 60 days after the record date. Does not include 7,657 shares which
have vested pursuant to the Company's Deferred Savings Plan.
(10) Includes 32,481 shares held by The Van Ness 1983 Revocable Trust, of
which Mr. Van Ness is a trustee. Also includes 450 shares held by various
trusts of which Mr. Van Ness may be deemed the beneficial owner. Mr. Van
Ness disclaims such beneficial ownership. Includes 22,500 shares issuable
upon the exercise of options exercisable as of 60 days after the record
date.
(11) Includes 1,802,471 shares issuable upon exercise of options exercisable
as of 60 days after the record date. Does not include 35,159 shares which
have vested pursuant to the Company's Deferred Savings Plan.
2
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the named executive
officers for the last three completed fiscal years of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------- ------------
Securities
Other Annual Underlying All Other
Name and Principal Salary Bonus Compensation Options Compensation
Position Year ($) ($)(1) ($)(2) (#) ($)(3)
------------------ ---- -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John L. Castello........ 1998 $500,000 N/A $18,537 50,000 $30,722
(Chairman of the Board, 1997 $500,000 N/A $ 878 60,000 $30,472
President and Chief 1996 $500,000 N/A $22,283 50,000 $30,472
Executive Officer)
Patrick J. Scannon,
M.D., Ph.D. ........... 1998 $310,000 $62,199 $13,173 25,000 $17,158
(Chief Scientific and 1997 $310,000 $46,714 $ 1,000 30,000 $17,421
Medical Officer) 1996 $300,000 $41,132 $ 0 50,000 $17,124
Clarence L. Dellio...... 1998 $240,500 $49,972 $ 9,346 25,000 $ 7,281
(Senior Vice President, 1997 $233,000 $38,133 $ 0 30,000 $ 7,056
Operations) 1996 $223,000 $27,377 $ 4,288 45,000 $ 7,031
Peter B. Davis.......... 1998 $217,500 $42,596 $ 0 25,000 $ 7,016
(Vice President,
Finance and 1997 $210,000 $37,364 $ 0 30,000 $ 6,788
Chief Financial
Officer) 1996 $200,000 $19,656 $ 0 35,000 $ 6,766
Christopher J.
Margolin............... 1998 $217,500 $45,084 $ 8,462 25,000 $ 7,016
(Vice President,
General 1997 $210,000 $34,606 $ 8,077 30,000 $ 6,788
Counsel and Secretary) 1996 $200,000 $26,042 $ 7,692 35,000 $ 6,766
</TABLE>
- --------
(1) Each amount in this column for 1998, 1997 and 1996 represents awards under
the Company's Management Incentive Compensation Plan in the following
amounts: Dr. Scannon--$15,306 and 1,917 Common Shares in 1998 (relating to
performance in 1997); $15,128 in 1998 and $15,128 and 1,537 Common Shares
in 1997 (relating to performance in 1996); $16,459 in 1998, $16,459 in
1997 and $16,459 and 2,465 Common Shares in 1996 (relating to performance
in 1995); $8,214 in 1996 (relating to performance in 1993); Mr. Dellio--
$11,522 and 1,443 Common Shares in 1998 (relating to performance in 1997);
$11,189 in 1998 and $11,189 and 943 Common Shares in 1997 (relating to
performance in 1996); 1,500 Common Shares in each of 1998 and 1997 and
$10,683 and 1,500 Common Shares in 1996 (relating to performance in 1995);
$6,011 in 1996 (relating to performance in 1993); Mr. Davis--$10,763 and
1,216 Common Shares in 1998 (relating to performance in 1997); 959 Common
Shares in 1998 and $11,435 and 959 Common Shares in 1997 (relating to
performance in 1996); 1,211 Common Shares in each of 1998 and 1997 and
$9,828 and 1,211 Common Shares in 1996 (relating to performance in 1995);
Mr. Margolin--$11,288 and 1,366 Common Shares in 1998 (relating to
performance in 1997); $12,098 in 1998 and $12,098 and 956 Common Shares in
1997 (relating to performance in 1996); $10,411 in each of 1998 and 1997
and $10,411 and 1,254 Common Shares in 1996 (relating to performance in
1995); $5,220 in 1996 (relating to performance in 1993).
(2) Mr. Castello's amounts in this column for 1998, 1997 and 1996 include
financial services provided to Mr. Castello in the amount of $5,588, $567
and $3,052, respectively. Mr. Castello's, Mr. Dellio's, Mr. Margolin's and
Dr. Scannon's amounts in this column for 1998, Mr. Margolin's amount in
this column
3
<PAGE>
for 1997 and Mr. Castello's, Mr. Dellio's and Mr. Margolin's amounts in
this column for 1996 represent cash payments in lieu of earned vacation.
(3) Each amount in this column for 1998, 1997 and 1996 includes 1,584, 881 and
908, respectively, of the Company's Common Shares contributed to the
accounts of Mr. Castello, Dr. Scannon, Mr. Dellio, Mr. Davis and Mr.
Margolin under the Company's Deferred Savings Plan, valued at fiscal year-
end formula prices of $3.16, $5.39, $5.23, respectively, per share.
Amounts for 1998, 1997 and 1996 also include group term life insurance
premiums in the following amounts: Mr. Castello--$7,722 for each of 1998,
1997 and 1996; Dr. Scannon--$3,168 for 1998, $3,203 for 1997 and $1,914
for 1996; Mr. Dellio--$2,281 for 1998; $2,306 for 1997 and $2,281 for
1996; Mr. Davis--$2,016 for 1998, $2,038 for 1997 and $2,016 for 1996; and
Mr. Margolin--$2,016 for 1998, $2,038 for 1997 and $2,016 for 1996. Dr.
Scannon's amounts for 1998, 1997 and 1996 include $8,990, $9,468 and
$10,460 respectively, which represent the difference between (i) the
amount of interest Dr. Scannon would have been required to pay in interest
for each such year had the loan made to him by the Company pursuant to his
employment agreement been made at the then-prevailing market rate and (ii)
the amount of interest payable on the loan for each such year in
accordance with its terms. See "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements."
The following table contains information concerning the grant of options
under the Company's option plans to the named executive officers as of the end
of the last completed fiscal year of the Company. No share appreciation rights
("SARs") were granted during the last fiscal year and none were held at the
end of the fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------
Potential Realized
Value
of Assumed Annual
Rates of
Number of % of Total Share Price
Securities Options Appreciation
Underlying Granted Exercise For Option Term(1)
Options to Employees or ---------------------
Granted In Fiscal Base Price Expiration 0% 5% 10%
Name (#) Year ($/Sh) Date ($) ($) ($)
---- ---------- ------------ ---------- ---------- --- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
John L. Castello........ 50,000 9.0% $5.00 2/25/08 0 $157,224 $398,436
Patrick J. Scannon,
M.D., Ph.D............. 25,000 4.5% $5.00 2/25/08 0 $ 78,612 $199,218
Clarence L. Dellio...... 25,000 4.5% $5.00 2/25/08 0 $ 78,612 $199,218
Peter B. Davis.......... 25,000 4.5% $5.00 2/25/08 0 $ 78,612 $199,218
Christopher J.
Margolin............... 25,000 4.5% $5.00 2/25/08 0 $ 78,612 $199,218
</TABLE>
- --------
(1) The amounts set forth in the three columns represent hypothetical gains
that might be achieved by the optionees if the respective options are
exercised at the end of their ten-year option terms. These gains are based
on assumed rates of share price appreciation of 0%, 5% and 10% compounded
annually from the dates the respective options were granted. The 0%
appreciation column is included because the options were granted with
exercise prices equal to the market price of the underlying Common Shares
on the date of grant, and thus will have no value unless the Company's
share price increases above the exercise prices as a result of actions by
the executives that improve the Company's performance and/or other factors
affecting such price.
4
<PAGE>
The following table sets forth information with respect to the named
executive officers concerning the exercise of options during the last
completed fiscal year of the Company and unexercised options held as of the
end of the fiscal year. No SARs were exercised during the last fiscal year and
none were held at the end of the fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options at
On Value Options at FY-End(1) FY-End ($)(1)
Exercise Realized ------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John L. Castello........ -- -- 637,291 122,709 $368,829 $15,547
Patrick J. Scannon M.D.,
Ph.D................... -- -- 382,788 72,212 $215,649 $ 7,789
Clarence L. Dellio...... -- -- 156,112 68,526 $ 76,580 $ 6,006
Peter B. Davis.......... -- -- 112,251 62,749 $ 52,292 $ 5,521
Christopher J.
Margolin............... -- -- 132,034 62,966 $ 64,656 $ 5,656
</TABLE>
- --------
(1) The amounts listed in the two columns are based on the closing price per
share of $3.1875 on December 31, 1998, as reported on the Nasdaq National
Market, less the applicable option exercise prices.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company has entered into an employment agreement with Mr. Castello,
dated as of April 29, 1992, that provides for his employment as President and
Chief Executive Officer at a salary of $500,000 per year. Under this
agreement, Mr. Castello also receives all standard Company employee benefits
and supplemental life insurance for the amount that an annual premium of
$18,000 provides. The agreement also provides for a grant of options for
500,000 Common Shares under the Company's 1981 Share Option Plan, which was
made in 1992.
Mr. Castello's employment may be terminated, with or without cause, at the
will of either party. If terminated by the Company for any reason other than
due cause or by Mr. Castello for good reason, Mr. Castello must be paid his
then current base salary and benefits for one year. If terminated for due
cause, he is entitled to no further compensation. Good reason includes, in the
context of a change of control, the assignment to Mr. Castello of duties
inconsistent with his prior duties; his removal from, or failure to re-elect
him to, any position he held immediately prior to the change in control; any
termination by the Company within three years of the change of control other
than for due cause or upon disability or death; a good faith determination by
Mr. Castello that changes in circumstances resulting from the change in
control leave him substantially unable to perform his duties, after notice;
the failure of the Company's successor or the transferee of its assets or
business to assume its obligations under the agreement; or, a significant
relocation of the Company's executive offices. Good reason also includes any
reduction in base pay or benefits or any breach of the agreement by the
Company.
The Company has entered into an employment agreement with Dr. Scannon, dated
as of March 26, 1999, that provides for his employment as Chief Scientific and
Medical Officer at a salary of $320,000 per year. Under this agreement, Dr.
Scannon is entitled to participate in any benefit plan for which key
executives of the Company are eligible, including the Management Incentive
Compensation Plan. The agreement also provides for a one-year loan to Dr.
Scannon in the amount of $209,565, bearing interest at 6% per annum and
secured by a pledge of certain of the Company's Common Shares. The loan was
originally made to Dr. Scannon in 1993, has been extended for six additional
years, and $177,141 in principal and interest payments have been received by
the Company to date. The loan will become payable on demand in the event of
any early termination of Dr. Scannon's employment. Upon termination of his
employment for any reason other than cause, or upon resignation, Dr. Scannon
must be paid his then current base salary and benefits for one year.
5
<PAGE>
The Company has entered into an employment agreement with Mr. Davis dated as
of April 1, 1994 that provides for his employment as Chief Financial Officer
at a salary of $200,000 per year. Under this agreement, Mr. Davis received a
one-time transition allowance in the amount of $35,000 and is entitled to
participate in any benefit plan for which executives of the Company are
eligible. In addition, the agreement provides for a grant of options for
60,000 Common Shares under the Company's 1981 Share Option Plan, which was
made in 1994, as well as participation in the Management Incentive
Compensation Plan. Mr. Davis' employment agreement provides no additional
compensation in the event of a change of control but provides a minimum
severance amount equal to six months of base salary at the time of
termination.
Compensation Committee Report on Executive Compensation
The Company's compensation program for officers (including the named
executive officers) is administered by the Compensation Committee of the Board
of Directors (the "Committee"), which is composed of two non-employee
directors. Following review and approval by the Committee, all issues
pertaining to officer compensation are submitted to the full Board of
Directors for approval. The primary objectives of the Company's compensation
program are to enable the Company to attract, motivate and retain outstanding
individuals and align their success with that of the Company's shareholders
through the creation of shareholder value and achievement of strategic
corporate objectives.
The level of compensation paid to an officer is determined on the basis of
the individual's overall experience, responsibility, performance and
compensation level in his or her prior position (for newly hired officers),
the individual's overall performance and compensation level at the Company
during the prior year (for current employees), the compensation levels of
similarly situated individuals in the pharmaceutical and biotechnology
industries (including, but not limited to, the biotechnology companies
included in the Dow Jones Medical and Biotechnology Index) and other labor
markets in which the Company competes for employees, the performance of the
Company's Common Shares during the prior fiscal year and such other factors as
may be appropriately considered by the Board of Directors, by the Committee
and by management in making its initial proposals to the Committee.
Mr. Castello's compensation for 1997 was determined after considering the
general factors described above and the terms of his existing employment
contract. In 1992, the Committee approved, and recommended that the Board
approve, the terms of Mr. Castello's employment contract, as more fully
described under "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements," because it felt that the terms thereof were
necessary in order to attract a candidate of Mr. Castello's experience and
reputation in the pharmaceutical industry, which in turn was deemed necessary
in order to enable the Company to advance toward its long-range goal of
becoming a pharmaceutical company with commercially viable products. Mr.
Castello has not received a salary increase since his employment contract was
executed in 1992.
The principal methods for long-term incentive compensation are the Company's
1981 Share Option Plan (the "1981 Option Plan") and Restricted Share Plan (the
"Restricted Plan"), and compensation thereunder principally takes the form of
incentive and non-qualified option grants. These grants are designed to
promote the convergence of long-term interests between the Company's key
employees and its shareholders; specifically, the value of options granted
will increase or decrease with the value of the Company's Common Shares. In
this manner, key individuals are rewarded commensurately with increases in
shareholder value. These grants also typically include a 5-year vesting period
to encourage continued employment. The size of a particular option grant is
determined based on the individual's position with and contribution to the
Company. For grants during 1998, the number of options granted were determined
based on the numbers of options granted to such individuals in the previous
fiscal year, the aggregate number of options held by each such individual, the
number of options granted to similarly situated individuals in the
pharmaceutical and biotechnology industries, the price of the Company's Common
Shares relative to other companies in such industries and the resulting
relative value of such options; no specific measures of corporate performance
were considered.
6
<PAGE>
Certain employees are also compensated through the Management Incentive
Compensation Plan established effective July 1, 1993 (as amended, the
"Incentive Plan"), in which management employees (other than the Chief
Executive Officer), as well as certain additional discretionary participants
chosen by the Chief Executive Officer, are eligible to participate. Under the
Incentive Plan, at the beginning of each fiscal year, the Board of Directors
(with advice from the Committee) establishes a target incentive compensation
pool, which is then adjusted at year-end to reflect the Company's performance
in achieving its corporate objectives.
After each fiscal year, the Board of Directors and the Committee make a
determination as to the performance of the Company and Incentive Plan
participants in meeting corporate objectives and individual objectives, which
are determined from time to time by the Board of Directors in its sole
discretion and which included for 1998: a target level of cash at year end;
improvement in operating cash flow; generation of current income; progress
toward strategic alliances, potential partnerships or financing arrangements;
and various objectives tied to development of the Company's product lines.
Awards to Incentive Plan participants vary depending upon the level of
achievement of corporate objectives, the size of the incentive compensation
pool and the Incentive Plan participants' base salaries and performance during
the fiscal year as well as their expected ongoing contribution to the Company.
The Company must meet a minimum percentage of its corporate objectives
(currently 70%) before any awards are made under the Incentive Plan.
Awards under the Incentive Plan vest over a three-year period with 50% of
each award payable on a date to be determined, expected to be in February or
March of the following fiscal year, and 25% payable on each of the next two
annual distribution dates, so long as the Incentive Plan participant continues
to participate in the Incentive Plan. The portion payable on the first
distribution date is payable 50% in cash and 50% in Common Shares (based on a
10-day average market price). Incentive Plan participants must choose prior to
the end of the first year of the three-year period whether the balance is to
be paid in cash or Common Shares. All share issuances under the Incentive Plan
are made pursuant to the Restricted Plan.
For 1998, the Committee and the Board of Directors determined that
management had met a percentage of the corporate objectives summarized above
in excess of the 70% minimum required by the Plan in order to make awards
thereunder. In 1998, 35 individuals were eligible to participate in the
Incentive Plan, including all of the executive officers named in the "Summary
Compensation Table" above other than Mr. Castello.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code")
generally limits the deductible amount of annual compensation paid to certain
individual executive officers (i.e., the chief executive officer and the four
other most highly compensated executive officers of the Company) to no more
than $1 million. However, qualifying performance-based compensation will be
excluded from the $1 million cap on deductibility, and the Committee believes,
based on information currently available, that the Company's options issued to
its executive officers qualify for this exclusion. Considering the current
structure of executive officer compensation and the availability of deferral
opportunities, the Committee believes that the Company will not be denied any
significant tax deduction for 1999. The Committee will continue to review tax
consequences as well as other relevant considerations in connection with
compensation decisions.
William K. Bowes, Jr.
W. Denman Van Ness
7
<PAGE>
Performance Graph
Comparison of Five Year Cumulative Total Return Among XOMA, Nasdaq Composite
Index and DJ Medical Biotech Index
[LINE GRAPH]
As of Nasdaq Dow Jones Medical
December 31, XOMA Composite Index and Biotechnology
- ------------ ---- --------------- -----------------
1993................................ 100 100 100
1994................................ 52 97 113
1995................................ 67 135 193
1996................................ 98 166 204
1997................................ 106 202 263
1998................................ 61 282 358
The comparison assumes $100 invested on December 31, 1993 in the Company's
Common Shares, the Nasdaq Composite Index, and the Dow Jones Medical and
Biotechnology Index (weighted). Total return assumes reinvestment of dividends
although the Company has never paid cash dividends. Returns for the Company
are not necessarily indicative of future performance.
8
<PAGE>
PROPOSAL 1--ELECTION OF DIRECTORS
The Company's directors are elected annually to serve until the next annual
meeting of shareholders and until their successors are elected and have
qualified, or until their death, resignation or removal. The nominees for the
Board of Directors are set forth below. Unless otherwise instructed, the proxy
holders will vote all proxies received by them in the accompanying form for
the nominees for directors listed below. In the event any nominee should
become unavailable for election due to an unexpected occurrence, the proxies
will be voted for any such substitute nominee as may be designated by the
present Board of Directors to fill the vacancy. In the event that additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them for the nominees listed below. Each person
nominated for election has agreed to serve if elected, and management has no
reason to believe that any of the nominees listed below will be unable to
serve. The seven candidates receiving the highest number of affirmative votes
of the shares entitled to vote at the annual meeting will be elected as
directors of the Company.
NOMINEES TO BOARD OF DIRECTORS
<TABLE>
<CAPTION>
Name Title Age
---- ----- ---
<S> <C> <C>
John L. Castello................. Chairman of the Board, President and
Chief Executive Officer 62
Patrick J. Scannon, M.D., Chief Scientific and Medical Officer
Ph.D. .......................... and Director 51
James G. Andress................. Director 60
Williams K. Bowes, Jr. .......... Director 72
Arthur Kornberg, M.D. ........... Director 81
Steven C. Mendell................ Director 57
W. Denman Van Ness............... Director 56
</TABLE>
Mr. Castello became Chairman of the Board, President and Chief Executive
Officer in March 1993. From April 1992 to March 1993, Mr. Castello was
President, Chief Executive Officer and a director. Mr. Castello was President
and Chief Operating Officer of the Ares Serono Group from 1988 to 1991 and
prior to that was President of the Serono Diagnostics Division from 1986 to
1988. Ares Serono is known in the United States for fertility drugs, and it is
also the manufacturer of a bioengineered human growth hormone which is
marketed primarily outside of the United States. Mr. Castello previously held
senior management positions at Amersham International PLC and Abbott
Laboratories. Mr. Castello is also a director of Cholestech Corporation and
Metra Biotech, Inc. Cholestech is engaged in the business of developing
products for the diagnostic measurement of cholesterol and other blood
components. Metra is engaged in the business of developing bone resorption
diagnostic products.
Dr. Scannon is one of the founders of the Company and has served as a
director since its formation. Dr. Scannon became Chief Scientific and Medical
Officer in March 1993. He served as President of the Company from its
formation until April 1992 and as Vice Chairman, Scientific and Medical
Affairs from April 1992 to March 1993. In 1998, Dr. Scannon also became a
director of NanoLogics, Inc., a software company. From 1979 until 1981, Dr.
Scannon was a clinical research scientist at the Letterman Army Institute of
Research in San Francisco. A Board-certified internist, Dr. Scannon holds a
Ph.D. in organic chemistry from the University of California, Berkeley, and an
M.D. from the Medical College of Georgia. Dr. Scannon is also a member of
XOMA's Scientific Advisory Board.
Mr. Andress has been a director since November 1995 and is a former Chairman
of the Pharmaceuticals Group, Beecham Group, plc and Chairman, Healthcare
Products and Services of SmithKline Beecham, plc and the former President and
Chief Operating Officer of Sterling Drug, Inc. Since November 1, 1996, he has
served as Chairman and CEO of Warner Chilcott, plc, a specialty
pharmaceuticals company. From 1989 to 1995, he
9
<PAGE>
served as President and director of Information Resources, Inc., a decision
support software and consumer packaged goods research company and currently
serves as a director. Mr. Andress is also a director of The Liposome Company,
Inc., a biotechnology company. He also serves as a director of Sepracor, Inc.,
a separations technology company, O.P.T.I.O.N. Care, Inc., a home health care
company, Allstate Insurance Company and one private company.
Mr. Bowes has been a director since February 1986 and has been a General
Partner of U.S. Venture Partners since 1981. Mr. Bowes is also a director of
Amgen Inc., Applied Micro-Circuits Corporation, Lynx Therapeutics, Inc. and
one private company.
Dr. Kornberg has been a director since April 1991 and is a member of XOMA's
Scientific Advisory Board. He is a distinguished author and researcher who was
chairman and founder of the Department of Biochemistry at the Stanford
University School of Medicine. Dr. Kornberg received the Nobel Prize in 1959
for his discovery of the enzymatic synthesis of DNA. His present research is
on the genetics, biochemistry, physiology and clinical relevance of inorganic
polyphosphate. He is the author of "DNA Replication," one of the basic
textbooks of biochemistry. Dr. Kornberg was a founder and is a member of the
Boards of Scientific Advisors of DNAX, now a wholly owned subsidiary of
Schering-Plough Corporation, and Regeneron Pharmaceuticals, Inc., a
biotechnology company focused on neurobiology.
Mr. Mendell has been a director of the Company since 1984. From April 1992
to March 1993, he was Chairman of the Board. Mr. Mendell was also Chief
Executive Officer of the Company from 1986 until April 1992. He is currently
Chairman and President of Selective Genetics, Inc. (formerly Prizm
Pharmaceuticals, Inc.), a private company engaged in the development of gene
therapy products for tissue regeneration and repairs. Mr. Mendell is currently
a director of Ciblex Corporation and from November 1997 to December 1998, he
served as President and Chief Executive Officer of that company. Ciblex is a
private company engaged in the development of small molecules to block the
release of disease-causing proteins. Mr. Mendell is also a director of
StressGen Biotechnologies Corp., a biopharmaceutical company engaged in the
development of pharmaceutical products for treatment of cancer and the
prevention of infectious disease, and Wells Publishing Corporation.
Mr. Van Ness has been a director since October 1981. He is a Managing
Director of CIBC Capital Partners, an international merchant banking
organization. From 1986 through March 31, 1996, Mr. Van Ness was a General
Partner of Olympic Venture Partners II and Rainier Venture Partners, venture
capital funds, and from 1977 until 1985, he was a General Partner of the
venture capital group at Hambrecht & Quist, the manager of several venture
capital funds.
BOARD MATTERS
Board Meetings and Committees
During the fiscal year ended December 31, 1998, the Board of Directors held
eight meetings. Each Board member attended at least 75% of the aggregate
number of meetings of the Board and the committees of the Board on which he
served that were held during the last fiscal year.
The Board of Directors has standing audit, compensation and nominating
committees. The nominating committee performs the functions of director
evaluation and selection. The committee currently consists of Messrs. Bowes,
Castello and Van Ness. The committee will not accept unsolicited director
nominations by shareholders. The committee held no meetings during 1998.
The audit committee is primarily responsible for approving the services
performed by the Company's independent accountants and reviewing the Company's
accounting practices and system of internal accounting controls. This
committee, currently consisting of Mr. Mendell and Mr. Andress, held two
meetings during 1998.
The compensation committee is responsible for recommending and reviewing the
compensation, including options and perquisites, of the Company's officers and
other employees. This committee, currently consisting of Messrs. Bowes and Van
Ness, held one meeting during 1998.
10
<PAGE>
Board Compensation and Related Matters
Each non-employee director receives a quarterly retainer of $1,000, $1,000
for each meeting of the Board of Directors attended and $500 for each
committee meeting attended in person on a date other than on the date of a
meeting of the Board of Directors. Additionally, each non-employee director is
granted options to purchase 15,000 Common Shares pursuant to the 1992
Directors Share Option Plan (the "Directors Plan") upon initial election to
the Board of Directors and is annually granted 7,500 Common Shares pursuant to
the Directors Plan upon reelection to the Board of Directors, each at an
exercise price per share equal to the closing market price of the Common
Shares on the date of grant, which for 1998 was $4.875.
Directors who are employees of the Company are neither paid any fees or
other remuneration nor awarded options or Common Shares of the Company for
services as members of the Board of Directors or its committees.
PROPOSAL 2--AMENDMENT TO BYE-LAWS
Bermuda law does not expressly authorize the transmission of proxies
directly to the Company by means other than in writing on paper. Consequently,
it is recommended that the Company's Bye-Laws be amended to add the following
sentence to Section 11 of Article II thereof:
"Each shareholder may appoint a proxy to vote at any meeting (i) by a
written instrument subscribed by such shareholder in such form as the Board
may accept, or (ii) if provided in the written notice for such meeting, by
telephonic, electronic or other means of transmission (including, without
limitation, Internet voting)."
The Board of Directors recommends a vote "FOR" this amendment to the
Company's Bye-Laws.
11
<PAGE>
PROPOSAL 3--APPROVAL OF THE ISSUANCE OF COMMON SHARES IN
COMPLIANCE WITH NASDAQ RULE 4460
Background
In August 1997 and June 1998, the Company (then a Delaware corporation)
completed two private placements with the same group of investors, issuing a
combined total of 2,500 shares of Convertible Preferred Stock, Series G
("Series G Preferred") and another series of convertible preferred stock (now
designated "Series C Preference Shares") for total proceeds of approximately
$24.2 million net of cash issuance costs. Conversions of both series into
Common Shares were (and are) based on the market price of the Common Shares at
the time of conversion. There was no initial discount on the conversion price,
but a discount of 2% was added for each month the relevant series was held, up
to a maximum discount of 14%, in the case of the Series G Preferred, and 12%
(which is also the current discount), in the case of the Series C Preference
Shares. Minimum conversion prices of $7.80 (for the Series G Preferred) and
$5.35 (for the Series C Preference Shares) were in effect for the first 60
days after the issuance of each series.
Of the two series, only 360 of the Series C Preference Shares (representing
$3.6 million) remained outstanding as of March 31, 1999, all of the Series G
Preferred and 890 of the Series C Preference Shares having been converted in
accordance with their terms.
The Board of Directors authorized the sale of the Series G Preferred and the
Series C Preference Shares in order to raise proceeds which were applied
principally towards product development. The terms of the two series are
discussed in Note 4 to the Company's Consolidated Financial Statements, which
are included in the Annual Report to Shareholders for 1998 enclosed with this
proxy statement. Copies of the relevant documents for the issuance of the two
series were filed as exhibits to the Company's Reports on Form 8-K filed
August 18, 1997 and June 29, 1998, respectively. Shareholders desiring a more
complete understanding of these securities are urged to refer to such footnote
and exhibits.
Nasdaq Rule 4460
Rule 4460 of the Nasdaq Stock Market, Inc. sets forth certain corporate
governance standards for issuers, such as the Company, whose securities are
listed on the Nasdaq National Market. Rule 4460 requires, among other things,
that the Company obtain shareholder approval for the sale or issuance of a
number of Common Shares (or securities convertible into or exchangeable for
Common Shares, such as the Series G Preferred and the Series C Preference
Shares) equal to or in excess of 20% of the number of Common Shares
outstanding prior to such issuance if such issuance is for a purchase price
which is less than the greater of the book or market value of the Common
Shares. Due to the similarities between the Series G Preferred and the Series
C Preference Shares, the Company believes they would be treated as securities
of the same class or series for purposes of Rule 4460.
On the date the Series G Preferred was issued (the "Series G Closing Date"),
there were 39,687,433 Common Shares outstanding, and one share less than 20%
of such number of shares is 7,937,486. The Series G Preferred, plus accrued
dividends, have been converted into a total of 4,019,581 Common Shares,
leaving 3,917,905 shares available for issuance upon conversion of the Series
C Preference Shares in compliance with Rule 4460 at the time of issuance of
the Series C Preference Shares. On the date the Series C Preference Shares
were issued (the "Series C Closing Date"), the Series C Preference Shares were
convertible into 2,336,448 Common Shares. Given the initial minimum conversion
price of the Series C Preference Shares, the Company was not required to
obtain shareholder approval for the issuance of the Series C Preference
Shares. Because the conversion price is a floating price, however, the
conversion right of the investors was structured so that at any time a
conversion would comply with the Rule 4460.
Accordingly, the rights of the Series C Preference Shares provide that if on
any conversion date the conversion of all the outstanding Series C Preference
Shares, together with all Common Shares previously issued upon conversion of
Series C Preference Shares and the Series G Preferred and in respect of
payment of dividends thereon, would require the issuance of a number of Common
Shares in excess of 20% of the number
12
<PAGE>
of such shares outstanding on the Series G Closing Date, the Company is
required, at its option, either to redeem all of such holder's inconvertible
Series C Preference Shares at a redemption price per share based on the five
day trailing average market price at the time of conversion or at the time of
redemption, whichever is greater, or, after obtaining shareholder approval, to
convert such Series C Preference Shares into Common Shares; however, if the
Company elects to seek shareholder approval, the holders of a majority of the
outstanding Series C Preference Shares may request, in lieu of such approval,
that the Company redeem the Series C Preference Shares.
Conversions
On the Series G Closing Date, the effective conversion price of the Series G
Preferred was $7.80 per Common Share (or $5.59 after giving effect to the 14%
discount and without regard to the initial minimum price referred to above).
Due to adverse general market conditions resulting in substantial declines in
the market price of the Common Shares, a total of 3,853,987 Common Shares were
issued upon conversion of Series G Preferred (excluding accrued dividends),
for an average conversion price of $3.24 per share. On the Series C Closing
Date, the effective conversion price of the Series C Preference Shares was
$5.35 per Common Share (or $3.92 after giving effect to the 12% discount and
without regard to the initial minimum price referred to above). As of March
31, 1999, due to adverse general market conditions resulting in substantial
declines in the market price of the Common Shares, 3,632,985 Common Shares
have been issued upon conversion of Series C Preference Shares (excluding
accrued dividends), for an average conversion price of $2.45 per share. As of
March 31, 1999, only $3.6 million stated value of Series C Preference Shares
remained outstanding, but only 213,872 Common Shares remained available for
issuance upon conversion of Series C Preference Shares in compliance with Rule
4460.
Redemption
If an investor requests that the Company redeem Series C Preference Shares
as described above and the Company fails for any reason to pay the redemption
price within seven days after the conversion date, the Company will pay
interest on such amount at an annual rate of 15%. Because the redemption price
depends on the date on which the Company pays the redemption amount in full
and such date is not known, the Company cannot determine at this time the
amount it may have to pay to redeem any inconvertible Series C Preference
Shares. Under the redemption price calculation, however, the Company bears the
risk of any decrease in the market price of the Common Shares between the
conversion date and the redemption date. Were it to use any of its available
liquidity to redeem the inconvertible Series C Preference Shares, the Company
would diminish its cash position, depriving itself of necessary resources for
product development. If the Company had redeemed the remaining inconvertible
Series C Preference Shares on March 31, 1999, the Company would have paid the
remaining investors approximately $3.6 million.
Reasons for the Proposal
The Board of Directors of the Company believes that the right of the
investors to require the Company to redeem the inconvertible Series C
Preference Shares has the potential to severely diminish the Company's
existing working capital. Alternatively, if the Company does not obtain
shareholder approval necessary to issue the shares in excess of the limits of
Rule 4460, and the Company nevertheless issues such shares, the Company would
be delisted from the Nasdaq National Market. The Board of Directors believes
that the potential adverse consequences of a failure of the shareholders to
approve this proposal far outweigh the possible dilutive effect of approval of
the proposal. Therefore, in order to protect the Company's working capital and
preserve the liquidity of the investment of its shareholders in the Common
Shares, the Board of Directors has determined that approving under Rule 4460
the issuance to the investors of 20% or more of the outstanding Common Shares
at less than the greater of market or book value is advisable and in the best
interest of the Company and its shareholders.
Vote Required
The affirmative vote of the holders of a majority of the votes cast by the
shareholders at the annual meeting, in person or by proxy, is required for the
approval of the issuance of the shares pursuant to Rule 4460.
The Board of Directors unanimously recommends a vote "FOR" adoption of this
proposal.
13
<PAGE>
PROPOSAL 4--RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, on the recommendation of its audit committee, has
selected Ernst & Young LLP ("Ernst & Young") to serve as the Company's
independent accountants for 1999. Ernst & Young has been acting as the
Company's independent accountants since fiscal year 1998.
From fiscal 1983 through fiscal 1997, Arthur Andersen LLP ("Arthur
Andersen") acted as the Company's independent accountants. Arthur Andersen was
dismissed on March 19, 1998. The decision to change accountants was approved
by the audit committee of the Board of Directors. The reports of Arthur
Andersen on the financial statements of the Company for the two most recent
fiscal years preceding such dismissal did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. During the Company's two most recent
fiscal years preceding such dismissal, there were no disagreements with Arthur
Andersen on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Arthur Andersen, would have caused it to
make a reference to the subject matter of the disagreements in connection with
its reports; nor has Arthur Andersen ever presented a written report, or
otherwise communicated in writing to the Company or the Board of Directors or
the audit committee thereof the existence of any "disagreement" or "reportable
event" within the meaning of Item 304 of Regulation S-K. The Company has
authorized Arthur Andersen to respond fully to the inquiries of Ernst & Young.
The letter from Arthur Andersen addressed to the Securities and Exchange
Commission (the "SEC"), as required by Item 304(a)(3) of Regulation S-K, to
the effect that it agrees with the Company's disclosure regarding its
dismissal, has been filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997, as amended.
The ratification of the appointment of Ernst & Young is being submitted to
the shareholders at the annual meeting. If such appointment is not ratified,
the Board of Directors will consider the appointment of other accountants. The
Board of Directors recommends a vote "FOR" the ratification of the appointment
of Ernst & Young as the Company's independent accountants for the 1999 fiscal
year.
A representative of Ernst & Young is expected to be present at the meeting
with an opportunity, if desired, to make a statement and to respond to your
questions.
RECEIPT OF AUDITED FINANCIAL STATEMENTS
In accordance with Bermuda company law and practice, the Company's audited
financial statements for fiscal year 1998 will be laid before the annual
meeting. No shareholder action is required in connection therewith.
CERTAIN TRANSACTIONS
Pursuant to his employment agreement, in 1993 the Company made a loan to Dr.
Scannon, its Chief Scientific and Medical Officer and a Director, in the
initial amount of $290,000. See "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements." As of April 1, 1999, $209,565
of principal and interest on the loan remained outstanding and $177,141 in
principal and interest payments have been received by the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities to file initial reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC") and the Nasdaq National Market. Such executive officers, directors
and shareholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based on a review of the copies
of the forms furnished to the Company and written representations from the
Company's executive officers and directors, all persons subject to the
reporting requirements of Section 16(a) filed the required reports with
respect to 1998 on a timely basis.
14
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at this
annual meeting other than those set forth in this proxy statement and in the
notice accompanying this proxy statement. If other matters should properly
come before the meeting, it is intended that the proxy holders will vote on
such matters in accordance with their best judgment.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to promptly
execute and return the accompanying proxy in the postage prepaid envelope
which has been enclosed for your convenience or vote via the Internet.
SHAREHOLDER PROPOSALS
A shareholder who intends to present a proposal at the 2000 meeting of
shareholders must submit such proposal by November 30, 1999, to the Company
for inclusion in the Company's 2000 proxy statement and proxy card relating to
such meeting. The proposal must be mailed to the Company's principal office,
at 2910 Seventh Street, Berkeley, California, 94710, Attention: Secretary.
By Order of the Board of Directors,
Christopher J. Margolin
Secretary
April 21, 1999
Berkeley, California
15
<PAGE>
XOMA LTD.
2910 Seventh Street
Berkeley, CA 94710
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JOHN L. CASTELLO and PATRICK J. SCANNON, and
each of them, with full power of substitution, as the proxy or proxies of the
undersigned to vote all Common Shares of XOMA Ltd. which the undersigned is
entitled to vote at the annual meeting of shareholders of XOMA Ltd. to be held
at The Claremont Hotel, Ashby and Domingo Avenues, Berkeley, California 94623 on
May 25, 1999, at 9:00 a.m. local time, and at any adjournment or postponement
thereof, with all powers that the undersigned would have if personally present
thereat:
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON OTHER SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
TO VOTE, PLEASE MARK, SIGN AND DATE YOUR PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
Please mark
your votes as [X]
indicated in
this example
1. Election of Directors
01 James G. Andress 02 William K. Bowes, Jr. 03 John L. Castello
04 Arthur Kornberg, M.D. 05 Steven C. Mendell 06 Patrick J. Scannon,
07 W. Denman Van Ness M.D., Ph.D.
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
(except as marked to to vote for all nominees
the contrary below)
(The Board of Directors recommends a vote FOR.)
This proxy will be voted in the election of directors in the manner described in
the proxy statement for the 1999 annual meeting of shareholders. (INSTRUCTION:
To withhold authority to vote for one or more individual nominees, write such
name or names in the space provided below.)
- -------------------------------
2. Proposal to amend the Company's Bye-Laws to allow for shareholder voting by
telephonic, electronic or other means.
(The Board of Directors recommends a vote FOR.)
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to approve the issuance of Common Shares upon conversion of the
Company's remaining outstanding Series C Preference Shares in compliance
with Rule 4460 of the Nasdaq Stock Market.
(The Board of Directors recommends a vote FOR.)
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to ratify the appointment of Ernst & Young LLP to act as the
Company's independent accountants for the 1999 fiscal year.
(The Board of Directors recommends a vote FOR.)
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and at any adjournment or
postponement thereof.
(The Board of Directors recommends a vote FOR.)
Dated: , 1999
------------------
- -------------------------------------
Signature of Shareholder
- -------------------------------------
Signature if held jointly
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this
proxy will be voted FOR Proposals 1 through 4.
