UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
ON
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): January 28, 1999
XOMA LTD.
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(Exact name of registrant as specified in its charter)
BERMUDA
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(State or other jurisdiction of incorporation)
0-14710 94-2756657
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(Commission File Number) (IRS Employer Identification No.)
2910 Seventh Street, Berkeley, California 94710
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (510) 644-1170
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(Former name or former address, if changed since last report)
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Item 7. Exhibits
1. Press Release dated January 29, 1999*
2. Form of Subscription Agreement dated as of January 28, 1999 by and between
XOMA Ltd. and the purchasers of Common Shares in the 1999 Private
Placement
3. Form of Registration Rights Agreement dated as of January 28, 1999 by and
between XOMA Ltd. and the purchasers of Common Shares in the 1999 Private
Placement
4. Form of Escrow Agreement dated as of January 28, 1999 by and between XOMA
Ltd., Brian W. Pusch as Escrow Agent and the purchasers of Common Shares in
the 1999 Private Placement
5. Form of Common Share Purchase Warrant
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* Previously filed
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 18, 1999 XOMA LTD.
By: /s/ Peter B. Davis
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Peter B. Davis
Vice President, Finance
and Chief Financial Officer
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EXHIBIT INDEX
Number Description
1. Press Release dated January 29, 1999*
2. Form of Subscription Agreement dated as of January 28, 1999 by and between
XOMA Ltd. and the purchasers of Common Shares in the 1999 Private
Placement
3. Form of Registration Rights Agreement dated as of January 28, 1999 by and
between XOMA Ltd. and the purchasers of Common Shares in the 1999 Private
Placement
4. Form of Escrow Agreement dated as of January 28, 1999 by and between XOMA
Ltd., Brian W. Pusch as Escrow Agent and the purchasers of Common Shares in
the 1999 Private Placement
5. Form of Common Share Purchase Warrant
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* Previously filed
Exhibit 2
SUBSCRIPTION AGREEMENT
dated as of January 28, 1999
by and between
XOMA LTD.
and
[Buyer]
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COMMON STOCK
and
COMMON STOCK PURCHASE WARRANTS
--------------------
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SUBSCRIPTION AGREEMENT
COMMON STOCK
and
COMMON STOCK PURCHASE WARRANTS
XOMA LTD.
Page
1. DEFINITIONS..............................................................1
2. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE..................................12
(a) Subscription.......................................................12
(b) Form of Payment....................................................12
(c) Method of Payment..................................................12
3. RESET SHARES............................................................13
(a) Reset Rights.......................................................13
(b) Reset Date No. 1...................................................13
(c) Subsequent Reset Dates.............................................13
(d) Reset Notices......................................................13
(e) Delivery of Reset Shares to the Escrow Agent.......................14
(f) Delivery of Reset Shares to the Company............................15
(g) Termination of Reset Rights........................................15
4. BUYER REPRESENTATIONS, WARRANTIES, ETC..................................15
(a) Purchase for Investment............................................15
(b) Accredited Investor................................................15
(c) Reoffers and Resales...............................................15
(d) Company Reliance...................................................15
(e) Information Provided...............................................15
(f) Absence of Approvals...............................................16
(g) Subscription Agreement.............................................16
(h) Approvals..........................................................16
(i) Absence of Brokers, Finders, Etc...................................16
5. COMPANY REPRESENTATIONS, WARRANTIES, ETC................................16
(a) Organization and Authority.........................................16
(b) Capitalization.....................................................16
(c) Concerning the Shares and the Common Shares........................17
(d) Subscription Agreement; Escrow Agreement; Registration
Rights Agreement; Warrants.......................................17
(e) Non-contravention..................................................18
(f) Approvals..........................................................18
(g) Information Provided...............................................18
(h) Absence of Certain Changes.........................................19
(i) Absence of Certain Proceedings.....................................19
(j) Properties.........................................................19
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(k) SEC Filings........................................................20
(l) Absence of Brokers, Finders, Etc...................................20
(m) No Solicitation....................................................20
(n) Certain Issuances of Securities....................................20
(o) Rights Agreement...................................................20
6. Certain CovenaNts and Acknowledgments...................................20
(a) Transfer Restrictions..............................................20
(b) Restrictive Legend.................................................21
(c) Escrow Agreement; Registration Rights Agreement....................21
(d) Form D.............................................................21
(e) Authorization for Trading..........................................22
(f) Use of Proceeds....................................................22
(g) Blue Sky Laws......................................................22
(h) Certain Expenses...................................................22
(i) Certain Issuances of Securities....................................23
(j) Certain Trading Restrictions.......................................24
(k) Reservation of Common Shares.......................................24
(l) Consolidation, Merger, Etc.........................................24
(m) Overdue Amounts....................................................25
(n) Best Efforts.......................................................25
7. ESCROW SHARES...........................................................25
8. CLOSING DATE............................................................25
9. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE................26
10. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE........................26
11. REPURCHASE AT OPTION OF THE BUYER.......................................27
(a) Repurchase Right...................................................27
(b) Notices; Method of Exercising Optional Repurchase Rights, Etc......27
(c) Other..............................................................27
(d) Special Repurchase Events..........................................28
12. REPURCHASE AT OPTION OF THE COMPANY.....................................28
(a) Repurchase Right...................................................28
(b) Special Repurchase Right...........................................29
(c) Restriction on Repurchases.........................................29
13. MISCELLANEOUS...........................................................29
(a) Governing Law......................................................29
(b) Counterparts.......................................................29
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(c) Headings, etc......................................................29
(d) Severability.......................................................29
(e) Amendments.........................................................29
(f) Waivers............................................................30
(g) Notices............................................................30
(h) Assignment.........................................................30
(i) Survival of Representations and Warranties.........................30
(j) Entire Agreement...................................................30
(k) Termination........................................................30
(l) Further Assurances.................................................31
(m) Public Statements, Press Releases, Etc.............................31
(n) Construction.......................................................31
SCHEDULES
Schedule 5(b)-1 Antidilution Adjustments
Schedule 5(i) Certain Proceedings
Schedule 5(j) Company Proprietary Rights Matters
ANNEXES
Annex I Form of Common Share Purchase Warrant
Annex II Joint Escrow Instructions
Annex III Form of Escrow Agreement
Annex IV Form of Registration Rights Agreement
Annex V Form of Opinion of Cahill Gordon & Reindel to be Delivered on
Closing Date
Annex VI Form of Opinion of General Counsel of the Company to
be Delivered on Closing Date
Annex VII Form of Opinion of Conyers Dill & Pearman to be
Delivered on Closing Date
Annex VIII Form of Opinion of Bryan Cave LLP to be
Delivered on Closing Date
Annex IX Form of Reset Notice
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SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of January 28, 1999 (this
"Agreement"), by and between XOMA LTD., a Bermuda company (the "Company"), with
headquarters located at 2910 Seventh Street, Berkeley, California 94710, and [ ]
(the "Buyer").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement,
the Buyer wishes to purchase Common Shares (such capitalized term and all other
capitalized terms used in this Agreement having the respective meanings provided
in Section 1) and receive Warrants and the Company wishes to sell Common Shares
and issue to the Buyer Warrants as provided in the Agreement; and
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the SEC under the 1933 Act;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions.
(a) As used in this Agreement, the terms "Agreement," "Buyer" and "Company"
shall have the respective meanings assigned to such terms in the introductory
paragraph of this Agreement; provided, however, that, when referring to a time
or period before January 1, 1999, or when the context so requires, the term
"Company" shall refer to Xoma Corporation, a Delaware corporation and the
predecessor of XOMA Ltd.
(b) All the agreements or instruments herein defined shall mean such
agreements or instruments as the same may from time to time be supplemented or
amended or the terms thereof waived or modified to the extent permitted by, and
in accordance with, the terms thereof and of this Agreement.
(c) The following terms shall have the following meanings (such meanings to
be equally applicable to both the singular and plural forms of the terms
defined):
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"Action" means an action, suit, proceeding, inquiry or investigation before
or by any court, public board or body, arbitrator or governmental agency.
"Adjustment Price" means the lesser of (x) the Average Market Price and (y)
the Purchase Price; provided, however, that, notwithstanding any other provision
of this Agreement and without limiting the Buyer's other rights and remedies
hereunder or under applicable law, if a Registration Event occurs then the
Adjustment Price on the next Reset Date to occur and all Adjustment Prices
determined on Reset Dates thereafter shall be permanently reduced on each
Computation Date by one and one-half percent from the otherwise applicable
Adjustment Price (such reduction to be prorated in the case of any Computation
Date which is less than 30 days after a Registration Event occurs or less than
30 days after another Computation Date) (as an example of such reductions in the
Adjustment Price, assuming that: (i) the Average Market Price is always less
than the Purchase Price, (ii) a Registration Event commences on the 30th day
after Reset Date No. 1 and continues until the 60th day thereafter and (iii)
another Registration Event commences on the 50th day after Reset Date No. 3 and
continues until the 80th day thereafter, then (1) the Adjustment Price on Reset
Date No. 1 is 100% of the Average Market Price on such date, (2) the Adjustment
Price on Reset Date No. 2 is 98.5% of the Average Market Price on such date, (3)
the Adjustment Price on Reset Date No. 3 is 98.5% of the Average Market Price on
such date, and (4) the Adjustment Price on Reset Date No. 4 and on each Reset
Date thereafter is 97.0% of the Average Market Price on each such date).
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject Person; for purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Aggregate Purchase Price" means $7,000,000.00.
"Amendment Event" means a Repurchase Event described in clause (4)(B) of
the definition of Repurchase Event which arises under the terms of any amendment
of any of the following: this Agreement, the Escrow Agreement, the Registration
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Rights Agreement, the Warrants, or any other agreement or document entered into
in connection with the issuance of the Shares.
"AMEX" means the American Stock Exchange, Inc.
"Auditors" means Ernst & Young LLP or such other firm of independent public
accountants of recognized national standing as shall have been engaged by the
Company to audit its financial statements.
"Auditors' Determination" means a determination requested by the Company
and signed by the Auditors concurring with the Company's conclusion that (a) a
requirement of the Company to repurchase, or a right of any holder of Shares to
require repurchase of, Shares, or (b) a requirement of the Company to make a
payment pursuant to Section 6(i)(2), by reason of the occurrence of (i) a
specified Repurchase Event which occurs by reason of (x) an event described in
clause (1), (2), (3) or (5) of the definition of Repurchase Event or (y) an
Amendment Event or (ii) a specified Share Limitation Event, whichever is
applicable, would result in the Company being required to classify the Shares as
redeemable common stock on a balance sheet of the Company prepared in accordance
with Generally Accepted Accounting Principles and which shall set forth (i) in
reasonable detail all relevant facts considered by the Auditors in connection
therewith, (ii) all applicable accounting principles and assumptions made in
connection therewith, and (iii) in reasonable detail or have attached thereto
copies of all legal, expert and other advice or information used by the Auditors
in reaching their conclusion.
"Average Market Price" for any date means 89% of the arithmetic average of
the Market Price on each of the five Trading Days, whether or not consecutive,
during the applicable Measurement Period on which the lowest Market Prices
occurred and which are Trading Days on which the Buyer did not sell Common
Shares (including short sales) on the securities market from which the Market
Price of the Common Shares on such date is determined.
"Blackout Period" means any period of one or more consecutive Trading Days,
but not in excess of five consecutive Trading Days, occurring after the SEC
Effective Date as to which the Company has notified the holders of Shares on or
prior to such Trading Day in accordance with Section 3(e) of the Registration
Rights Agreement that they are required, pursuant to Section 3(e) of the
Registration Rights Agreement, to
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suspend offers and sales of Common Shares pursuant to the Registration Statement
as a result of an event or circumstance which relates to a development
concerning the business of the Company which development occurred subsequent to
the later of (x) the SEC Effective Date and (y) the latest date prior to such
notice on which the Company has amended or supplemented the Registration
Statement and as to which the Board of Directors of the Company shall have
determined in good faith that public disclosure of such event or circumstance at
such time would not be in the best interests of the Company, which determination
shall be set forth in a resolution duly adopted by the Board of Directors of the
Company and copies of which shall be furnished to the holders of the Shares at
the same time such notice under Section 3(e) of the Registration Rights
Agreement is given; provided, however, that (i) no more than one Blackout Period
may commence in any period of 180 consecutive days and (ii) no more than 15
Trading Days in the aggregate may occur during all Blackout Periods permitted
under this Agreement.
"Closing Date" means the date and time of the issuance and sale of the
Initial Shares and the issuance of the Warrants.
"Closing Escrow Agent" means the escrow agent named in the Joint Escrow
Instructions.
"Common Shares" means the Common Shares, U.S. $.0005 par value, together
with the related Preference Share Purchase Rights or similar rights, of the
Company.
"Company Escrow Shares" means Escrow Shares which are to be released to the
Company as specified in a Reset Notice given pursuant to Section 3 and which
shares have not been released to the Company.
"Company Proprietary Rights" means all patents, patent applications,
inventions, trademarks, trade names, applications for registration of
trademarks, service marks, service mark applications, copyrights, know-how,
manufacturing processes, formulae, trade secrets, licenses and rights in any
thereof and any other intangible property and assets which are material to the
business of the Company.
"Company Repurchase Notice" means a notice given by the Company to the
Buyer pursuant to Section 12 exercising the Company's right to repurchase all or
a portion of the Escrow Shares pursuant to Section 12 which states (1) the
number of Escrow Shares which are to be repurchased, (2) the Repurchase
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Price or the Special Repurchase Price, as the case may be, and the formula for
determining the same, determined in accordance herewith and (3) the applicable
Repurchase Date.
"Computation Date" means, if a Registration Event occurs, any of (1) the
date which is 30 days after such Registration Event occurs, if any Registration
Event is continuing on such date, (2) each date which is 30 days after a
Computation Date, if any Registration Event is continuing on such date, and (3)
the date on which all Registration Events cease to continue.
"Control Notice" means a notice given by the Company to the Buyer, in
accordance with Section 6(i)(3) or Section 11(d), (i) stating that a Share
Limitation Event or a Repurchase Event, as the case may be, has occurred by
reason of events which are not solely within the control of the Company and (ii)
enclosing an executed copy of an Auditors' Determination.
"Designated Escrow Shares" means with respect to any Reset Date the number
of Escrow Shares beneficially owned by the Buyer on such Reset Date, determined
immediately prior to the computation of Reset Shares for such Reset Date
pursuant to Section 3.
"Designated Shares" means the Initial Shares and the Reset Shares (whether
or not held in escrow).
"DTC" means the Depository Trust Company.
"Escrow Agent" means the Escrow Agent named in the Escrow Agreement and any
successor thereto.
"Escrow Agreement" means the Escrow Agreement to be entered into by and
between the Company, the Buyer and the Escrow Agent in the form attached hereto
as Annex III.
"Escrow Shares" means the Designated Shares held in escrow by the Escrow
Agent as adjusted from time to time, for stock dividends, stock splits,
combinations, recapitalizations or other changes affecting all outstanding
Common Shares of which the Escrow Agent is advised and permitted to participate
in with respect to the Escrow Shares.
"Generally Accepted Accounting Principles" for any Person means the
generally accepted accounting principles and
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practices applied by such Person from time to time in the preparation of its
audited financial statements.
"Initial Shares" means ________ Common Shares.
"Joint Escrow Instructions" means the Joint Escrow Instructions attached
hereto as Annex II.
"Market Price" of the Common Shares on any date means the closing bid price
per Common Share on such date on the first applicable among the following: (a)
the national securities exchange on which the Common Shares are listed which
constitutes the principal securities market for the Common Shares, (b) the
Nasdaq, if the Nasdaq constitutes the principal market for the Common Shares on
such date, or (c) the Nasdaq SmallCap, if the Nasdaq SmallCap constitutes the
principal securities market for the Common Shares on such date, in any such case
as reported by the Nasdaq Stock Market; provided, however, that if during any
Measurement Period or other period during which the Market Price is being
determined:
(i) The Company shall declare or pay a dividend or make a distribution
to all holders of the outstanding Common Shares in Common Shares or fix any
record date for any such action, then the Market Price for each day in such
Measurement Period or such other period which day is prior to the earlier
of (1) the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution and (2) the date on which
ex-dividend trading in the Common Shares with respect to such dividend or
distribution begins shall be reduced by multiplying the Market Price
(determined without regard to this proviso) for each such day in such
Measurement Period or such other period by a fraction, the numerator of
which shall be the number of Common Shares outstanding at the close of
business on the earlier of (1) the record date fixed for such determination
and (2) the date on which ex-dividend trading in the Common Shares with
respect to such dividend or distribution begins and the denominator of
which shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution;
(ii) The Company shall issue rights or warrants to all holders of its
outstanding Common Shares, or fix a record date for such issuance, which
rights or warrants entitle such holders (for a period expiring within
forty-five (45) days after the date fixed for the determination of
shareholders entitled to receive such rights or war-
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rants) to subscribe for or purchase Common Shares at a price per share less
than the Market Price (determined without regard to this proviso) for any
day in such Measurement Period or such other period which day is prior to
the end of such 45-day period, then the Market Price for each such day
shall be reduced so that the same shall equal the price determined by
multiplying the Market Price (determined without regard to this proviso) by
a fraction, the numerator of which shall be the number of Common Shares
outstanding at the close of business on the record date fixed for the
determination of shareholders entitled to receive 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 Market Price, and the
denominator of which shall be the number of Common Shares outstanding on
the close of business on such record date plus the total number of
additional Common Shares so offered for subscription or purchase. In
determining whether any rights or warrants entitle the holders to subscribe
for or purchase Common Shares at less than the Market Price (determined
without regard to this proviso), and in determining the aggregate offering
price of such Common Shares, there shall be taken into account any
consideration received for such rights or warrants, the value of such
consideration, if other than cash, to be determined in good faith by a
resolution of the Board of Directors of the Company;
(iii) (A) The outstanding Common Shares shall be subdivided into a
greater number of Common Shares or a record date for any such subdivision
shall be fixed, then the Market Price of the Common Shares for each day in
such Measurement Period or such other period which day is prior to the
earlier of (1) the day upon which such subdivision becomes effective and
(2) the date on which ex-dividend trading in the Common Shares with respect
to such subdivision begins shall be proportionately reduced, and (B)
conversely, in case the outstanding Common Shares shall be combined into a
smaller number of Common Shares, the Market Price for each day in such
Measurement Period or such other period which day is prior to the earlier
of (1) the date on which such combination becomes effective and (2) the
date on which trading in the Common Shares on a basis which gives effect to
such combination begins, shall be proportionately increased;
(iv) The Company shall, by dividend or otherwise, distribute to all
holders of its Common Shares shares of
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any class of capital stock of the Company (other than any dividends or
distributions to which clause (i) of this proviso applies) or evidences of
its indebtedness, cash or other assets (including securities, but excluding
any rights or warrants referred to in clause (ii) of this proviso and
dividends and distributions paid exclusively in cash and excluding any
capital stock, evidences of indebtedness, cash or assets distributed upon a
merger, amalgamation or consolidation) (the foregoing hereinafter in this
clause (iv) of this proviso called the "Securities"), or fix a record date
for any such distribution, then, in each such case, the Market Price for
each day in such Measurement Period or such other period which day is prior
to the earlier of (1) the record date for such distribution and (2) the
date on which ex-dividend trading in the Common Shares with respect to such
distribution begins shall be reduced so that the same shall be equal to the
price determined by multiplying the Market Price (determined without regard
to this proviso) by a fraction, the numerator of which shall be the Market
Price (determined without regard to this proviso) for such trade less the
fair market value (as determined in good faith by resolution of the Board
of Directors of the Company) on such date of the portion of the Securities
so distributed or to be distributed applicable to one Common Share and the
denominator of which shall be the Market Price (determined without regard
to this proviso). If the Board of Directors of the Company determines the
fair market value of any distribution for purposes of this clause (iv) by
reference to the actual or when issued trading market for any securities
comprising all or part of such distribution, it must in doing so consider
the prices in such market on the same day for which an adjustment in the
Market Price is being determined.
(v) For purposes of this clause (iv) and clauses (i) and (ii) of this
proviso, any dividend or distribution to which this clause (iv) is
applicable that also includes Common Shares, or rights or warrants to
subscribe for or purchase Common Shares to which clause (i) or (ii) of this
proviso applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, assets, shares of capital
stock, rights or warrants other than such Common Shares or rights or
warrants to which clause (i) or (ii) of this proviso applies (and any
Market Price reduction required by this clause (iv) with respect to such
dividend or distribution shall then be made) immediately followed by (2) a
dividend or distri-
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bution of such Common Shares or such rights or warrants (and any further
Market Price reduction required by clauses (i) and (ii) of this proviso
with respect to such dividend or distribution shall then be made), except
that any Common Shares included in such dividend or distribution shall not
be deemed "outstanding at the close of business on the date fixed for such
determination" within the meaning of clause (i) of this proviso;
(vi) The Company or any subsidiary of the Company shall (x) by
dividend or otherwise, distribute to all holders of its Common Shares cash
in (or fix any record date for any such distribution), or (y) repurchase or
reacquire its Common Shares (other than an Option Share Surrender) for, in
either case, an aggregate amount that, combined with (1) the aggregate
amount of any other such distributions to all holders of its Common Shares
made exclusively in cash after the Closing Date and within the twelve (12)
months preceding the date of payment of such distribution, and in respect
of which no adjustment pursuant to this clause (v) has been made, (2) the
aggregate amount of any cash plus the fair market value (as determined in
good faith by a resolution of the Board of Directors of the Company) of
consideration paid in respect of any repurchase or other reacquisition by
the Company or any subsidiary of the Company of any Common Shares (other
than an Option Share Surrender) made after the Closing Date and within the
twelve (12) months preceding the date of payment of such distribution or
making of such repurchase or reacquisition, as the case may be, and in
respect of which no adjustment pursuant to this clause (v) has been made,
and (3) the aggregate of any cash plus the fair market value (as determined
in good faith by a resolution of the Board of Directors of the Company) of
consideration payable in respect of any Tender Offer by the Company or any
of its subsidiaries for all or any portion of the Common Shares concluded
within the twelve (12) months preceding the date of payment of such
distribution or completion of such repurchase or reacquisition, as the case
may be, and in respect of which no adjustment pursuant to clause (vi) of
this proviso has been made (such aggregate amount combined with the amounts
in clauses (1), (2) and (3) above being the "Combined Amount"), exceeds 10%
of the product of the Market Price (determined without regard to this
proviso) for any day in such Measurement Period or such other period which
day is prior to the earlier of (A) the record date with respect to such
distribution and (B) the date on which ex-dividend trading in the Common
Shares
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with respect to such distribution begins or the date of such repurchase or
reacquisition, as the case may be, times the number of Common Shares
outstanding on such date, then, and in each such case, the Market Price for
each such day shall be reduced so that the same shall equal the price
determined by multiplying the Market Price (determined without regard to
this proviso) for such day by a fraction (i) the numerator of which shall
be equal to the Market Price (determined without regard to this proviso)
for such day less an amount equal to the quotient of (x) the excess of such
Combined Amount over such 10% and (y) the number of Common Shares
outstanding on such day and (ii) the denominator of which shall be equal to
the Market Price (determined without regard to this proviso) for such day;
or
(vii) A Tender Offer made by the Company or any of its subsidiaries
for all or any portion of the Common Shares shall expire and such Tender
Offer (as amended upon the expiration thereof) shall require the payment to
shareholders (based on the acceptance (up to any maximum specified in the
terms of the Tender Offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a fair market value (as determined in good
faith by resolution of the Board of Directors of the Company) that combined
together with (1) the aggregate of the cash plus the fair market value (as
determined in good faith by a resolution of the Board of Directors of the
Company), as of the expiration of such Tender Offer, of consideration
payable in respect of any other Tender Offers, by the Company or any of its
subsidiaries for all or any portion of the Common Shares expiring within
the 12 months preceding the expiration of such Tender Offer and in respect
of which no adjustment pursuant to this clause (vi) has been made, (2) the
aggregate amount of any cash plus the fair market value (as determined in
good faith by a resolution of the Board of Directors of the Company) of
consideration paid in respect of any repurchase or other reacquisition by
the Company or any subsidiary of the Company of any Common Shares (other
than an Option Share Surrender) made after the Closing Date and within the
12 months preceding the expiration of such Tender Offer and in respect of
which no adjustment pursuant to clause (v) of this proviso has been made,
and (3) the aggregate amount of any distributions to all holders of Common
Shares made exclusively in cash within 12 months preceding the expiration
of such Tender Offer and in respect of which no adjustment pursuant to
clause (v) of this proviso has been made, exceeds 10% of
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the product of the Market Price (determined without regard to this proviso)
for any day in such period times the number of Common Shares outstanding on
such day, then, and in each such case, the Market Price for such day shall
be reduced so that the same shall equal the price determined by multiplying
the Market Price (determined without regard to this proviso) for such day
by a fraction, the numerator of which shall be the number of Common Shares
outstanding on such day multiplied by the Market Price (determined without
regard to this proviso) for such day and the denominator of which shall be
the sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to shareholders based on the acceptance (up
to any maximum specified in the terms of the Tender Offer) of all shares
validly tendered and not withdrawn as of the last time tenders could have
been made pursuant to such Tender Offer (the "Expiration Time") (the shares
deemed so accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (y) the product of the number of Common Shares
outstanding (less any Purchased Shares) on such day times the Market Price
(determined without regard to this proviso) of the Common Shares on the
Trading Day next succeeding the Expiration Time. If the application of this
clause (vi) to any Tender Offer would result in an increase in the Market
Price (determined without regard to this proviso) for any trade, no
adjustment shall be made for such Tender Offer under this clause (vi) for
such day.
"Measurement Period" means, with respect to any Reset Date, the period of
25 consecutive Trading Days ending on the Trading Day prior to such Reset Date.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"Nasdaq Stock Market" means the Nasdaq Stock Market, Inc.
"1997 10-K" means the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997, as amended by Amendments No. 1 and No. 2 thereto
on Form 10-K/A.
"1934 Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute.
"1933 Act" means the Securities Act of 1933, as amended, or any successor
statute.
<PAGE>
-12-
"NYSE" means the New York Stock Exchange, Inc.
"Option Share Surrender" means the surrender of Common Shares to the
Company in payment of the exercise price or tax obligations incurred in
connection with the exercise of a stock option granted by the Company to any of
its employees, directors or consultants.
"Other Buyer" means the buyer of Common Shares named in the Other
Subscription Agreement.
"Other Subscription Agreement" means the Subscription Agreement, dated as
of the date hereof, between the Company and the Other Buyer relating to the
agreement of such Other Buyer to purchase Common Shares and receive warrants and
reset shares on the same terms as provided in this Agreement.
"Permitted Transferee" means any Person (1) who is an "accredited investor"
as defined in Regulation D under the Securities Act and who is designated a
non-resident of Bermuda for Bermuda Exchange Control purposes, (2) who is to be
assigned rights under this Agreement, the Registration Rights Agreement and the
Escrow Agreement and transferred (x) Shares valued at least $2,000,000
determined on the basis of the most recent Adjustment Price, (y) Warrants to
purchase at least 60,000 Warrant Shares or (z) at least 60,000 Warrant Shares
which have not been transferred following their issuance and (3) who is either
(A) an Affiliate of the beneficial owner of the Securities to be transferred or
(B) a Person as to whom the Company shall have consented to such transfer and
assignment, such consent not to be unreasonably withheld (it being understood
that a proposed assignment by the Buyer to a competitor or potential competitor
of the Company or a Person which the Company determines in good faith is
accumulating or is likely to accumulate ownership of Common Shares for hostile
or unfriendly purposes may constitute a basis for withholding such consent).
"Person" means an individual, partnership, corporation, limited liability
company, trust, incorporated organization, unincorporated association or joint
stock company.
"Preference Share Purchase Rights" means the Preference Share Purchase
Rights issued or issuable pursuant to the Rights Agreement (or any similar
rights hereafter issued by the Company with respect to the Common Shares).
<PAGE>
-13-
"Purchase Price" means $5.85008; provided, however, that when used after
the Closing Date, the Purchase Price shall be subject to equitable adjustments
from time to time for stock splits, stock dividends, combinations,
recapitalizations, reclassifications and similar events occurring after the
Closing Date on the same terms as the adjustments provided in the definition of
"Market Price" in this Section 1.
"Recently Released Shares" means Shares released to the Buyer from escrow
under the Escrow Agreement not more than 30 days prior to the date the Buyer
gives a Repurchase Notice.
"Registration Event" shall mean any one of the following: (1) the Company
fails to file the Registration Statement with the SEC prior to the 30th day
after the Closing Date, (2) the Company fails to submit a request for
acceleration of the effective date of the Registration Statement in accordance
with Section 3(a) of the Registration Rights Agreement, (3) the Registration
Statement is not effective prior to the 90th day after the Closing Date, (4) the
Registration Statement shall cease to be available during the Registration
Period (as defined in the Registration Rights Agreement) for use by any holder
of Shares who is named therein as a selling shareholder for any reason
(including, without limitation, by reason of an SEC stop order, a material
misstatement or omission in the Registration Statement or the information
contained in the Registration Statement having become outdated) without being
succeeded within ten Trading Days by a subsequent Registration Statement filed
with and declared effective by the SEC; provided, however, that no Registration
Event pursuant to this clause (4) shall be deemed to occur prior to the SEC
Effective Date, (5) the Common Shares cease to be listed for trading on any of
the NYSE, the AMEX, the Nasdaq or the Nasdaq SmallCap or trading in the Common
Shares shall be suspended for any reason (other than as a result of the
suspension of trading of securities generally) in either case for more than five
Trading Days in the aggregate (whether or not consecutive), (6) the Company
fails to deliver any Reset Shares to the Escrow Agent as and when required by
Section 3 unless within ten Trading Days of such failure the Company can
demonstrate, to the reasonable satisfaction of the Buyer, that such failure did
not result in any direct, indirect or consequential damages or expenses,
including lost trading opportunities, to the Buyer, or (7) if the Company
breaches in a material respect any covenant or other material term or condition
to this Agreement (other than a representation or warranty contained herein),
the Registration Rights Agreement, the Escrow Agreement or any other agreement,
document, certificate or other instrument delivered in connec-
<PAGE>
-14-
tion with the transactions contemplated hereby and thereby, and such breach
continues for a period of 30 days after written notice thereof to the Company;
provided, further, however, that (x) with respect to clauses (3) and (4) above,
no Registration Event shall be deemed to occur to the extent such failure to
become effective or such unavailability of the Registration Statement, as the
case may be, shall be primarily caused or requested by the Buyer or the Other
Buyer after reasonable notice of the circumstances creating such potential
failure or unavailability has been given to the Buyer and the Other Buyer, (y)
with respect to clauses (3), (4) and (5) above, the respective 90 day, ten
Trading Day, and five Trading Day periods referred to in such clauses shall be
extended by the number of days of any Blackout Period commencing prior to the
end of each such period and (z) with respect to clause (6) above, if the Buyer
fails to furnish the Company with information reasonably requested by the
Company describing the Buyer's trading activity in Common Shares during the
period from the applicable Reset Date until the earlier of the date such Reset
Shares are delivered or the date of such request, then the ten Trading Day
period referred to in clause (6) shall be extended until the day which is two
Trading Days after such information is furnished to the Company.
"Registration Rights Agreement" means the Registration Rights Agreement to
be entered into between the Company and the Buyer in the form attached hereto as
Annex IV.
"Registration Statement" means the Registration Statement required to be
filed by the Company with the SEC pursuant to Section 2(a) of the Registration
Rights Agreement.
"Regulation D" means Regulation D promulgated by the SEC under the 1933
Act.
"Release Notice" means the notice from the Buyer to the Escrow Agent in the
form attached to the Escrow Agreement.
"Repurchase Date" means the date of repurchase of Shares pursuant to
Section 11 or Section 12, as the case may be.
"Repurchase Event" means any one of the following events:
(1) For any period of five consecutive Trading Days (excluding days
during a Blackout Period) commencing on or after the Closing Date trading
in the Common Shares shall
<PAGE>
-15-
be suspended for any reason (other than as a result of the suspension of
trading of securities generally);
(2) For any period of five consecutive Trading Days (excluding days
during a Blackout Period) the Common Shares cease to be listed for trading
on any of the NYSE, the AMEX, the Nasdaq or the Nasdaq SmallCap;
(3) The inability for 30 or more days commencing after the SEC
Effective Date (excluding days during a Blackout Period), whether or not
consecutive, of any holder of Shares to sell Common Shares pursuant to the
Registration Statement for any reason (other than reasons arising solely
from the status, action or inaction of the Buyer) on each of such 30 days;
(4) The Company shall fail or default in the timely performance of any
obligation (A) to issue Reset Shares as and when required by Section 3,
unless the Company makes the demonstration set forth in clause (6) of the
definition of Registration Event or (B) any other material obligation not
covered by clauses (1), (2), (3) or 4(A), in each case to a holder of
Shares under the terms of this Agreement, the Escrow Agreement, the
Registration Rights Agreement, the Warrants or any other agreements or
documents entered into in connection with the issuance of the Shares, as
such instruments may be amended from time to time; provided, however, that
an event described in this clause (4) shall be a Repurchase Event only if
such failure or default shall have continued for a period of 15 Trading
Days (excluding days during a Blackout Period) after notice thereof is
given to the Company by any holder of Shares; or
(5) Any consolidation or merger of the Company with or into another
entity (other than a merger or consolidation of a subsidiary of the Company
into the Company or a wholly-owned subsidiary of the Company) where the
shareholders of the Company immediately prior to such transaction do not
collectively own at least 51% of the outstanding voting securities of the
surviving corporation of such consolidation or merger immediately following
such transaction or the common stock of such surviving company is not
listed for trading on the NYSE, the AMEX, the Nasdaq or the Nasdaq
SmallCap; or any sale or other transfer of all or substantially all of the
assets of the Company.
<PAGE>
-16-
"Repurchase Notice" means a notice from the Buyer to the Company which
states (1) that the Buyer is thereby requiring the Company to repurchase Shares
pursuant to Section 11, (2) in general terms the Repurchase Event giving rise to
such repurchase, and (3) the number of Shares which are to be repurchased.
"Repurchase Percentage" means, with respect to each Repurchase Date, the
applicable percentage determined with respect to such Repurchase Date as
follows:
Repurchase
Repurchase Date Percentage
- --------------- ----------
Closing Date through day prior to Reset Date No. 1 115%
Reset Date No. 1 through 360th day after Closing Date 120%
361st through 540th day after Closing Date 125%
541st through 720th day after Closing Date 130%
721st through 900th day after Closing Date 135%
On and after 901st day after Closing Date 150%
"Repurchase Price" means, for each Share repurchased pursuant to Section 11
or Section 12, the greater of (A) the arithmetic average of the Market Price on
each of the five consecutive Trading Days ending on the Trading Day prior to
such Repurchase Date and (B) the most recently determined Adjustment Price (or
in the case of a Repurchase Date prior to Reset Date No. 1, the Purchase Price)
multiplied by the applicable Repurchase Percentage.
"Repurchase Share Amount" means 15% of the sum of (i) the number of Escrow
Shares and (ii) the number of Recently Released Shares which are beneficially
owned by the Buyer on the Repurchase Date.
"Repurchase Shares" means the Common Shares issuable to the Buyer pursuant
to Section 11(d).
"Reset Date" means any of Reset Date No. 1, Reset Date No. 2, and each
sequentially numbered Reset Date thereafter which shall occur every 90 days
after Reset Date No. 2 un-
<PAGE>
-17-
til the earlier of (x) the day which is 1,080 days after the Closing Date (which
shall be a Reset Date) or (y) the last Reset Date to occur on which there is a
positive number of Designated Escrow Shares.
"Reset Date No. 1" means August 31, 1999.
"Reset Date No. 2" means the day which is 90 days after Reset Date No. 1.
"Reset Notice" means a notice from the Buyer to the Company and the Escrow
Agent in the form attached hereto as Annex IX.
"Reset Period" means the period commencing on each Reset Date and ending
three Trading Days after the Escrow Agent receives a Reset Notice in respect of
such Reset Date.
"Reset Shares" means either (i) additional Common Shares issuable by the
Company to the Buyer or (ii) Company Escrow Shares to be released to the Company
from the escrow maintained by the Escrow Agent, in each case in accordance with
Section 3.
"Rights Agreement" means the Amended and Restated Shareholder Rights
Agreement, dated as of October 27, 1993 and amended and restated as of December
31, 1998, by and between the Company and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent.
"Rule 144" means Rule 144 promulgated by the SEC under the 1933 Act or any
other similar rule or regulation of the SEC that may at any time permit a holder
of any securities to sell such securities to the public without registration
under the 1933 Act.
"SEC" means the United States Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement is first
declared effective by the SEC.
"SEC Reports" means (1) the 1997 10-K, (2) the Company's Quarterly Reports
on Form 10-Q for the fiscal quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998 (as amended by Amendment No. 1 thereto on Form 10-Q/A), (3)
the Company's Current Reports on Form 8-K dated December 30, 1997, June 26, 1998
(as amended by Amendment No. 1 thereto on Form 8-
<PAGE>
-18-
K/A), July 9, 1998 and December 29, 1998, (4) to the extent incorporated by
reference in the 1997 10-K, the Company's definitive proxy statement for its
1998 Annual Meeting of Stockholders and (5) the Company's definitive proxy
statement for its special meeting of stockholders dated November 30, 1998, in
each case as filed with the SEC.
"Securities" means the Shares and the Warrants; provided, however, for
purposes of the definition of the term "Market Price" set forth in clause (iv)
of the proviso to the definition of the term "Market Price," Securities shall
have the meaning set forth in such clause (iv).
"Share Limitation Event" means a time at which the Company is unable to
issue all Reset Shares or Repurchase Shares otherwise required to be issued by
this Agreement by reason of the restrictions set forth in the Shareholder
Approval Rule and the Company has not obtained a waiver thereof.
"Share Limitation Repurchase Price" means an amount equal to 115% of the
Repurchase Price determined as of the applicable Reset Date or the date on which
Repurchase Shares were otherwise required to be issued, as the case may be, for
which payment is due pursuant to Section 6(i)(2).
"Shareholder Approval" shall mean the approval by a majority of the votes
cast by the holders of Common Shares (in person or by proxy) at a meeting of the
shareholders of the Company (duly convened at which a quorum was present), or a
unanimous written consent of holders of Common Shares given without a meeting,
of the issuance by the Company of 20% or more of the Common Shares of the
Company outstanding on the Closing Date for less than the greater of the book or
market value of such Common Shares, as and to the extent required under the
Shareholder Approval Rule.
"Shareholder Approval Rule" means Rule 4460(i) of the Nasdaq as in effect
from time to time or any successor, replacement or similar provision thereof or
of any other market on which the Common Shares are listed for trading.
"Shares" means the Designated Shares, the Repurchase Shares and the Warrant
Shares.
"Special Repurchase Price" means, for each Escrow Share repurchased
pursuant to Section 12(b), the amount determined by dividing (a) the Aggregate
Purchase Price by (b) the number of Designated Shares (as adjusted from time to
time for
<PAGE>
-19-
stock dividends, stock splits, combinations, recapitalizations or other changes
affecting all outstanding Common Shares) issued to the Buyer at any time prior
to the applicable Repurchase Date.
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on whichever of (w) the national securities
exchange, (x) the Nasdaq, (y) the Nasdaq SmallCap or (z) such other securities
market, which at the time constitutes the principal securities market for the
Common Shares, is open for general trading of securities; provided, however,
that if there shall be no principal securities market for the Common Shares,
"Trading Day" means any day other than a Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law or
executive order to remain closed.
"Transfer Agent" means ChaseMellon Shareholder Services, L.L.C., or any
successor thereof, serving as transfer agent and registrar for the Common
Shares.
"Warrants" means the Common Share Purchase Warrants to purchase ______
Common Shares in the form attached hereto as Annex I.
"Warrant Shares" means the Common Shares issuable upon exercise of the
Warrants.
2. Agreement To Subscribe; Purchase Price.
(a) Subscription. In consideration of the representations, warranties,
covenants and agreements contained in this Agreement and the Escrow Agreement,
the Buyer hereby agrees to purchase from the Company the Initial Shares, and the
Company hereby agrees to issue and sell to the Buyer, at the Purchase Price per
share and for the Aggregate Purchase Price, upon the terms and conditions of
this Agreement. In connection with the purchase of the Initial Shares by the
Buyer, the Company shall issue to the Buyer, at the closing on the Closing Date,
Warrants in the form attached hereto as Annex I.
(b) Form of Payment. Prior to the closing on the Closing Date, the Buyer
shall pay the Aggregate Purchase Price for the Initial Shares by delivering good
funds in United States Dollars to the Closing Escrow Agent identified in the
Joint Escrow Instructions attached hereto as Annex II. Such
<PAGE>
-20-
delivery of funds shall be made against delivery by the Company of the
certificates for the Initial Shares, registered in the name of the Escrow Agent,
and the Warrants, registered in the name of the Buyer. Prior to the closing on
the Closing Date, the Company shall deliver certificates for the Initial Shares,
registered in the name of the Escrow Agent, and the Warrants, registered in the
name of the Buyer, to the Closing Escrow Agent. The certificates for the Initial
Shares shall be delivered by the Company to the Closing Escrow Agent on a
delivery against payment basis at the closing. By signing this Agreement, the
Buyer and the Company each agrees to all of the terms and conditions of, and
becomes a party to, the Joint Escrow Instructions, all of the provisions of
which are incorporated herein by this reference as if set forth in full.
(c) Method of Payment. Payment of the Aggregate Purchase Price for the
Initial Shares shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA #021000089
For credit to A/C#[ ]
For credit to the account of
Brian W. Pusch Attorney Escrow Account
Reference: [ ]/XOMA
Not later than 4:00 p.m., New York City time, on the date which is one Trading
Day after the Company shall have accepted this Agreement and returned a signed
counterpart of this Agreement to the Buyer or its legal counsel, the Buyer shall
deposit with the Closing Escrow Agent an amount equal to the Aggregate Purchase
Price.
3. Reset Shares.
(a) Reset Rights. The Buyer shall be entitled to receive Reset Shares in
such amounts and at such times as provided in this Section 3.
(b) Reset Date No. 1. The number of Reset Shares to be issued to the Buyer
on Reset Date No. 1, shall be computed as follows:
R = [(D x P) / A] - D
<PAGE>
-21-
where:
R = Number of Reset Shares for Reset Date No. 1
D = Number of Designated Escrow Shares on Reset Date No. 1
P = Purchase Price
A = Adjustment Price on Reset Date No. 1
If the number of Reset Shares so computed is positive, such number of Reset
Shares shall be issued and delivered by the Company to the Escrow Agent for
deposit in escrow to be held for the account of the Buyer. If the number of
Reset Shares so computed is negative, Escrow Shares held in escrow on Reset Date
No. 1 equal to the number (taken as a positive number) of such Reset Shares (or
such lesser number of Escrow Shares then held) shall be released from escrow to
the Company.
(c) Subsequent Reset Dates. The number of Reset Shares to be issued to the
Buyer on each Reset Date after Reset Date No. 1, shall be computed as follows:
R = [(D x P) / A] - D
where:
R = Number of Reset Shares
D = Number of Designated Escrow Shares on such Reset Date P =
Adjustment Price determined on the immediately preceding Reset
Date A = Adjustment Price on such Reset Date
If the number of Reset Shares so computed for such Reset Date is positive, such
number of Reset Shares shall be issued and delivered by the Company to the
Escrow Agent for deposit in escrow to be held for the account of the Buyer. If
the number of Reset Shares so computed is negative, Escrow Shares held in escrow
on such Reset Date equal to the number (taken as a positive number) of such
Reset Shares (or such lesser number of Escrow Shares then held) shall be
released from escrow to the Company.
(d) Reset Notices. On each Reset Date or within three Trading Days
thereafter, the Buyer shall give a Reset Notice in the form attached hereto as
Annex IX to the Company and the Escrow Agent. If the Buyer fails to give a Reset
Notice within three Trading Days after any Reset Date, the Company may notify
the Buyer and the Escrow Agent of such failure
<PAGE>
-22-
and, if the Buyer does not deliver such Reset Notice within three Trading Days
after such notice of failure is given to the Buyer, the Company may give such
Reset Notice to the Buyer and the Escrow Agent.
(e) Delivery of Reset Shares to the Escrow Agent. (1) If any Reset Notice
states that Reset Shares are due to the Buyer, within three Trading Days after
such Reset Notice is given the Company shall issue and deliver certificates
representing such number of Reset Shares to the Escrow Agent for deposit in
escrow for the account of the Buyer. The number of Reset Shares to be issued or
released from escrow in connection with a particular Reset Date shall be, in the
absence of manifest error in a particular Reset Notice, conclusively the number
of Reset Shares stated in the applicable Reset Notice. If in connection with a
particular Reset Date the Company determines that manifest error has been made
by virtue of the computation of Reset Shares or other information set forth in
the Reset Notice given by the Buyer in respect of such Reset Date, the Company
shall have the right within two Trading Days after the Buyer gives such Reset
Notice to notify the Escrow Agent and the Buyer of such error, which notice
shall state the number of Reset Shares in dispute. Notwithstanding such notice
of manifest error given by the Company, the Company shall issue and deliver to
the Escrow Agent the number of Reset Shares, or the Escrow Agent shall release
to the Company the number of Company Escrow Shares, as the case may be, that are
not in dispute as and when required by this Agreement and the Escrow Agreement.
If the Company shall have notified the Escrow Agent and the Buyer of any such
manifest error, and the Company and the Buyer have not agreed as to a resolution
of such manifest error on or before the date the Company gives the Buyer such
notice of manifest error in such Reset Notice, the Company shall, on the date
the Company gives such notice of manifest error to the Buyer, submit the dispute
to the Auditors for determination and shall instruct the Auditors to resolve
such dispute and to notify the Company, the Escrow Agent and the Buyer of the
Auditors' determination with respect to such dispute within three Trading Days
after such dispute is submitted to the Auditors. Promptly after receipt of
timely notice of the Auditors' determination (but in any event within five
Trading Days after the applicable Reset Notice is given to the Escrow Agent and
the Company), the Company shall deliver to the Escrow Agent for deposit in
escrow for the account of the Buyer any additional Reset Shares to which the
Buyer is entitled based on the determination of the Auditors. If (1) the
Auditors shall fail to notify the Escrow Agent and the Company of their
determination within three Trading Days after such dis-
<PAGE>
-23-
pute is submitted to the Auditors, then the Company shall, within four Trading
Days after such dispute is submitted to the Auditors, or (2) the Company does
not timely submit the dispute to the Auditors and such dispute is not resolved
by the parties, then the Company shall, within four Trading Days after receipt
of the applicable Reset Notice, deliver to the Escrow Agent for deposit in
escrow for the account of the Buyer any additional Reset Shares to which the
Buyer is entitled based on the applicable Reset Notice. Such immediate and
prompt action shall be taken by all the parties in order to assure that there
shall be full compliance with the Company's unqualified obligation that all
Reset Shares issuable upon each Reset Date be issued and delivered by the due
dates therefor as provided herein.
(2) If a particular Reset Notice states that Reset Shares are due to the
Buyer, the Company's obligation to issue and deliver such Reset Shares shall be
absolute and unconditional, irrespective of any action or inaction by the Buyer
to enforce the same, any waiver or consent with respect to any provision hereof
or of the Escrow Agreement, the recovery of any judgment against any Person or
any action to enforce the same, any failure or delay in the enforcement of any
other obligation of the Company to the Buyer, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Buyer or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Buyer or any other Person, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Company to the Buyer in connection with the issuance of Reset Shares. If the
Company fails to issue and deliver the certificates for any Reset Shares
pursuant to this Section 3(e) as and when required to do so following each Reset
Date, in addition to any other liabilities the Company may have hereunder and
under applicable law, the Company shall pay or reimburse the Buyer on demand for
all reasonable out-of-pocket expenses, including, without limitation, fees and
expenses of legal counsel, incurred by the Buyer as a result of such failure. In
addition to the Buyer's rights and remedies hereunder and under applicable law,
the Company acknowledges and agrees that the Company's failure to issue and
deliver any Reset Shares as and when required to do so in accordance with this
Agreement would cause immediate and irreparable harm to the Buyer and that the
Buyer shall be entitled to injunctive relief in connection therewith. In lieu of
delivering physical certificates representing any Reset Shares, provided that
the Transfer Agent is participating in the DTC Fast Automated Securities
Transfer program ("FAST"), the Company shall, if reasonably practicable,
<PAGE>
-24-
cause the Transfer Agent to electronically transmit such Reset Shares by
crediting the account of the Escrow Agent or the Escrow Agent's broker with the
DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The Company
shall not be liable for any failure on the part of the Escrow Agent or the Buyer
to take actions necessary to receive such shares through the DWAC system. No
fractional Reset Shares shall be issued; the number of Reset Shares issued shall
be rounded to the nearest whole share.
(f) Delivery of Reset Shares to the Company. If a particular Reset Notice
states that Reset Shares are due to the Company, within ten Trading Days after
such Reset Notice is given to the Escrow Agent and the Buyer, the Escrow Agent
shall release the applicable whole number of Company Escrow Shares to the
Company or the Transfer Agent by delivering certificates therefor or by means of
electronic transmission through the FAST system. The Company shall not be
entitled to receive a number of Reset Shares with respect to any Reset Date in
excess of the number of Escrow Shares, if any, held in escrow by the Escrow
Agent on such Reset Date after giving effect to the release by the Escrow Agent
of all Escrow Shares released or required to be released from escrow by the
Escrow Agent prior to such Reset Date.
(g) Termination of Reset Rights. The rights provided in this Section 3
shall terminate following the last Reset Date to occur when (1) no additional
shares are required to be deposited into escrow and (2) all Escrow Shares are
released from escrow in accordance with the terms of this Agreement and the
Escrow Agreement.
4. Buyer Representations, Warranties, Etc. The Buyer represents and
warrants to, and covenants and agrees with, the Company as follows:
(a) Purchase for Investment. The Buyer is purchasing the Initial Shares and
acquiring the Warrants, and upon issuance and delivery of any Reset Shares or
Repurchase Shares to or for the account of the Buyer, will acquire such Reset
Shares or Repurchase Shares, for its own account for investment only and not
with a view towards the public sale or distribution thereof;
(b) Accredited Investor. The Buyer is an "accredited investor" as that term
is defined in Rule 501 of the General Rules and Regulations under the 1933 Act
by reason of Rule 501(a)(3);
<PAGE>
-25-
(c) Reoffers and Resales. All subsequent offers and sales of the Shares by
the Buyer shall be made pursuant to registration of the Shares being offered and
sold under the 1933 Act or pursuant to an exemption from registration;
(d) Company Reliance. The Buyer understands that the Initial Shares are
being offered and sold, the Warrants are being issued and the Reset Shares, the
Warrant Shares and the Repurchase Shares are being offered, in each case to it
in reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Initial Shares, the Warrants and to
receive an offer of the Reset Shares, the Warrant Shares and the Repurchase
Shares;
(e) Information Provided. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Initial
Shares and the issuance of the Warrants and the offer of the Reset Shares, the
Warrant Shares and the Repurchase Shares which have been requested by the Buyer;
the Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received satisfactory answers to any such
inquiries; without limiting the generality of the foregoing, the Buyer has had
the opportunity to obtain and to review the SEC Reports; and the Buyer
understands that its investment in the Securities involves a high degree of
risk;
(f) Absence of Approvals. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities; and
(g) Subscription Agreement. The Buyer has all requisite power and
authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the other agreements executed or to be
executed by the Buyer in connection herewith and to consummate the transactions
contemplated hereby and thereby. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to bankruptcy,
in-
<PAGE>
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solvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
(h) Approvals. If the Buyer's principal executive offices are located
outside the United States, the purchase of the Initial Shares and the
acquisition of the other Securities by the Buyer pursuant to this Agreement does
not require any governmental or regulatory approval, consent or filing on the
part of the Buyer or, to the knowledge of the Buyer, on the part of the Company,
under the securities or similar laws of the jurisdiction in which the Buyer's
principal executive offices are located.
(i) Absence of Brokers, Finders, Etc. To the Buyer's knowledge, no broker,
finder or similar Person is entitled to any commission, fee or other
compensation by reason of the transactions contemplated by this Agreement other
than as disclosed in writing to the Buyer by the Company, and the Buyer shall
pay, and indemnify and hold harmless the Company from, any claim made against
the Company by any other Persons not referred to in such disclosure for any such
commission, fee or other compensation which is ultimately determined by a final
nonappealable decision of a court of competent jurisdiction to be the obligation
of the Buyer and not of the Company.
5. Company Representations, Warranties, Etc. The Company represents and
warrants to, and covenants and agrees with, the Buyer that:
(a) Organization and Authority. The Company is a company duly organized and
validly existing under the laws of Bermuda, and has all requisite power and
authority to (i) own, lease and operate its properties and to carry on its
business as described in the SEC Reports and as now being conducted, and (ii) to
execute, deliver and perform its obligations under this Agreement, the Warrants,
the Registration Rights Agreement, the Escrow Agreement and the other agreements
to be executed and delivered by the Company in connection herewith, and to
consummate the transactions contemplated hereby and thereby. The Company is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and where failure so to
qualify could reasonably be expected to have a material adverse effect on the
business, properties, operations, condition (financial or other) or results of
operations of the Company. The Company has no subsidiaries or equity investment
in any Person other than XOMA Limited, a United Kingdom company, and XOMA
Technologies Ltd., a Bermuda company, each of which, as of the Closing
<PAGE>
-27-
Date (i) are not and have never been active and (ii) have no material assets or
liabilities of any nature.
(b) Capitalization. The authorized capital stock of the Company consists of
(a) 70,000,000 Common Shares of which 47,696,891 Common Shares were outstanding
on January 27, 1999, all of which are fully paid and nonassessable; and (b)
1,000,000 preference shares, U.S. $.05 par value, of which as of January 27,
1999 (i) 650,000 shares are designated Series A Preference Shares, none of which
are outstanding, (ii) 7,500 shares are designated Series B Preference Shares,
none of which are outstanding, and (iii) 1,250 shares are designated Series C
Preference Shares, of which 461 shares are outstanding; and on the Closing Date
(x) there will be no material increase from January 27, 1999 in the number of
Common Shares outstanding and (y) no issuances of preference shares will have
occurred since January 27, 1999. As of January 27, 1999, the Company had
outstanding options, warrants and similar rights entitling the holders to
purchase 5,108,607 Common Shares. Other than as set forth in the preceding two
sentences, the Company does not have outstanding any material amount of
securities (or obligations to issue any such securities) convertible into,
exchangeable for or otherwise entitling the holders thereof to acquire Common
Shares, except as disclosed in the SEC Reports. The Company has duly reserved
from its authorized and unissued Common Shares the full number of shares
required for (a) all options, warrants, convertible securities and other rights
to acquire Common Shares which are outstanding and (b) all Common Shares and
options and other rights to acquire Common Shares which may be issued or granted
under the stock option and similar plans which have been adopted by the Company.
Each outstanding class or series of securities, if any, for which any
antidilution or similar adjustment arising by reason of the issuance of the
Designated Shares or the issuance or exercise of the Warrants is identified in
Schedule 5(b)-1 attached hereto, together with the amount of such antidilution
adjustment. The outstanding Common Shares and outstanding options, warrants and
other securities convertible into, exchangeable for or otherwise entitling the
holder thereof to acquire Common Shares have been duly authorized and validly
issued. To the knowledge of the Company, none of such outstanding Common Shares,
options, warrants and other securities has been issued in violation of the
preemptive rights of any securityholder of the Company. The offers and sales of
the outstanding Common Shares and such options, warrants and other securities
were at all relevant times either registered under the 1933 Act and applicable
state securities laws or exempt from such requirements. No holder of any of the
Company's securities has any rights, "demand," "piggy-
<PAGE>
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back" or otherwise, to have such securities registered by reason of the
intention to file, filing or effectiveness of the Registration Statement.
(c) Concerning the Shares and the Common Shares. The Shares have been duly
authorized. The Initial Shares, when issued and paid for in accordance with this
Agreement, the Reset Shares and the Repurchase Shares when issued in accordance
with this Agreement, and the Warrant Shares, when issued upon exercise of the
Warrants, as the case may be, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. There are no preemptive or similar rights of any
shareholder of the Company or any other Person to acquire any of the Securities.
The Company has duly reserved a sufficient number of Common Shares for issuance
of the Initial Shares, the Reset Shares and the Repurchase Shares and exercise
of the Warrants and the issuance of similar securities under the Other
Subscription Agreement, and such shares shall remain so reserved except for such
Reset Shares or Repurchase Shares and similar securities which the Company has
no obligation to issue. The Common Shares are listed for trading on the Nasdaq
and (1) the Company and the Common Shares meet the criteria for continued
listing and trading on the Nasdaq Stock Market; (2) the Company has not been
notified since January 1, 1997 by the Nasdaq of any failure or potential failure
to meet the criteria for continued listing and trading on the Nasdaq; and (3) no
suspension of trading in the Common Shares is in effect. The filing by the
Company of the listing application for the Shares with Nasdaq after the Closing
Date, rather than prior to the Closing Date, will not have material adverse
effect on the listing of the Common Shares.
(d) Subscription Agreement; Escrow Agreement; Registration Rights
Agreement; Warrants. This Agreement, the Escrow Agreement, the Registration
Rights Agreement and the Warrants and the other agreements and instruments
contemplated hereby and thereby have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered by the Company and,
assuming due authorization, execution and delivery hereof and thereof by the
Buyer, this Agreement is, and the Escrow Agreement, the Registration Rights
Agreement and the Warrants and such other agreements, when executed and
delivered by the Company, will be, valid and binding obligations of the Company
enforceable against it in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
<PAGE>
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generally and except that rights to indemnity and contribution may be limited by
public policy.
(e) Non-contravention. The execution and delivery by the Company of this
Agreement and the other documents contemplated by this Agreement and the
consummation by the Company of the issuance of the Shares and the Warrants as
contemplated by this Agreement, and the other transactions contemplated by this
Agreement, the Escrow Agreement, the Registration Rights Agreement and the
Warrants do not and will not, with or without the giving of notice or the lapse
of time, or both (i) result in any violation of any terms of the Memorandum of
Continuance or bye-laws of the Company, (ii) conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default
under, or result in the modification, amendment, termination or cancellation of,
result in the acceleration of any obligation of the Company under, or result in
the creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company pursuant to, any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which the Company or any of its properties or assets is
bound or affected, or (iii) (assuming the representations and warranties of the
Buyer in Section 4 hereof, of the Other Buyer in Section 4 of the Other
Subscription Agreement and of Wharton Capital Markets LLC and CIBC Oppenheimer
Corp. in their representation letters dated the date hereof, copies of which
have been provided to the Buyer, are true and accurate) violate or contravene
any applicable law, rule or regulation or any applicable decree, judgment or
order of any court, federal, state or other regulatory body, administrative
agency or other governmental body of the United States or Bermuda having
jurisdiction over the Company or any of its properties or assets, which
conflict, breach, violation or default could reasonably be expected to have a
material adverse effect on the validity or enforceability of this Agreement, the
Registration Rights Agreement or the issuance of the Shares or the transactions
contemplated by this Agreement, or the Registration Rights Agreement or on any
right or remedy of the Buyer under this Agreement or the Registration Rights
Agreement; provided, however, that the Company makes no representation or
warranty in this Section 5(e) with regard to any law, rule or regulation of any
jurisdiction or any decree, judgment or order of any court having jurisdiction
over the Company or any of its properties or assets which law, rule or
regulation becomes applicable to the Company or which court acquires
jurisdiction over the Company solely by reason of the Buyer's status as a
corpo-
<PAGE>
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ration organized under the laws of the British Virgin Islands or headquartered
in Curacao, Netherlands Antilles.
(f) Approvals. Assuming the representations and warranties of the Buyer in
Section 4 hereof, of the Other Buyer in Section 4 of the Other Subscription
Agreement and of Wharton Capital Markets LLC and CIBC Oppenheimer Corp. in their
representation letters dated the date hereof, copies of which have been provided
to the Buyer, are true and accurate, no authorization, approval or consent of,
or filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the shareholders of the Company is
required to be obtained or made by the Company for (1) the execution, delivery
and performance by the Company of this Agreement, the Escrow Agreement, the
Registration Rights Agreement, the Warrants and the other agreements and
instruments contemplated hereby and thereby, (2) the issuance and sale of the
Initial Shares and the issuance of the Reset Shares, the Repurchase Shares and
the Warrants as contemplated by this Agreement and (3) the issuance of the
Warrant Shares upon the exercise of the Warrants, other than (w) the listing of
the Shares on the Nasdaq, (x) registration of the resale of the Shares under the
1933 Act as contemplated by the Registration Rights Agreement, (y) as may be
required under applicable state securities or "blue sky" laws and (z) filing of
one or more Forms D with respect to the Shares as required under Regulation D.
(g) Information Provided. The written information provided by or on behalf
of the Company to the Buyer in connection with the transactions contemplated by
this Agreement, including, without limitation, the written information referred
to in Section 4(e) of this Agreement, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, it being understood that, for purposes of this Section 5(g), any
statement contained in such information shall be deemed to be modified or
superseded for purposes of this Section 5(g) to the extent that a statement in
any document included in such information which was prepared or filed with the
SEC on a later date modifies or replaces such statement, whether or not such
later prepared or filed statement so states. The Company has not filed any
reports with the SEC under the 1934 Act since December 31, 1997 other than the
SEC Reports.
<PAGE>
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(h) Absence of Certain Changes. Except as disclosed in the SEC Reports,
since December 31, 1997, there has been no material adverse change and no
material adverse development in the business, properties, operations, condition
(financial or other) or results of operations of the Company. Except as and to
the extent disclosed, reflected or reserved against in the financial statements
of the Company and the notes thereto included in the SEC Reports, to the
knowledge of the Company, the Company has no material (individually or in the
aggregate) liabilities, debts or obligations whether accrued, absolute,
contingent or otherwise, and whether due or to become due. Subsequent to
December 31, 1997, to the knowledge of the Company, the Company has not incurred
any liabilities, debts or obligations of any nature whatsoever which are
individually or in the aggregate material to the Company, other than those
incurred in the ordinary course of its business or disclosed in the SEC Reports.
(i) Absence of Certain Proceedings. Except as described in the SEC Reports
and except for applications and proceedings relating to regulatory approval of
new drugs or the granting of patents, there is no Action pending or, to the
knowledge of the Company, threatened against the Company, in any such case
wherein an unfavorable decision, ruling or finding would have a material adverse
effect on the business, properties, condition (financial or other) or results of
operations of the Company or the transactions contemplated by this Agreement or
any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents;
except as described on Schedule 5(i), neither the Company or any subsidiary nor
any current officer thereof is or has been the subject of any Action involving
(i) a claim of violation of or liability under federal or state securities laws
or (ii) a claim of breach of fiduciary duty; the Company does not have pending
before the SEC any request for confidential treatment of information and to the
Company's knowledge no such request will be made by the Company prior to the
time the Registration Statement relating to the Shares which is contemplated by
the Registration Rights Agreement is first ordered effective by the SEC; and,
except as previously disclosed to the Buyer concerning certain investors in the
Company, there has not been, and to the Company's knowledge there is not pending
or contemplated, any investigation by the SEC involving the Company or any
current or former director or officer of the Company.
<PAGE>
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(j) Properties. To the knowledge of the Company, the Company has not given
or received any notice of, any pending conflicts with or infringement of the
rights of others with respect to any Company Proprietary Rights or with respect
to any license of Company Proprietary Rights. No action, suit, arbitration, or
legal, administrative or other proceeding or investigation is pending, or, to
the knowledge of the Company, threatened, which involves any Company Proprietary
Rights, except as set forth on Schedule 5(j). The Company is not subject to any
judgment, order, writ, injunction or decree of any court or any federal, state,
local, foreign or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any arbitrator, or has
entered into or is a party to any contract which restricts or impairs the use of
any such Company Proprietary Rights in a manner which would have a material
adverse effect on the use by the Company of any of the Company Proprietary
Rights. To the knowledge of the Company, no Company Proprietary Rights and no
services or products sold by the Company, conflict with or infringe upon any
proprietary rights available to any third party, except as set forth on Schedule
5(j). The Company has not received written notice of any pending conflict with
or infringement upon such third-party proprietary rights, except as set forth on
Schedule 5(j). The Company has not entered into any consent, indemnification,
forbearance to sue or settlement agreement with respect to Company Proprietary
Rights other than in the ordinary course of business. No claims have been
asserted by any Person with respect to the validity of the Company's ownership
or right to use the Company Proprietary Rights, except as set forth on Schedule
5(j) and, to the knowledge of the Company, there is no reasonable basis for any
such claim to be successful. To the knowledge of the Company, the Company
Proprietary Rights are valid and enforceable. To the knowledge of the Company,
the Company has complied, in all material respects, with its contractual
obligations relating to the protection of the Company Proprietary Rights used
pursuant to licenses. To the knowledge of the Company, no Person is infringing
on or violating the Company Proprietary Rights.
(k) SEC Filings. The Company has timely filed all required forms, reports
and other documents required to be filed with the SEC under the 1934 Act since
January 1, 1997. All of such forms, reports and other documents complied as to
form, when filed, in all material respects, with all applicable requirements of
the 1933 Act and the 1934 Act.
(l) Absence of Brokers, Finders, Etc. No broker, finder or similar Person
is entitled to any commission, fee or
<PAGE>
-33-
other compensation by reason of the transactions contemplated by this Agreement
other than as disclosed in writing to the Buyer and the Company shall pay, and
indemnify and hold harmless the Buyer from, any claim made against the Buyer by
the entity or entities referred to in such disclosure and any other Person for
any such commission, fee or other compensation.
(m) No Solicitation. No form of general solicitation or general advertising
was used by the Company or, to its knowledge, any other Person acting on behalf
of the Company, in respect of or in connection with the offer and sale of the
Shares. Neither the Company nor, to its knowledge, any Person acting on behalf
of the Company has, either directly or indirectly, sold or offered for sale to
any Person any of the Shares or the Warrants or, within the six months prior to
the date hereof, any other similar security of the Company except as
contemplated by this Agreement; and neither the Company nor any person
authorized to act on its behalf will sell or offer for sale any Common Shares or
Warrants, or solicit any offers to buy any Common Shares or Warrants, so as
thereby to cause the issuance or sale of any of the Shares or the issuance of
the Warrants to be in violation of Section 5 of the 1933 Act.
(n) Certain Issuances of Securities. The Company has not issued any Common
Shares, common shares or preference shares or other securities convertible into,
exchangeable for or otherwise entitling the holder to acquire Common Shares
which are subject to the Shareholder Approval Rule and which could reasonably be
integrated with the sale of the Initial Shares to the Buyer or the issuance of
Reset Shares, Warrant Shares or Repurchase Shares to the Buyer for purposes of
the Shareholder Approval Rule.
(o) Rights Agreement. Assuming that the Buyer does not hold any Common
Shares other than as acquired pursuant to this Agreement, (1) the execution and
delivery of this Agreement by the Company, the issuance of the Shares as
contemplated by this Agreement, and the other transactions contemplated by this
Agreement and the other agreements and documents contemplated hereby will not
result in the Buyer becoming an Acquiring Person, as defined in the Rights
Agreement, and (2) the holders of the Shares will be entitled to the benefits
available to the holders of Common Shares under the Rights Agreement.
<PAGE>
-34-
6. Certain Covenants And Acknowledgments.
(a) Transfer Restrictions. The Company and the Buyer acknowledge and agree
that (1) the Warrants have not been and are not being registered under the
provisions of the 1933 Act and, except as provided in the Registration Rights
Agreement with respect to the resale of the Shares, the Shares have not been and
are not being registered for resale under the 1933 Act, and the Securities may
not be transferred unless (A) subsequently registered for resale thereunder or
(B) (i) transferred to a Permitted Transferee and (ii) the Buyer shall have
delivered to the Company an opinion, reasonably satisfactory in form, scope and
substance to the Company, of counsel reasonably satisfactory to the Company
(which shall include, but not be limited to, counsel who represented the Buyer
in connection with the negotiation and execution of this Agreement) to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; (2) any resale of the
Securities made in reliance on Rule 144 promulgated under the 1933 Act may be
made only in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any such resale of Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other Person is under any
obligation to register the Securities (other than registration of the resale of
the Shares pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder (other than
pursuant to Section 6(d) hereof and pursuant to the Registration Rights
Agreement).
(b) Restrictive Legend.
(1) The Buyer acknowledges and agrees that the Warrants shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the Warrants):
The securities represented by this certificate (and the shares
underlying them) have not been registered under the Securities Act of
1933, as amended. The securities have been acquired for investment and
may not be resold, transferred or assigned in the absence of an
effective registration statement for the securities under the
Securities
<PAGE>
-35-
Act of 1933, as amended, or an opinion of counsel that registration
is not required under said Act.
(2) The Buyer further acknowledges and agrees that until such time as the
Shares have been registered for resale under the 1933 Act as contemplated by the
Registration Rights Agreement, the certificates for the Shares may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for the Shares):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the
securities under the Securities Act of 1933, as amended, or an opinion
of counsel that registration is not required under said Act.
(3) Once the Registration Statement required to be filed by the Company
pursuant to Section 2 of the Registration Rights Agreement has been declared
effective, thereafter (1) upon request of the Buyer the Company will substitute
certificates without restrictive legend for certificates for any Shares issued
prior to the date such Registration Statement is declared effective by the SEC
which bear such restrictive legend and remove any stop-transfer restriction
relating thereto promptly, but in no event later than three Trading Days after
surrender of such certificates by the Buyer or the Escrow Agent acting at the
request of the Buyer and (2) the Company shall not place any restrictive legend
on certificates for any Shares issued or impose any stop-transfer restriction
thereon.
(c) Escrow Agreement; Registration Rights Agreement. On or before the
Closing Date, the parties hereto agree to enter into (i) the Escrow Agreement in
the form attached hereto as Annex III and (ii) the Registration Rights Agreement
in the form attached hereto as Annex IV.
(d) Form D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the
Buyer promptly after such filing. The Buyer agrees to cooperate with the Company
in connection with such filing and, upon request of the Company, to provide all
information relating to the Buyer reasonably required for such filing.
<PAGE>
-36-
(e) Authorization for Trading; Reporting Status. Within five days after the
Closing Date, the Company shall file a notification for listing of additional
shares with the Nasdaq relating to the Shares and shall provide evidence of such
filing to the Buyer. So long as the Buyer beneficially owns any of the Shares or
the Warrants, the Company shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
(f) Use of Proceeds. The Company does not own or have any present intention
of acquiring any "margin stock" as defined in Regulation G (12 CFR Part 207) of
the Board of Governors of the Federal Reserve System ("margin stock"). The
proceeds of sale of the Initial Shares will be used for general working capital
purposes and in the operation of the Company's business. None of such proceeds
will be used, directly or indirectly (1) to make any loan to or investment in
any other Person (other than financing the Company's existing or future
subsidiaries in the ordinary course of business and provided, however, that
nothing in this Section 6(f) shall prohibit the Company from using such proceeds
for the acquisition of or investment in businesses, product lines or
technologies in the fields of research, development or marketing of
pharmaceutical products for the treatment of human and animal diseases and
illnesses or from making any loan to any business engaged in such activity and
in which the Company owns an interest having a majority of the voting or similar
power of such business) or (2) for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any margin stock or for the purpose of
maintaining, reducing or retiring any indebtedness which was originally incurred
to purchase or carry any stock that is currently a margin stock or for any other
purpose which might constitute the transactions contemplated by this Agreement a
"purpose credit" within the meaning of such Regulation G. Neither the Company
nor any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the transactions contemplated hereby to violate
Regulation G, Regulation T or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the 1934 Act, in each case as in effect
now or as the same may hereafter be in effect.
(g) Blue Sky Laws. On or before the Closing Date, the Company shall take
such action as and to the extent it shall be necessary or required to qualify,
or to obtain an ex-
<PAGE>
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emption for, the Initial Shares for sale to the Buyer and the Warrants for
issuance to the Buyer pursuant to this Agreement, the Reset Shares and the
Repurchase Shares for issuance to the Buyer pursuant to this Agreement, and the
Warrant Shares for issuance to the Buyer on exercise of the Warrants under such
of the securities or "blue sky" laws of jurisdictions as shall be applicable to
the sale of the Initial Shares and the issuance of the Warrants pursuant to this
Agreement, the issuance to the Buyer of the Reset Shares and the Repurchase
Shares pursuant to this Agreement, and the issuance to the Buyer of Warrant
Shares on exercise of the Warrants. The Company shall furnish copies of all
filings, applications, orders and grants or confirmations of exemptions relating
to such securities or "blue sky" laws on or prior to the Closing Date.
(h) Certain Expenses. Whether or not any closing occurs, the Company shall
pay or reimburse the Buyer and the Other Buyer for all reasonable expenses
(including, without limitation, reasonable legal fees and expenses of counsel to
the Buyer and the Other Buyer) incurred or to be incurred by them, not in excess
of $30,000 in the aggregate, in connection with this Agreement, the Other
Subscription Agreement, the Escrow Agreement and the transactions contemplated
hereby and thereby, including but not limited to fees and expenses of the Escrow
Agent under Section 14(a) of the Escrow Agreement. Subject to the immediately
preceding sentence, the Company shall pay on demand all reasonable expenses
incurred by the Buyer, including reasonable attorneys' fees and expenses, as a
consequence of, or in connection with (1) the negotiation, preparation or
execution of any amendment, modification or waiver of this Agreement, the Escrow
Agreement, the Registration Rights Agreement, the Warrants and the other
agreements and instruments contemplated hereby and thereby requested by the
Company, (2) any default or breach of any of the Company's obligations set forth
in any of such agreements or instruments and (3) the enforcement or
restructuring of any right of, including the collection of any payments due, the
Buyer under any of such agreements or instruments, including any action or
proceeding relating to such enforcement or any order, injunction or other
process seeking to restrain the Company from paying any amount due the Buyer, in
which the Buyer prevails.
(i) Certain Issuances of Securities. (1) Unless the Company obtains the
Shareholder Approval or a waiver thereof from the Nasdaq, the Company will not
issue any Common Shares or shares of any series of preference shares or other
securities convertible into, exchangeable for, or otherwise entitling the holder
to acquire, Common Shares which would be
<PAGE>
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subject to the requirements of the Shareholder Approval Rule and which could
reasonably be integrated with the sale of the Initial Shares or the issuance of
Reset Shares or the Repurchase Shares to the Buyer for purposes of the
Shareholder Approval Rule.
(2) In the event the Company is unable to issue (I) all Reset Shares
required to be issued to the Buyer with respect to any Reset Date or (II) all
Repurchase Shares required to be issued to the Buyer pursuant to Section 11(d),
by reason of the restrictions set forth in the Shareholder Approval Rule, the
Buyer shall be entitled, at its option, by notice to the Company given not
sooner than 15 days, but within 90 days, after such Reset Date or the date on
which such Repurchase Shares were otherwise required to be issued (provided that
such restrictions continue to be applicable), to require the Company to make a
payment to the Buyer in an amount equal to the product of (x) the number of
Reset Shares otherwise required to be issued to the Buyer on such Reset Date or
the number of Repurchase Shares otherwise required to be issued to the Buyer, as
the case may be, which the Company is unable to issue by reason of the
Shareholder Approval Rule and (y) the Share Limitation Repurchase Price.
Promptly and in no event later than ten Trading Days after the Company's receipt
of such notice, the Company shall make a cash payment in immediately available
funds of the Share Limitation Repurchase Price to or upon the order of the
Buyer. The number of Reset Shares or Repurchase Shares unable to be issued by
reason of the Shareholder Approval Rule and the amounts of the corresponding
cash payments to be made to the Buyer and the Other Buyer pursuant to this
Section 6(i)(2) shall be allocated pro rata between the Buyer and the Other
Buyer in proportion to the total number of Reset Shares or Repurchase Shares
each is otherwise entitled to receive on such Reset Date without regard to the
Shareholder Approval Rule. The Company's obligations to make payments pursuant
to this Section 6(i)(2) shall not limit or otherwise affect its obligations to
repurchase Shares pursuant to the other provisions of this Agreement.
(3) Notwithstanding any other provision of this Agreement, if a Share
Limitation Event occurs by reason of events which are not solely within the
control of the Company, the Company shall have the right to give a Control
Notice to the Buyer at any time after such Share Limitation Event occurs and
prior to the earlier of (1) the date on which the Buyer's right (other than as
limited by this Section 6(i)(3)) to receive a cash payment pursuant to Section
6(i)(2) by reason of the occurrence of such Share Limitation Event expires and
(2)
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the date on which the Company is obligated to make a payment to the Buyer
pursuant to Section 6(i)(2). For purposes of this Section 6(i)(3), a Share
Limitation Event shall be deemed to have occurred by reason of events which are
not solely within the control of the Company if a requirement of the Company to
repurchase, or a right of the Buyer to require repurchase of, Shares by reason
thereof, or the requirement of the Company to make a payment pursuant to Section
6(i)(2), would result in the Company being required to classify the Shares as
redeemable common stock on a balance sheet of the Company prepared in accordance
with Generally Accepted Accounting Principles. To the extent any facts are
assumed for purposes of either the Company's conclusion as to such
classification of the Shares or the Auditors' Determination required to be
delivered as part of the Control Notice, the validity of such conclusion or
determination shall depend on such assumed facts being true and complete in all
material respects. If the Company timely gives a Control Notice to the Buyer,
then in lieu of making the payment required by Section 6(i)(2) pursuant to a
notice given by the Buyer by reason of such Share Limitation Event, on the next
Reset Date to occur the Adjustment Price shall be reduced to 80% of the amount
such Adjustment Price would otherwise be. On or after the date the Company gives
such Control Notice, upon notice from the Buyer, the Company promptly shall call
a special meeting of its shareholders, to be held not later than 90 days after
such notice is given, to seek the Shareholder Approval for the issuance of all
Common Shares issuable in accordance with this Agreement without regard to the
Shareholder Approval Rule and shall use all commercially reasonable efforts to
obtain the Shareholder Approval. The Company shall prepare and file with the SEC
within 30 days after such notice is given preliminary proxy materials which set
forth a proposal to seek such Shareholder Approval. The Company shall provide
the Buyer an opportunity to consult with the Company regarding the content of
such proxy materials insofar as it relates to the Shareholder Approval by
providing copies of such preliminary proxy materials and any revised preliminary
proxy materials to the Buyer within a reasonable period of time prior to their
filing with the SEC. The Company shall furnish to the Buyer a copy of its
definitive proxy materials for such special meeting and any amendments or
supplements thereto promptly after the same are mailed to shareholders or filed
with the SEC. Upon the earlier of (i) the failure to obtain the Shareholder
Approval at the special meeting or (ii) the failure to hold the special meeting
within such 90-day period, the Company shall so notify the Buyer and such of the
following as shall be specified by notice to the Company from the Buyer shall
occur: (1) on the next Reset Date to occur the Adjustment Price shall be
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reduced to 70% of the amount such Adjustment Price would otherwise be and (2)
the Company shall promptly file applications and take all other actions
necessary to (i) list the Common Shares for trading and quotation on the OTC
Bulletin Board or such other securities market or exchange which will not
restrict the number of Common Shares issuable under this Agreement and (ii) upon
filing such applications, request the immediate removal of the Common Shares
from listing on the securities market on which it is then listed which restricts
the issuance of Common Shares under this Agreement without the Shareholder
Approval.
(j) Certain Trading Restrictions. The Buyer agrees that on at least five
Trading Days during any Measurement Period it will not sell Common Shares on the
principal securities market for the Common Shares.
(k) Reservation of Common Shares. The Company (and any successor
corporation) shall take all action necessary so that a number of shares of the
authorized but unissued Common Shares (or common stock in the case of any
successor corporation) sufficient to provide for the issuance of all Reset
Shares, Warrant Shares and Repurchase Shares issuable hereunder are at all times
reserved by the Company (or any successor corporation), free from preemptive
rights. If the Company shall issue any securities or make any change in its
capital structure which would change the number of Common Shares issuable as
Reset Shares, Warrant Shares or Repurchase Shares as herein provided, the
Company shall at the same time also make proper provision so that thereafter
there shall be a sufficient number of Common Shares authorized and reserved,
free from preemptive rights, for issuance of such Shares on the new basis. If at
any time the number of authorized but unissued Common Shares shall not be
sufficient to permit the issuance of all Reset Shares, Warrant Shares and
Repurchase Shares issuable hereunder, the Company promptly shall seek, and use
its reasonable best efforts to obtain and complete, such company action as may,
in the opinion of its counsel, be necessary to increase its authorized but
unissued Common Shares to such number of shares as shall be sufficient for such
purpose.
(l) Consolidation, Merger, Etc. In case of any consolidation, amalgamation
or merger of the Company with any other corporation (other than a wholly-owned
subsidiary of the Company) in which the Company is not the surviving or
continuing corporation, or in case of any sale or transfer of all or
substantially all of the assets of the Company, or in the case of any share
exchange pursuant to which all of the outstanding
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Common Shares are converted into other securities or property, the Company shall
make appropriate provision or cause appropriate provision to be made so that
each holder of Escrow Shares then outstanding shall have the right thereafter to
receive Reset Shares in the form of the kind of shares of stock and other
securities and property receivable upon such consolidation, amalgamation,
merger, sale, transfer, or share exchange by a holder of Common Shares
immediately prior to the effective date of such consolidation, amalgamation,
merger, sale, transfer, or share exchange and on a basis which preserves the
economic benefits of the rights of the holders of Escrow Shares to receive Reset
Shares on a basis as nearly as practical as such rights exist hereunder prior
thereto. The Company shall not effect any such transaction unless the provisions
of this Section 6(l) have been complied with. The above provisions shall
similarly apply to successive consolidations, amalgamations, mergers, sales,
transfers, or share exchanges. In the event the Company enters into a
transaction to be accounted for as a pooling of interests under Generally
Accepted Accounting Principles, the Buyer agrees to make such changes to this
Agreement and the terms of the transactions contemplated hereby as are
reasonably necessary to facilitate the Company in accounting for the transaction
as a pooling of interests; provided, however, that the Buyer shall have no
obligation to make any such changes which the Buyer reasonably determines could
have a material adverse effect on the Buyer's investment in the Shares or its
rights under this Agreement and the transactions contemplated hereby
(m) Overdue Amounts. Whenever any amount which is due by the Company to any
holder of Shares pursuant to the terms of this Agreement, the Registration
Rights Agreement or the Warrants is not paid to such holder when due, such
amount shall bear interest at the rate of 14% per annum (or such other rate as
shall be the maximum rate allowable by applicable law) until paid in full.
(n) Best Efforts. Each of the parties shall use its best efforts timely to
satisfy each of the conditions to the other party's obligations to sell and
purchase the Initial Shares set forth in Section 9 or 10, as the case may be, of
this Agreement on or before the Closing Date.
7. Escrow Shares. Prior to the Closing Date, the Company and the Buyer will
execute and deliver the Escrow Agreement in the form attached hereto as Annex
III. The Escrow Agent shall receive into and release from escrow the Initial
Shares and the Reset Shares as provided in this Agreement
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and the Escrow Agreement. Except for the Company Escrow Shares, the Buyer shall
be the sole beneficial owner of and shall have the sole right to vote the Escrow
Shares, and the escrow provisions of this Agreement shall not in any way limit
or affect the ownership or the right to dispose of such Escrow Shares by the
Buyer and shall not in any manner create any lien, pledge, charge, equity,
encumbrance, claim or right of the Company of any nature whatsoever in or with
respect to such Escrow Shares. At any time after the earlier of (i) the SEC
Effective Date and (ii) Reset Date No. 1 which time is not during a Reset
Period, the Buyer shall have the sole and exclusive right to direct the Escrow
Agent to release to or upon the order of the Buyer any or all Escrow Shares
which are not Company Escrow Shares by delivering a Release Notice to the Escrow
Agent. Within three Trading Days following receipt of a Release Notice, the
Escrow Agent shall release the Escrow Shares covered by such Release Notice in
accordance with the Buyer's instructions stated therein. The certificates for
any Designated Shares so released from escrow prior to the SEC Effective Date
shall bear the restrictive legend specified in Section 6(b). Any remaining
Escrow Shares which are not Company Escrow Shares following the last Reset Date
shall be promptly delivered to or upon the order of the Buyer. Once properly
released from escrow in accordance with this Agreement, Escrow Shares may not be
re-deposited into escrow with the Escrow Agent or again be deemed Escrow Shares.
8. Closing Date. Subject to the satisfaction or waiver of the conditions
set forth in Sections 9 and 10, the Closing Date shall be 12:00 noon, New York
City time, on or before the date which is one Trading Day after the date of this
Agreement, or such other mutually agreed to time. The closing of such sale of
the Initial Shares shall occur on the Closing Date at the Law Offices of Brian W
Pusch, Penthouse Suite, 29 West 57th Street, New York, New York 10019.
9. Conditions To The Company's Obligation To Sell And Issue. The Buyer
understands that the Company's obligation to sell the Initial Shares and issue
the Warrants to the Buyer pursuant to this Agreement on the Closing Date is
conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Company in its
sole discretion):
(a) The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
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(b) Delivery by the Buyer to the Company of good funds as payment in full
of the Aggregate Purchase Price for the Initial Shares in accordance with
Section 2(b) hereof;
(c) The accuracy on the Closing Date of the representations and warranties
of the Buyer contained in this Agreement as if made on the Closing Date and the
performance by the Buyer on or before the Closing Date of all covenants and
agreements of the Buyer required to be performed on or before the Closing Date;
and
(d) On the Closing Date, no legal action, suit or proceeding shall be
pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement.
10. Conditions To The Buyer's Obligation To Purchase. The Company
understands that the Buyer's obligation to purchase the Initial Shares and
acquire the Warrants from the Company pursuant to this Agreement on the Closing
Date is conditioned upon the satisfaction of the following conditions precedent
on or before the Closing Date (any or all of which may be waived by the Buyer in
its sole discretion):
(a) Delivery by the Company to the Closing Escrow Agent of the certificates
for the Initial Shares and the Warrants in accordance with this Agreement;
(b) The accuracy on the Closing Date of the representations and warranties
of the Company contained in this Agreement as if made on the Closing Date and
the performance by the Company on or before the Closing Date of all covenants
and agreements of the Company required to be performed on or before the Closing
Date and receipt by the Buyer of a certificate, dated the Closing Date, of the
Chief Executive Officer or the Chief Financial Officer of the Company confirming
such matters;
(c) The receipt by the Buyer of a certificate, dated the Closing Date, of
the Secretary of the Company certifying (1) the Memorandum of Continuance and
Bye-Laws of the Company as in effect on the Closing Date, and (2) all
resolutions of the Board of Directors (and committees thereof) of the Company
relating to this Agreement and the transactions contemplated hereby;
(d) The Escrow Agent shall have executed and delivered the Escrow Agreement
in the form attached hereto as Annex III;
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(e) Receipt by the Buyer on the Closing Date of (i) an opinion of Cahill
Gordon & Reindel, counsel for the Company, dated the Closing Date, to the effect
set forth in Annex V attached hereto, (ii) an opinion of Christopher J.
Margolin, Esq., the General Counsel of the Company, dated the Closing Date, to
the effect set forth in Annex VI attached hereto, (iii) an opinion of Conyers
Dill & Pearman, Bermuda counsel to the Company, dated the Closing Date, to the
effect set forth in Annex VII attached hereto and (iv) an opinion of Bryan Cave
LLP, Arizona counsel to the Company, dated the Closing Date, to the effect set
forth in Annex VIII attached hereto; and
(f) On the Closing Date, no legal action, suit or proceeding shall be
pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement.
11. Repurchase At Option Of The Buyer.
(a) Repurchase Right. If a Repurchase Event occurs, then, in addition to
any other right or remedy of the Buyer, the Buyer shall have the right, at the
Buyer's option, to require the Company to repurchase all of the Buyer's Escrow
Shares, any Reset Shares due to the Buyer which have not been delivered by the
Company to the Escrow Agent, and all Recently Released Shares, or any portion
thereof, on the date that is three Trading Days after the date the Buyer gives
the Company a Repurchase Notice with respect to such Repurchase Event at any
time while any of such Shares are outstanding, at a price equal to the
Repurchase Price multiplied by the number of Shares being repurchased.
(b) Notices; Method of Exercising Optional Repurchase Rights, Etc. (1) On
or before the fifth Trading Day after the occurrence of a Repurchase Event, the
Company shall give to the Buyer a notice of the occurrence of such Repurchase
Event and of the repurchase right set forth herein arising as a result thereof.
Such notice from the Company shall set forth:
(i) the date by which the optional repurchase right must be exercised,
and
(ii) a description of the procedure (set forth below) which the Buyer
must follow to exercise the Buyer's optional repurchase right.
No failure of the Company to give such notice or defect therein shall limit the
right of the Buyer to exercise the optional re-
<PAGE>
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demption right or affect the validity of the proceedings for the repurchase of
the Buyer's Shares.
(2) To exercise its optional repurchase right, the Buyer shall deliver to
the Company on or before the 30th day after the notice required by Section
11(b)(1) is given to the Buyer (or if no such notice has been given by the
Company to the Buyer, within 40 days after the Buyer first learns of such
Repurchase Event) a Repurchase Notice to the Company. A Repurchase Notice may be
revoked by the Buyer giving such Repurchase Notice by giving notice of such
revocation to the Company at any time prior to the time the Company pays the
Repurchase Price to the Buyer.
(3) If the Buyer shall have given a Repurchase Notice, on the date which is
three Trading Days after the date such Repurchase Notice is given (or such later
date as the Buyer or the Escrow Agent, at the request of the Buyer, surrenders
the Buyer's certificates for the Shares repurchased) the Company shall make
payment in immediately available funds of the applicable Repurchase Price to
such account as specified by the Buyer in writing to the Company at least one
Trading Day prior to the applicable Repurchase Date.
(c) Other. (1) In connection with a repurchase pursuant to this Section 11
of less than all of the Shares evidenced by a particular certificate, promptly,
but in no event later than three Trading Days after surrender of such
certificate to the Company, the Company shall issue and deliver to the Buyer a
replacement certificate for the Shares evidenced by such certificate which have
not been repurchased.
(2) A Repurchase Notice given by the Buyer shall be deemed for all purposes
to be in proper form unless the Company notifies the Buyer in writing within
three Trading Days after such Repurchase Notice has been given (which notice
shall specify all defects in such Repurchase Notice), and any Repurchase Notice
containing any such defect shall nonetheless be effective on the date given if
the Buyer promptly undertakes to correct all such defects. No such claim of
error shall limit or delay performance of the Company's obligation to repurchase
all Shares requested to be repurchased not in dispute whether or not the Buyer
makes such undertaking.
(d) Special Repurchase Events. Notwithstanding any other provision of this
Agreement, if a Repurchase Event occurs by reason of the occurrence of (x) an
event described in clause (1), (2), (3) or (5) of the definition of the term
Repurchase
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Event or (y) an Amendment Event, and such occurrence is by reason of events
which are not solely within the control of the Company, the Company shall have
the right to give a Control Notice to the Buyer at any time after such
Repurchase Event occurs and prior to the earlier of (1) the date on which the
Buyer's right (other than as limited by this Section 11(d)) to require
repurchase of its Shares by reason of the occurrence of such Repurchase Event
expires and (2) the applicable Repurchase Date by reason of the Repurchase
Notice given by the Buyer by reason of such Repurchase Event. If the Company
timely gives such Control Notice to the Buyer, then, in lieu of payment of the
Repurchase Price by reason of any such Repurchase Event, on or before the third
Trading Day of each calendar month after the occurrence and during the
continuance of such Repurchase Event, the Company may issue and deliver to the
Buyer a number of Common Shares equal to the Repurchase Share Amount. The
Repurchase Share Amount shall be prorated for any partial month in which such
Repurchase Event continues.
For purposes of this Section 11(d), a Repurchase Event described in clause
(1), (2), (3) or (5) of the definition of the term Repurchase Event or an
Amendment Event shall be deemed to have occurred by reason of events which are
not solely within the control of the Company if a requirement of the Company to
repurchase, or a right of the Buyer to require repurchase of, Shares by reason
thereof would result in the Company being required to classify the Shares as
redeemable common stock on a balance sheet of the Company prepared in accordance
with Generally Accepted Accounting Principles, and, in the case of an Repurchase
Event described in clause (5) of the definition of the term Repurchase Event,
the Board of Directors or the shareholders of the Company do not have the right
to approve or disapprove the transactions resulting in such event. To the extent
any facts are assumed for purposes of either the Company's conclusion as to such
classification of the Shares or the Auditors' Determination required to be
delivered as part of the Control Notice, the validity of such conclusion or
determination shall depend on such assumed facts being true and complete in all
material respects.
12. Repurchase At Option Of The Company. If (i) the Company shall be in
compliance in all material respects with its obligations to the Buyer
(including, without limitation, its obligations under this Agreement, the Escrow
Agreement and the Registration Rights Agreement), (ii) on the date the Company
Repurchase Notice is given and at all times until the Repurchase Date, the
Registration Statement is effective and available for use by the Buyer for the
resale of its Shares
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and (iii) no Repurchase Event shall have occurred with respect to which, on the
date a Company Repurchase Notice is to be given or on the Redemption Date, the
Buyer (A) shall be entitled to exercise optional repurchase rights under Section
11 by reason of such Repurchase Event or (B) shall have exercised optional
repurchase rights under Section 11 by reason of such Repurchase Event and the
Company shall not have paid the Repurchase Price to the Buyer, then the Company
shall have the right to repurchase Escrow Shares as follows:
(a) Repurchase Right. If the Company gives a Company Repurchase Notice to
the Buyer not less than 30 Trading Days or more than 60 Trading Days prior to
the Repurchase Date, the Company may at any time repurchase all or from time to
time any part of the Escrow Shares in accordance with this Section 12(a). On the
Repurchase Date (or such later date as the Escrow Agent, at the request of the
Buyer, surrenders to the Company the certificate(s) for the Escrow Shares to be
repurchased pursuant to this Section 12(a)), the Company shall make payment to
the Buyer of the applicable Repurchase Price multiplied by the number of Escrow
Shares to be repurchased in immediately available funds to such account as
specified by the Buyer in writing to the Company at least one Trading Day prior
to the Repurchase Date.
(b) Special Repurchase Right. If on each of the 30 consecutive Trading Days
ending immediately prior to the Trading Day on which the Company elects to give
a Company Repurchase Notice to the Buyer pursuant to this Section 12(b) the
Market Price is at least 150% of the Purchase Price, then the Company shall
repurchase the number of Escrow Shares specified in the Company Repurchase
Notice in accordance with this Section 12(b). The Repurchase Date pursuant to
this Section 12(b) shall occur not less than 10 Trading Days and no more than 20
Trading Days after the date such Company Repurchase Notice is given. On such
Repurchase Date, the Company shall make payment to the Buyer of the Special
Repurchase Price multiplied by the number of Escrow Shares to be repurchased in
immediately available funds to such account as specified by the Buyer in writing
to the Company at least one Trading Day prior to the Repurchase Date.
(c) Restriction on Repurchases. The Buyer may remove from escrow in
accordance with Section 7 any Escrow Shares to be repurchased pursuant to this
Section 12 (i) through the day prior to the Repurchase Date and (ii) if the
Company shall fail to pay the Repurchase Price or the Special Repurchase Price,
as the case may be, of any Escrow Shares when due, at
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any time after the due date thereof until such date as the Company pays the
Repurchase Price or the Special Repurchase Price, as the case may be, of such
Escrow Shares. No Escrow Shares which the Buyer removes from escrow pursuant to
Section 7 or exercises the optional repurchase right pursuant to Section 11 may
be repurchased by the Company pursuant to this Section 12 on or after the date
of exercise of such removal right or optional repurchase right, as the case may
be, regardless of whether the Company Repurchase Notice shall have been given
prior to, or on or after, the date of exercise of such removal right or optional
redemption right, as the case may be.
13. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York.
(b) Counterparts. This Agreement may be executed in counterparts and by the
parties hereto on separate counterparts, all of which together shall constitute
one and the same instrument. A facsimile transmission of this Agreement bearing
a signature on behalf of a party hereto shall be legal and binding on such
party. Although this Agreement is dated as of the date first set forth above,
the actual date of execution and delivery of this Agreement by each party is the
date set forth below such party's signature on the signature page hereof. Any
reference in this Agreement or in any of the documents executed and delivered by
the parties hereto in connection herewith to (1) the date of execution and
delivery of this Agreement by the Buyer shall be deemed a reference to the date
set forth below the Buyer's signature on the signature page hereof, (2) the date
of execution and delivery of this Agreement by the Company shall be deemed a
reference to the date set forth below the Company's signature on the signature
page hereof and (3) the date of execution and delivery of this Agreement or the
date of execution and delivery of this Agreement by the Buyer and the Company
shall be deemed a reference to the later of the dates set forth below the
signatures of the parties on the signature page hereof.
(c) Headings, etc. The headings, captions and footers of this Agreement are
for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction,
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such invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(e) Amendments. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(f) Waivers. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be delivered personally (which shall include telephone
line facsimile transmission with answer back confirmation) or by courier and
shall be effective upon receipt, if delivered personally or by courier, in the
case of the Company addressed to the Company at its address shown in the
introductory paragraph of this Agreement, Attention: Legal Department (telephone
line facsimile transmission number (510) 649-7571), or, in the case of the
Buyer, at its address or telephone line facsimile transmission number shown on
the signature page of this Agreement, with a copy to [ ] or such other address
or telephone line facsimile transmission number as a party shall have provided
by notice to the other party in accordance with this provision.
(h) Assignment. Prior to the Closing Date, the Buyer may not assign its
rights and obligations under this Agreement. Any transfer of the Shares or the
Warrants by the Buyer after the Closing Date shall be made in accordance with
Section 6(a). After the Closing Date, the Buyer shall have the right to assign
its rights and obligations under this Agreement and the Escrow Agreement to
Permitted Transferees in connection
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with any transfer of the Buyer's rights under the Registration Rights Agreement
by compliance with the provisions of Section 9 of the Registration Rights
Agreement.
(i) Survival of Representations and Warranties. The respective
representations, warranties, covenants and agreements of the Buyer and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of payment
for the Initial Shares and shall remain in full force and effect regardless of
any investigation made by or on behalf of them or any Person controlling or
advising any of them.
(j) Entire Agreement. This Agreement and its Schedules and Annexes set
forth the entire agreement between the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and understandings,
whether written or oral, with respect thereto.
(k) Termination. The Buyer shall have the right to terminate this Agreement
by giving notice to the Company at any time at or prior to the Closing Date if:
(1) the Company shall have failed, refused, or been unable at or prior
to the date of such termination of this Agreement to perform any of its
obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is not
fulfilled; or
(3) the closing of the sale of the Initial Shares shall not have
occurred on a Closing Date on or before January 31, 1999, other than solely
by reason of a breach of this Agreement by the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
(l) Further Assurances. Each party to this Agreement will perform any and
all acts and execute any and all documents as may be necessary and proper under
the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
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(m) Public Statements, Press Releases, Etc. The Company and the Buyer shall
have the right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyer, to make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations (although the
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
(n) Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer and
the Company by their respective officers or other representatives thereunto duly
authorized on the respective dates set forth below.
[Buyer]
By:
------------------------------------
Name:
Title:
Date:
------------------------------------
Address:
Facsimile No.:
XOMA LTD.
By:
------------------------------------
Name:
Title:
Date:
-----------------------------------
Exhibit 3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of January 28, 1999 (this
"Agreement"), is made by and between XOMA LTD., a Bermuda company (the
"Company"), and the person named on the signature page hereto (the "Initial
Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Subscription Agreement, dated as of January
28, 1999, between the Initial Investor and the Company (the "Subscription
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of the Subscription Agreement, to issue and sell to the Initial
Investor Common Shares, $.0005 par value (the "Common Shares"), of the Company,
and to issue to the Initial Investor common share purchase warrants (the
"Warrants") to purchase Common Shares (the "Warrant Shares");
WHEREAS, under the conditions set forth in the Subscription Agreement, the
Company may be obligated from time to time to issue to the Investors (as defined
below) additional Common Shares; and
WHEREAS, to induce the Initial Investor to execute and deliver the
Subscription Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws with respect to the
Registrable Securities (as defined below) issuable to or for the account of the
Investors pursuant to the Subscription Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investor hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the following
meanings:
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"Investor" or "Investors" means the Initial Investor and any transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
"Nasdaq" means the Nasdaq National Market.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the "SEC").
"Registrable Securities" means the Initial Shares, the Reset Shares, the
Repurchase Shares and the Warrant Shares.
"Registration Period" means the period from the Closing Date to the earlier
of (i) the date which is three years after the date on which the last Reset
Shares may be issued to the Investors pursuant to the Subscription Agreement,
(ii) the date on which each Investor may sell all of its Registrable Securities
(including Reset Shares which may be issued from time to time) without
registration under the 1933 Act pursuant to Rule 144, without restriction on the
manner of sale or the volume of securities which may be sold in any period and
without the requirement for the giving of any notice to, or the making of any
filing with, the SEC and (iii) the date on which the Investors no longer
beneficially own any Registrable Securities.
"Registration Statement" means a registration statement of the Company
under the 1933 Act, including any amendment thereto.
"Rule 144" means Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit a holder of
any securities to sell securities of the Company to the public without
registration under the 1933 Act.
"SEC Effective Date" means the date the Registration Statement is first
declared effective by the SEC.
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"SEC Filing Date" means the date the Registration Statement is first filed
with the SEC pursuant to Section 2(a).
(b) Capitalized terms defined in the introductory paragraph or the recitals
to this Agreement shall have the respective meanings therein provided.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Subscription Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare, and on or prior to
the date which is 30 days after the Closing Date, file with the SEC a
Registration Statement on Form S-3, which, on the date of filing with the SEC,
covers the resale by the Initial Investor or its assignees of a number of Common
Shares at least equal to the sum of (x) 200% of the number of Initial Shares,
plus (y) the number of Warrant Shares. If at any time the number of Common
Shares included in the Registration Statement required to be filed as provided
in the first sentence of this Section 2(a) shall be insufficient to cover the
number of Reset Shares and Repurchase Shares issuable pursuant to the
Subscription Agreement or the number of Common Shares issuable upon exercise of
the unexercised portions of Warrants, then promptly, but in no event later than
20 days after such insufficiency shall occur, the Company shall file with the
SEC an additional Registration Statement on Form S-3 (which shall not constitute
a post-effective amendment to the Registration Statement filed pursuant to the
first sentence of this Section 2(a)), covering such number of Common Shares as
shall be sufficient to cover such Reset Shares and Repurchase Shares and permit
such exercises. For all purposes of this Agreement such additional Registration
Statement shall be deemed to be the Registration Statement required to be filed
by the Company pursuant to Section 2(a) of this Agreement, and the Company and
the Investors shall have the same rights and obligations with respect to such
additional Registration Statement as they shall have with respect to the initial
Registration Statement required to be filed by the Company pursuant to this
Section 2(a). The Registration Statement shall not, without the Investor's
consent which shall not be unreasonably withheld, include securities to be sold
for the account of any other selling securityholder other than (i) the Other
Buyer and (ii) the persons offering to sell up to the respective numbers of
Common Shares listed on Schedule 2(a) attached hereto.
(b) Other Registrations. The Company will not file another registration
statement with the SEC covering Common
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Shares prior to the SEC Effective Date, other than registration statements on
Form S-4 or S-8.
(c) Piggy-Back Registrations. If at any time the Company shall determine to
prepare and file with the SEC a Registration Statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its
equity securities, other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Investor who is entitled to registration rights under this Section
2(c) written notice of such determination and, if within ten (10) days after
receipt of such notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, except that if, in
connection with any underwritten public offering for the account of the Company,
the managing underwriter(s) thereof shall impose a limitation on the number of
Registrable Securities which may be included in the Registration Statement
because, in such underwriter(s)' judgment, such limitation is necessary to
effect an orderly public distribution, then the Company shall be obligated to
include in such Registration Statement only such limited portion of the
Registrable Securities with respect to which such Investor has requested
inclusion hereunder. Any exclusion of Registrable Securities shall be made pro
rata among the Investors seeking to include Registrable Securities, in
proportion to the number of Registrable Securities sought to be included by such
Investors; provided, however, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities the
holders of which are not entitled by right to inclusion of securities in such
Registration Statement; and provided further, however, that, after giving effect
to the immediately preceding proviso, any exclusion of Registrable Securities
shall be made pro rata with holders of other securities having the right to
include such securities in the Registration Statement, based on the number of
securities for which registration is requested except to the extent such pro
rata exclusion of such other securities is prohibited under any written
agreement entered into by the Company with the holder of such other securities
prior to the date of this Agreement, in which case such other securities shall
be excluded, if at all, in accordance with the terms of such agreement. No right
to registration of Registrable Securities under this Section 2(c) shall be
construed to limit any registration required under Section
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2(a) hereof. The obligations of the Company under this Section 2(c) may be
waived by Investors holding a majority in interest of the Registrable Securities
and shall expire after the Company has afforded the opportunity for the
Investors to exercise registration rights under this Section 2(c) for two
registrations; provided, however, that any Investor who shall have had any
Registrable Securities excluded from any Registration Statement in accordance
with this Section 2(c) shall be entitled to include in an additional
Registration Statement filed by the Company the Registrable Securities so
excluded. Notwithstanding any other provision of this Agreement, if the
Registration Statement required to be filed pursuant to Section 2(a) of this
Agreement shall have been ordered effective by the SEC and the Company shall
have maintained the effectiveness of such Registration Statement as required by
this Agreement and if the Company shall otherwise have complied in all material
respects with its obligations under this Agreement, then the Company shall not
be obligated to register any Registrable Securities on such Registration
Statement referred to in this Section 2(c).
(d) Eligibility for Registration Statement Forms. The Company meets the
requirements for the use of Form S-3 for registration of the Registrable
Securities for resale by the Investors. The Company shall file all reports
required to be filed by the Company with the SEC in a timely manner so as to
maintain such eligibility for the use of Form S-3.
3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall:
(a) prepare promptly, and file with the SEC not later than 30 days after
the Closing Date, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter to use its
reasonable best efforts to cause each Registration Statement relating to
Registrable Securities to become effective as soon as possible after such
filing, and keep the Registration Statement effective pursuant to Rule 415 at
all times during the Registration Period; submit to the SEC, within two Trading
Days after the Company learns that no review of the Registration Statement will
be made by the staff of the SEC or that the staff of the SEC has no further
comments on the Registration Statement, as the case may be, a request for
acceleration of effectiveness of the Registration Statement to the earliest time
and date permitted by the staff of the SEC after the submission of such request;
notify the Investors of the effectiveness of the Regis-
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tration Statement on the date the Registration Statement is declared effective;
and the Company represents and warrants to, and covenants and agrees with, the
Investors that the Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein), at the time it is first
filed with the SEC, at the time it is ordered effective by the SEC and at all
times during which it is required to be effective hereunder (and each such
amendment and supplement at the time it is filed with the SEC and at all times
during which it is available for use in connection with the offer and sale of
the Registrable Securities) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading;
(b) prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement effective at all times during the Registration
Period, and, during the Registration Period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statement;
(c) furnish to each Investor whose Registrable Securities are included in
the Registration Statement and its legal counsel, (1) promptly after the same is
prepared and publicly distributed, filed with the SEC or received by the
Company, one copy of the Registration Statement and any amendment thereto, each
preliminary prospectus and prospectus and each amendment or supplement thereto,
each letter written by or on behalf of the Company to the SEC or the staff of
the SEC and each item of correspondence from the SEC or the staff of the SEC
relating to such Registration Statement (other than any portion of any thereof
which contains information for which the Company has sought confidential
treatment) and (2) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
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(d) use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such securities or blue
sky laws of such jurisdictions as the Investors who hold a majority in interest
of the Registrable Securities being offered reasonably request, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times until the end of
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto (I) to qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (II) to subject itself to general taxation in any such
jurisdiction, (III) to file a general consent to service of process in any such
jurisdiction, (IV) to provide any undertakings that cause more than nominal
expense or burden to the Company or (V) to make any change in its Memorandum of
Continuance or bye-laws, which in each case the Board of Directors of the
Company determines to be contrary to the best interests of the Company and its
shareholders;
(e) as promptly as practicable after becoming aware of such event or
circumstance, notify each Investor of any event or circumstance of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its reasonable best efforts
promptly to prepare a supplement or amendment to the Registration Statement to
correct such untrue statement or omission, file such supplement or amendment
with the SEC at such time as shall permit the Investors to sell Registrable
Securities pursuant to the Registration Statement as promptly as practical, and
deliver a number of copies of such supplement or amendment to each Investor as
such Investor may reasonably request;
(f) as promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold of the issuance by the
SEC of any stop order
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or other suspension of effectiveness of the Registration Statement at the
earliest possible time;
(g) permit a single firm of counsel designated as selling shareholders'
counsel by the Investors who hold a majority in interest of the Registrable
Securities being sold to review and comment on the Registration Statement and
all amendments and supplements thereto a reasonable period of time prior to
their filing with the SEC;
(h) make generally available to its security holders as soon as practical,
but not later than ninety (90) days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 under the 1933 Act) covering a twelve-month period beginning not later than
the first day of the Company's fiscal quarter next following the effective date
of the Registration Statement;
(i) make available for inspection by any Investor, and any attorney,
accountant or other agent retained by any such Investor (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably necessary to enable each Inspector to exercise its due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information which any Inspector may reasonably request for purposes
of such due diligence; provided, however, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an Investor) of any
Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction or (iii) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(i). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company,
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at the Company's own expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to Section 4 hereof unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Investor, at such Investor's own expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information;
(j) use its reasonable best efforts (i) to cause all the Registrable
Securities covered by the Registration Statement to be listed on the Nasdaq or
such other principal securities market on which securities of the same class or
series issued by the Company are then listed or traded or (ii) if securities of
the same class or series as the Registrable Securities are not then listed on
Nasdaq or any such other securities market, to cause all of the Registrable
Securities covered by the Registration Statement to be listed on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market;
(k) provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(l) cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be
offered pursuant to the Registration Statement and enable such certificates to
be in such denominations or amounts as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may request;
and, within three Trading Days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company shall
deliver to the transfer agent for the Registrable
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Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an instruction substantially in the
form attached hereto as Exhibit 1 and shall cause Cahill Gordon & Reindel,
counsel to the Company, to deliver to the Investors an opinion of such counsel
in the form attached hereto as Exhibit 2 (with a copy to the Company's transfer
agent) and the General Counsel of the Company to deliver to the Investors an
opinion of such counsel in the form attached hereto as Exhibit 3 (with a copy to
the Company's transfer agent);
(m) during the period the Company is required to maintain effectiveness of
the Registration Statement pursuant to Section 3(a), the Company shall not bid
for or purchase any Common Stock or any right to purchase Common Stock or
attempt to induce any person to purchase any such security or right if such bid,
purchase or attempt would in any way limit the right of the Investors to sell
Registrable Securities by reason of the limitations set forth in Regulation M
under the 1934 Act; and
(n) take all other reasonable actions necessary to expedite and facilitate
disposition by the Investors of the Registrable Securities pursuant to the
Registration Statement.
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least four (4) days prior
to the first anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires from each
such Investor (the "Requested Information") if any of such Investor's
Registrable Securities are eligible for inclusion in the Registration Statement.
If at least one (1) Trading Day prior to the filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including
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Registrable Securities of such Non-Responsive Investor but shall not be relieved
of its obligation to file a Registration Statement with the SEC relating to the
Registrable Securities of such Non-Responsive Investor reasonably promptly after
such Non-Responsive Investor provides the Requested Information;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(e) or 3(f),
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) or 3(f) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions and other fees and expenses of investment
bankers and other than brokerage commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees, printers
and accounting fees and the fees and disbursements of counsel for the Company,
shall be borne by the Company. The Company shall not be responsible for the fees
and expenses of counsel for the Investors except as contemplated by the
Subscription Agreement.
6. Indemnification. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who
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controls any Investor within the meaning of the 1933 Act or the 1934 Act (each,
an "Indemnified Person"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations in the Registration Statement, or any post-effective
amendment thereof, or any prospectus included therein: (i) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any state securities law
or any rule or regulation under the 1933 Act, the 1934 Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to the restrictions set forth in Section
6(d) with respect to the number of legal counsel, the Company shall reimburse
the Investors and each such controlling person, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (I) shall not apply to
a Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement, the prospectus or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (II) with respect to any preliminary prospectus
shall not inure to the benefit of any such person from whom the person asserting
any such Claim purchased the Registrable Securities that are the subject thereof
(or to the benefit of any person controlling such person) if the untrue
state-
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ment or omission of material fact contained in the preliminary prospectus was
corrected in the prospectus, as then amended or supplemented, if such prospectus
was timely made available by the Company pursuant to Section 3(c) hereof; and
(III) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act, any underwriter and any other shareholder selling securities
pursuant to the Registration Statement or any of its directors or officers or
any person who controls such shareholder or underwriter within the meaning of
the 1933 Act or the 1934 Act (collectively and together with an Indemnified
Person, an "Indemnified Party"), against any Claim to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim arises out of or is based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and such
Investor will reimburse any legal or other expenses reasonably incurred by any
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent shall
not be unreasonably withheld; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim as does
not exceed the amount by which the net proceeds to such Investor from the sale
of Registrable Securities pursuant to such Registration Statement exceeds the
cost of such Registrable Securities to such Investor. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained
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herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information so furnished in writing by such persons expressly for
inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel selected by the indemnifying party but reasonably
acceptable to the Indemnified Person or the Indemnified Party, as the case may
be; provided, however, that an Indemnified Person or Indemnified Party shall
have the right to retain its own counsel with the reasonable fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the Registration Statement to which the Claim relates. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of
<PAGE>
-16-
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. Contribution. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6, (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of such fraudulent misrepresentation and (c) contribution by
any seller of Registrable Securities shall be limited in amount to the amount by
which the net amount of proceeds received by such seller from the sale of such
Registrable Securities exceeds the purchase price paid by such seller for such
Registrable Securities.
8. Reports under 1934 Act. With a view to making available to the Investors
the benefits of Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144 and the 1934 Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Investors to sell such
securities pursuant to Rule 144 without registration.
9. Assignment of Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any Permitted Transferee of all or
any portion of such securities (or all or any portion of the Warrants) only if:
(a) the Investor agrees in writing with the Permitted Transferee to
<PAGE>
-17-
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (b) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (i) the name and address of such Permitted Transferee and (ii) the securities
with respect to which such registration rights are being transferred or
assigned, (c) immediately following such transfer or assignment the further
disposition of such securities by the Permitted Transferee is restricted under
the 1933 Act and applicable state securities laws, and (d) at or before the time
the Company receives the written notice contemplated by clause (b) of this
sentence the Permitted Transferee agrees in writing with the Company to be bound
by all of the provisions contained herein. In connection with any such transfer
the Company shall, at its sole cost and expense, promptly after such assignment
take such reasonable actions as shall be reasonably acceptable to the Initial
Investor and such Permitted Transferee to assure that the Registration Statement
and related prospectus are available for use by such Permitted Transferee for
sales of the Registrable Securities in respect of which the rights to
registration have been so assigned. In connection with any such assignment, each
Investor shall have the right to assign to such Permitted Transferee such
Investor's rights under the Subscription Agreement and the Escrow Agreement by
notice of such assignment to the Company. Following such notice of assignment of
rights under the Subscription Agreement and the Escrow Agreement, the Company
shall be obligated to such Permitted Transferee to perform all of its covenants
under the Subscription Agreement and the Escrow Agreement as if such Permitted
Transferee were the Buyer under the Subscription Agreement.
10. Amendment of Registration Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Secu-
<PAGE>
-18-
rities, the Company shall act upon the basis of instructions, notice or election
received from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered (by hand,
by courier, by telephone line facsimile transmission or other means) (i) if to
the Company, at 2910 Seventh Street, Berkeley, California, 94710, Attention:
Legal Department, telephone line facsimile transmission number (510) 649-7571,
(ii) if to the Initial Investor, [ ] and (iii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
<PAGE>
-19-
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(i) The Company acknowledges that any failure by the Company to perform its
obligations under this Agreement, including, without limitation, the Company's
obligations under Section 3(l), or any delay in such performance could result in
damages to the Investors and the Company agrees that, in addition to any other
liability the Company may have by reason of any such failure or delay, the
Company shall be liable for all direct and consequential damages caused by any
such failure or delay.
(j) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
<PAGE>
-20-
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day and
year first above written.
XOMA LTD.
By:
------------------------------------
Name:
Title:
[Buyer]
By:
------------------------------------
Name:
Title:
Exhibit 4
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of January 28, 1999 (this "Agreement"), by
and between XOMA LTD., a Bermuda company (the "Company"), [Buyer] (the "Buyer"),
and BRIAN W. PUSCH, not in his individual capacity but as Escrow Agent (the
"Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer have executed and delivered, one to the
other, a Subscription Agreement, dated as of January 28, 1999 (the "Subscription
Agreement"), pursuant to which, among other things, the Company has agreed to
sell to the Buyer, and the Buyer has agreed to purchase from the Company, upon
the terms and subject to the conditions of the Subscription Agreement, shares
(the "Purchased Shares") which are Common Shares, $.0005 par value, of the
Company (the "Common Shares"), and the Company has further agreed, under certain
circumstances, from time to time to issue additional Common Shares ("Reset
Shares") to the Buyer; and
WHEREAS, pursuant to the Subscription Agreement, the Company has agreed
with the Buyer, among other things, to execute and deliver this Agreement, and
to initially deposit all Purchased Shares and Reset Shares issued by the Company
for the account of the Buyer with the Escrow Agent for the purposes set forth in
Section 3 and Section 7 of the Subscription Agreement;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows (capitalized terms used herein without definition have
the meanings given them in the Subscription Agreement):
1. Deposit of Shares. Upon the closing of the sale of the Initial Shares to
the Buyer or its assignee in accordance with the Subscription Agreement, the
Company shall, and hereby authorizes the Closing Escrow Agent to, deposit with
the Escrow Agent for the separate account of the Buyer or its assignee one or
more certificates representing the Buyer's Initial Shares. Upon each issuance,
if any, of Reset Shares pursuant to Section 3 of the Subscription Agreement, the
Company shall deposit with the Escrow Agent for the account of the
<PAGE>
-2-
Buyer or its assignee one or more certificates representing such Reset Shares.
All Common Shares held by the Escrow Agent from time to time, including any
Reset Shares or additional Common Shares distributed or received by the Escrow
Agent as a stock dividend, stock split or other distribution on the Common
Shares held by the Escrow Agent, are referred to herein as the "Escrow Shares."
The Escrow Shares shall, if sent electronically through the DWAC system, be
registered in street name and, if delivered in certificated form, be registered
in the name of the Escrow Agent or shall be accompanied by duly executed stock
powers in blank with any necessary signature guarantees. The Company shall not
be liable for any failure on the part of the Escrow Agent or the Buyer to take
actions necessary to receive such shares electronically through the DWAC system.
The Escrow Agent shall be entitled, in its discretion, to retain possession of
certificates for the Escrow Shares or to deposit the Escrow Shares in a
segregated brokerage account maintained in the name of the Escrow Agent with
PaineWebber Incorporated or another brokerage firm which is a member of the
National Association of Securities Dealers, Inc.
2. Beneficial Ownership of Escrow Shares. As provided in Section 7 of the
Subscription Agreement, except for Escrow Shares which are due to the Company as
specified in a Reset Notice (as defined below) pursuant to Section 3 of the
Subscription Agreement which have not been released to the Company ("Company
Escrow Shares"), the Buyer shall be the sole beneficial owner of and shall have
the sole right to vote the Escrow Shares in the Buyer's account, and the escrow
provisions of this Agreement and the Subscription Agreement shall not in any way
limit or affect the ownership or the right to dispose of such Escrow Shares by
the Buyer and shall not in any manner create any lien, pledge, charge, equity,
encumbrance, claim or right of the Company of any nature whatsoever in or with
respect to such Escrow Shares. In the event of any dispute or uncertainty
regarding the existence or amount of any Company Escrow Shares, all Escrow
Shares in question shall be deemed beneficially owned by the Buyer until
designated as Company Escrow Shares by delivery by the Buyer or a court of
competent jurisdiction of a Reset Notice or other written confirmation thereof
to the Escrow Agent and the Company.
3. Release of Escrow Shares to the Buyer. (a) At any time after the earlier
of (i) the SEC Effective Date and (ii) Reset Date No. 1 which time is not during
a Reset Period, the Buyer shall have the sole and exclusive right to direct the
Escrow Agent to release to or upon the order of the Buyer any or all Escrow
Shares in the Buyer's account which are not Com-
<PAGE>
-3-
pany Escrow Shares by delivering a Release Notice, in the form attached hereto
as Exhibit A (each, a "Release Notice"), to the Escrow Agent. No Escrow Shares
may be released by the Escrow Agent during a Reset Period unless the Escrow
Agent is jointly instructed to do so by the Company and the Buyer. The Escrow
Agent shall determine the expiration date of any Reset Period, which
determination shall be binding on the Company and the Buyer.
(b) Within three Trading Days following receipt of a Release Notice or as
promptly as practicable thereafter, the Escrow Agent shall release to the Buyer
the number of Escrow Shares specified in such Release Notice in accordance with
the Buyer's instructions stated therein until such time as the Escrow Agent no
longer holds any Escrow Shares in the Buyer's account. A Release Notice given by
the Buyer shall be deemed for all purposes to be in proper form unless the
Escrow Agent notifies the Buyer in writing within five Trading Days after such
Release Notice has been given (which notice shall specify all defects in such
Release Notice) and any Release Notice containing any such defect shall
nonetheless be effective on the date given if the Buyer promptly undertakes to
correct all defects. The certificates for any Common Shares so released from
escrow prior to the SEC Effective Date may, if so requested by the Company, bear
the restrictive legend specified in Section 6(b) of the Subscription Agreement.
Any remaining Escrow Shares in the Buyer's account which are not Company Escrow
Shares following the last Reset Date to occur under the Subscription Agreement
shall be promptly delivered to or upon the order of the Buyer. Once properly
released from escrow in accordance with this Agreement, Escrow Shares may not be
re-deposited into escrow.
(c) When (1) no additional shares are required to be deposited into escrow
following the last Rest Date to occur under the Subscription Agreement and (2)
all Escrow Shares are properly released from escrow in accordance with this
Agreement, the escrow provisions of this Agreement shall terminate and no
further deposits of shares into escrow shall be permitted.
4. Release of Company Escrow Shares to the Company. On or after each Reset
Date, the Escrow Agent shall receive a Reset Notice, in the form attached hereto
as Exhibit B (each, a "Reset Notice"), from the Buyer or, when permitted by
Section 3(d) of the Subscription Agreement, from the Company. If a Reset Notice
states that Reset Shares are to be released to the Company, within ten Trading
Days after such Reset Notice
<PAGE>
-4-
is given to the Escrow Agent or as promptly as practicable thereafter, the
Escrow Agent shall release from the Buyer's account the applicable whole number
of Company Escrow Shares to the Company in accordance with the Company's written
instructions. In the event of any error or dispute concerning the number of
Reset Shares to be released to the Buyer or to the Company set forth in a Reset
Notice, the Company and the Buyer will comply with the provisions of Section
3(e) of the Subscription Agreement and the Escrow Agent shall receive the
notices provided therein. The Escrow Agent is authorized and directed to rely on
any determination of the Auditors made pursuant to such Section 3(e).
5. Method of Release. In the discretion of the Escrow Agent, the Escrow
Agent may release Escrow Shares to the Buyer or to the Company, as and when
required by this Agreement, by means of (i) delivering physical certificates
representing such Escrow Shares or (ii) electronic transfer of such Escrow
Shares by DWAC or a similar system to an account designated in writing to the
Escrow Agent by the Buyer or the Company, as the case may be.
6. Duties of Escrow Agent. The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein and may rely and
shall be protected in relying or refraining from acting on any instrument
reasonably believed by the Escrow Agent to be genuine and to have been signed or
presented by the proper party or parties. In no event shall the Escrow Agent
have any responsibility or liability for the accuracy of the information set
forth in any Release Notice or Reset Notice or for the determination of any
calculation to be made for purposes of Section 4 of the Subscription Agreement
or otherwise. The Escrow Agent shall not be personally liable for any act the
Escrow Agent may do or omit to do hereunder as Escrow Agent while acting in good
faith, and any act done or omitted by the Escrow Agent pursuant to the advice of
the Escrow Agent's attorneys-at-law shall be conclusive evidence of such good
faith. In no event shall the Escrow Agent incur any liability or be held
responsible, if any certificate for or electronic transmission of Escrow Shares,
once released from escrow hereunder, shall become lost, delayed, stolen,
destroyed, mutilated or misplaced while in transit to any person, provided the
Escrow Agent shall have dispatched the same by a means customarily used by the
Escrow Agent.
7. Disregard of Warnings; Judicial Orders. The Escrow Agent is hereby
expressly authorized to disregard any
<PAGE>
-5-
and all warnings given by any of the parties hereto or by any other person, firm
or corporation, excepting only orders or process of governmental authorities
(including courts of law) and is hereby expressly authorized to comply with and
obey orders, judgments or decrees of any court. In case the Escrow Agent obeys
or complies with any such order, judgment or decree, the Escrow Agent shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such decree being subsequently reversed, modified,
annulled, set aside, vacated or found to have been entered without jurisdiction.
8. No Liability for Genuineness. The Escrow Agent shall not be liable in
any respect on account of the identity, authorities or rights of the parties
executing or delivering or purporting to execute or deliver the Subscription
Agreement, a Release Notice, a Reset Notice or any other notice, document or
instrument deposited or called for hereunder or thereunder.
9. Statute of Limitations. The Escrow Agent shall not be liable for the
outlawing of any rights under the Statute of Limitations with respect to this
Agreement or any document or instrument deposited with or held by the Escrow
Agent pursuant to this Agreement.
10. Retention and Advice of Legal Counsel. The Escrow Agent shall be
entitled to employ such legal counsel and other experts as the Escrow Agent may
deem necessary properly to advise the Escrow Agent in connection with the Escrow
Agent's obligations hereunder, may rely upon the advice of such counsel, and may
pay such counsel reasonable compensation therefor, subject to reimbursement
thereof as and to the extent provided in Section 14. The Escrow Agent has acted
as legal counsel for [Buyer] and the Escrow Agent may continue to act as legal
counsel for [Buyer] notwithstanding its duties as Escrow Agent hereunder.
11. Resignation. The Escrow Agent's responsibilities as Escrow Agent
hereunder shall terminate if the Escrow Agent shall resign by written notice to
the Company and the Buyer. In the event of any such resignation, the Buyer shall
appoint a successor Escrow Agent. The Escrow Agent shall transfer any Escrow
Shares to any successor Escrow Agent promptly after receipt by the Escrow Agent
of notice from the Buyer of the appointment of such successor.
12. Further Assurances. If the Escrow Agent reasonably requires other or
further instruments in connection
<PAGE>
-6-
with this Agreement or obligations in respect hereto, the parties hereto shall
join in furnishing such instruments.
13. Disputes. It is understood and agreed that should any dispute arise
with respect to the release and/or right of possession of the Escrow Shares held
by the Escrow Agent hereunder, the Escrow Agent is authorized and directed, in
its sole discretion (a) to retain in the Escrow Agent's possession without
liability to anyone all or any part of the Escrow Shares until such disputes
shall have been settled either by mutual written agreement of the parties
concerned or by a final order, decree or judgment of a court of competent
jurisdiction after the time for appeal has expired and no appeal has been
perfected, but the Escrow Agent shall be under no duty whatsoever to institute
or defend any such proceedings or (b) at any time, to deposit any or all of the
Escrow Shares with any court of competent jurisdiction in the State of New York,
in which event the Escrow Agent shall give notice thereof to the Company and the
Buyer and shall thereupon be relieved and discharged from all further
obligations hereunder.
14. Fees and Expenses; Indemnity. (a) The Buyer agrees to pay the
reasonable fees and expenses of the Escrow Agent as billed to the Buyer from
time to time for the performance of the Escrow Agent's services under this
Agreement.
(b) In addition to the amounts payable pursuant to Section 14(a), the
Company and the Buyer jointly and severally agree to pay or reimburse the Escrow
Agent for, and to indemnify and hold harmless the Escrow Agent from, any and all
claims, liabilities, costs or expenses in any way arising from or relating to
the duties or performance of the Escrow Agent hereunder other than any such
claim, liability, cost or expense to the extent the same shall have been
determined by final, unappealable judgment of a court of competent jurisdiction
to have resulted from the gross negligence or willful misconduct of the Escrow
Agent.
15. Notices. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given upon personal delivery (which shall include telephone line facsimile
transmission or courier service), addressed to each person thereunto entitled at
the following addresses, or at such other address as such person may designate
by ten days advance written notice to each of the other parties hereto.
the Company: XOMA Ltd.
<PAGE>
-7-
2910 Seventh Street
Berkeley, California 94710
Attention: Legal Department
Facsimile No.: (510) 649-7571
the Buyer: [ ]
Facsimile No.:
with a copy to:
[ ]
the Escrow Agent: Law Offices of Brian W Pusch
Penthouse Suite
29 West 57th Street
New York, New York 10019
Facsimile No.: (212) 980-7055
16. Amendment, Modification, Etc. No amendment, modification, waiver,
discharge or termination of any provision of this Agreement nor consent to any
departure by the parties therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of, or a waiver of any right under, this Agreement.
17. Subscription Agreement. By signing this Agreement, the Escrow Agent
does not become a party to and has no liability with respect to the Subscription
Agreement and the agreements and transactions contemplated thereby.
18. Assignment. In connection with any permitted assignment by the Buyer of
any of its rights under the Subscription Agreement or the Registration Rights
Agreement in accordance with the respective terms thereof, the Buyer shall have
the right to assign all or a portion of its rights and obligations under this
Agreement to any such assignee by giving notice thereof to the Escrow Agent and
the Company. Each such notice shall be executed by the assignee. Such notice may
be contained in a notice of assignment given under the Subscription Agreement or
the Registration Rights Agreement. From and after the giving of such notice by
the Buyer, such assignee shall be deemed a party to this Agreement, and all
applicable references herein to the "Buyer" shall include such assignee.
19. Governing Law. This instrument shall be binding upon and inure to the
benefit of the parties hereto, and
<PAGE>
-8-
their respective successors and permitted assigns and shall be governed by the
laws of the State of New York, without giving effect to principles of conflicts
of law.
IN WITNESS WHEREOF, the Company and the Buyer have caused this Agreement to
be duly executed and delivered by their respective officers or other
representatives thereunto duly authorized and the Escrow Agent has duly executed
this Agreement, in each case as of the date first set forth above.
XOMA LTD.
By:
-----------------------------------
Name:
Title:
[Buyer]
By:
-----------------------------------
Name:
Title:
Brian W. Pusch, as
Escrow Agent
<PAGE>
Exhibit A
RELEASE NOTICE
TO: Brian W. Pusch,
as Escrow Agent
Law Offices of Brian W Pusch
29 West 57th Street
Penthouse Suite
New York, New York 10019
Facsimile No.: (212) 980-7055
(1) Pursuant to the terms of the Escrow Agreement, dated as of January 28,
1999 (the "Escrow Agreement"), by and between XOMA Ltd., a Bermuda company (the
"Company"), the Buyer named therein, and Brian W. Pusch, as Escrow Agent (the
"Escrow Agent"), the undersigned Buyer hereby elects to release
____________________ Escrow Shares (the "Released Shares"). Capitalized terms
used herein and not otherwise defined herein have the respective meanings
provided in the Escrow Agreement.
(2) Please send the Released Shares to the person and address or to the
account specified below or, if additional space is necessary, on an attachment
hereto:
Delivery Instructions
for Released Shares: ____________________________
____________________________
____________________________
____________________________
NAME OF BUYER:
____________________________
Date _________________________ By: _______________________
Name:
Title:
A-1
<PAGE>
Exhibit B
RESET NOTICE
TO: XOMA Ltd. Brian W. Pusch, as Escrow Agent
2910 Seventh Street Law Offices of Brian W Pusch
Berkeley, California 94710 29 West 57th Street
Penthouse Suite
Attention: Legal Department New York, New York 10019
Facsimile No.: (510) 649-7571 Facsimile No.: (212) 980-7055
This Reset Notice is given pursuant to the terms of (i) the Subscription
Agreement, dated as of January 28, 1999 (the "Subscription Agreement"), by and
between XOMA Ltd., a Bermuda company (the "Company"), and the undersigned (the
"Buyer"), and (ii) the Escrow Agreement, dated as of January 28, 1999 (the
"Escrow Agreement"), by and between the Company, the Buyer and Brian W. Pusch,
as Escrow Agent (the "Escrow Agent"). Capitalized terms used herein and not
otherwise defined herein have the respective meanings provided in the
Subscription Agreement. The undersigned Buyer hereby notifies the Company and
the Escrow Agent as follows:
(1) Reset Date No.
(2) Reset Date:
(3) Basis of computation of number of Reset Shares pursuant to Section 3(b)
or 3(c) of the Subscription Agreement:
(a) Number of Designated Escrow Shares:
(b) The Adjustment Price on this Reset Date No. ______ is based on (check
one):
/ / the Average Market Price, or
/ / the Purchase Price.
B-1
<PAGE>
(c) To determine the Average Market Price, the Market Price on each of the
five Trading Days during the Measurement Period was as follows:
Date Market Price ($)
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
___________________________ ___________________________
The Average Market Price, equal to 89% of the arithmetic average of such
five Market Prices, is $ . The Buyer hereby represents and warrants to the
Company that it did not sell any Common Shares (including short sales) on any of
the five Trading Days listed above.
(d) The Purchase Price is $_______________.
(e) The Adjustment Price determined on the immediately preceding Reset Date
is $_____________.
(4) Number of Reset Shares to be released to the Buyer: _________________
(5) Number of Reset Shares to be released to the Company: _____________.
The Buyer hereby instructs the Escrow Agent to release such Reset Shares to the
Company.
NAME OF BUYER:
Date _________________________ By: _______________________
Name:
Title:
B-2
Exhibit 5
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE RESOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.
Right to Purchase _______
Common Shares of XOMA Ltd.
XOMA LTD.
Common Share Purchase Warrant
No. W-
XOMA LTD., a Bermuda company (the "Company"), hereby certifies that, for
value received, _____________ or registered assigns (the "Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company at any time
or from time to time after the date hereof, and before 5:00 p.m., New York City
time, on the Expiration Date (as hereinafter defined), _______ fully paid and
nonassessable Common Shares (as hereinafter defined) at a purchase price per
share equal to the Purchase Price (as hereinafter defined). The number of such
Common Shares and the Purchase Price are subject to adjustment as provided in
this Warrant.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
"Common Shares" includes the Company's Common Shares, $.0005 par value
per share, as authorized on the date hereof, and any other securities into
which or for which the Common Shares may be converted or exchanged pursuant
to a plan of recapitalization, reorganization, merger, amalgamation, sale
of assets or otherwise.
"Company" shall include XOMA Ltd. and any corporation that shall
succeed to or assume the obligation of XOMA Ltd. hereunder in accordance
with the terms hereof.
<PAGE>
-2-
"Expiration Date" means January 29, 2004.
"Issuance Date" shall mean the first date of original issuance of this
Warrant.
"Other Securities" refers to any shares (other than Common Shares) and
other securities of the Company or any other person (corporate or
otherwise) which the Holder at any time shall be entitled to receive, or
shall have received, on the exercise of this Warrant, in lieu of or in
addition to Common Shares, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Shares or
Other Securities pursuant to Section 4.
"Permitted Transferee" means any person (1) who is an "accredited
investor" as defined in Regulation D under the Securities Act and who is
designated a non-resident of Bermuda for Bermuda Exchange Control purposes,
(2) who is to be transferred Warrants to purchase at least 60,000 Warrant
Shares and (3) who is either (A) an affiliate of the owner of this Warrant
or (B) a person as to whom the Company shall have consented to such
transfer, such consent not to be unreasonably withheld (it being understood
that a proposed transfer by the Buyer to a competitor or potential
competitor of the Company or a person which the Company determines in good
faith is accumulating or is likely to accumulate ownership of Common Shares
for hostile or unfriendly purposes may constitute a basis for withholding
such consent).
"Purchase Price" shall mean $5.85008 per share, subject to adjustment
as provided in this Warrant.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of January 28, 1999, by and between the Company and the
original Holder of this Warrant, as amended from time to time in accordance
with its terms.
"Subscription Agreement" means the Subscription Agreement, dated as of
January 28, 1999, by and between the Company and the original Holder of
this Warrant, as amended from time to time in accordance with its terms.
"Trading Day" means a day on which the principal securities market for
the Common Shares is open for general trading of securities.
<PAGE>
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1. Exercise of Warrant.
1.1 Exercise. This Warrant may be exercised by the Holder hereof in full or
in part at any time or from time to time during the exercise period specified in
the first paragraph hereof until the Expiration Date by surrender of this
Warrant and the subscription form annexed hereto (duly executed by the Holder),
to the Company's transfer agent and registrar for the Common Shares, and by
making payment, in cash or by certified or official bank check payable to the
order of the Company, in the amount obtained by multiplying (a) the number of
Common Shares designated by the Holder in the subscription form by (b) the
Purchase Price then in effect. On any partial exercise the Company will
forthwith issue and deliver to or upon the order of the Holder hereof a new
Warrant or Warrants of like tenor, in the name of the Holder hereof or as the
Holder (upon payment by the Holder of any applicable transfer taxes) may
request, providing in the aggregate on the face or faces thereof for the
purchase of the number of Common Shares for which such Warrant or Warrants may
still be exercised.
1.2. Net Issuance. Notwithstanding anything to the contrary contained in
Section 1.1, the Holder may elect to exercise this Warrant in whole or in part
by receiving Common Shares equal to the net issuance value (as determined below)
of this Warrant, or any part hereof, upon surrender of this Warrant to the
Company's transfer agent and registrar for the Common Shares at the principal
office of the Company together with the subscription form annexed hereto (duly
executed by the Holder), in which event the Company shall issue to the Holder a
number of Common Shares computed using the following formula:
X = Y(A-B)
A
Where: X = the number of Common Shares to be issued to the Holder
Y = the number of Common Shares as to which this Warrant is to be
exercised
A = the current fair market value of one Common Share calculated
as of the last trading day immediately preceding the exercise
of this Warrant
B = the Purchase Price
<PAGE>
-4-
As used herein, current fair market value of Common Shares as of a
specified date shall mean with respect to each Common Share the closing bid
price of the Common Shares on the principal securities market on which the
Common Shares may at the time be listed or, if on such day the Common Shares are
not so listed, the representative bid prices quoted in the Nasdaq System as of
4:00 p.m., New York City time, or, if on such day the Common Shares are not
quoted in the Nasdaq System, the average of the highest bid and lowest asked
price on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of five consecutive Trading Days
consisting of the day as of which the current fair market value of a Common
Share is being determined (or if such day is not a Trading Day, the Trading Day
next preceding such day) and the four consecutive Trading Days prior to such
day. If on the date for which current fair market value is to be determined the
Common Shares are not listed on any securities exchange or quoted in the Nasdaq
System or the over-the-counter market, the current fair market value of Common
Shares shall be the highest price per share which the Company could then obtain
from a willing buyer (not a current employee or director) for Common Shares sold
by the Company, from authorized but unissued shares, as determined in good faith
by the Board of Directors of the Company, unless prior to such date the Company
has become subject to a merger, acquisition or other consolidation pursuant to
which the Company is not the surviving party, in which case the current fair
market value of the Common Shares shall be deemed to be the value received by
the holders of the Company's Common Shares for each share thereof pursuant to
the Company's acquisition.
2. Delivery of Stock Certificates, etc., on Exercise. As soon as
practicable after the exercise of this Warrant, and in any event within three
Trading Days thereafter, the Company at its expense (including the payment by it
of any applicable issue or stamp taxes) will cause to be issued in the name of
and delivered to the Holder hereof, or as the Holder (upon payment by the Holder
of any applicable transfer taxes) may direct, the number of fully paid and
nonassessable Common Shares (or Other Securities) to which the Holder shall be
entitled on such exercise, in such denominations as may be requested by the
Holder and a certificate or certificates therefor, plus, in lieu of any
fractional share to which the Holder would otherwise be entitled, cash equal to
such fraction multiplied by the then current fair market value (as determined in
accordance with subsection 1.2) of one full share, together with any other stock
or other securities any property
<PAGE>
-5-
(including cash, where applicable) to which the Holder is entitled upon such
exercise pursuant to Section 1 or otherwise. Upon exercise of this Warrant as
provided herein, the Company's obligation to issue and deliver the certificates
for Common Shares shall be absolute and unconditional, irrespective of the
absence of any action by the Holder to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment against any
person or any action to enforce the same, any failure or delay in the
enforcement of any other obligation of the Company to the Holder, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other person of any obligation to the Company, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with such exercise. If the
Company fails to issue and deliver the certificates for the Common Shares to the
Holder pursuant to the first sentence of this paragraph as and when required to
do so, in addition to any other liabilities the Company may have hereunder and
under applicable law, the Company shall pay or reimburse the Holder on demand
for all reasonable out-of-pocket expenses including, without limitation, fees
and expenses of legal counsel incurred by the Holder as a result of such
failure.
3. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time, all the holders
of Common Shares (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of shareholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional shares or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings
or earned surplus of the Company), or
(c) other or additional shares or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional Common Shares (or Other Securities) issued as a stock
dividend or in a stock-split (adjustments in respect of which are provided for
in Section 5), then and in each such case the Holder, on the exercise hereof as
provided
<PAGE>
-6-
in Section 1, shall be entitled to receive the amount of shares and other
securities and property (including cash in the cases referred to in subdivisions
(b) and (c) of this Section 3) which the Holder would hold on the date of such
exercise if on the date thereof the Holder had been the holder of record of the
number of Common Shares called for on the face of this Warrant and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and all such other or additional shares and
other securities and property (including cash in the case referred to in
subdivisions (b) and (c) of this Section 3) receivable by the Holder as
aforesaid during such period, giving effect to all adjustments called for during
such period by Section 4.
4. Exercise upon Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate or amalgamate with or merge into any other person, or (c) transfer
all or substantially all of its properties or assets to any other person under
any plan or arrangement contemplating the dissolution of the Company, then, in
each such case, as a condition of such reorganization, consolidation,
amalgamation, merger, sale or conveyance, the Company shall give at least 20
days notice to the Holder of such pending transaction whereby the Holder shall
have the right to exercise this Warrant prior to any such reorganization,
consolidation, amalgamation, merger, sale or conveyance. Any exercise of this
Warrant pursuant to notice under this Section shall be conditioned upon the
closing of such reorganization, consolidation, amalgamation, merger, sale or
conveyance which is the subject of the notice and the exercise of this Warrant
shall not be deemed to have occurred until immediately prior to the closing of
such transaction.
5. Adjustment for Extraordinary Events. In the event that the Company shall
(i) issue additional Common Shares as a dividend or other distribution on
outstanding Common Shares, (ii) subdivide or reclassify its outstanding Common
Shares, or (iii) combine its outstanding Common Shares into a smaller number of
Common Shares, then, in each such event, the Purchase Price shall,
simultaneously with the happening of such event, be adjusted by multiplying the
Purchase Price in effect immediately prior to such event by a fraction, the
numerator of which shall be the number of Common Shares outstanding immediately
prior to such event and the denominator of which shall be the number of Common
Shares outstanding immediately after such event, and the product so obtained
shall thereafter be the Purchase Price then in effect. The Purchase Price, as so
ad-
<PAGE>
-7-
justed, shall be readjusted in the same manner upon the happening of any
successive event or events described in this Section 5. The Holder shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive that number of Common Shares determined by multiplying the number of
Common Shares which would be issuable on such exercise immediately prior to such
issuance by a fraction of which (i) the numerator is the Purchase Price in
effect immediately prior to such issuance and (ii) the denominator is the
Purchase Price in effect on the date of such exercise.
6. Further Assurances. The Company will take all action that may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares, free from all taxes, liens and charges with
respect to the issue thereof, on the exercise of all or any portion of this
Warrant from time to time outstanding.
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend on, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all
or substantially all of the assets of the Company to or consolidation,
amalgamation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, amalgamation,
merger, dissolution, liquidation or winding-up is to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Shares (or
<PAGE>
-8-
Other Securities) shall be entitled to exchange their Common Shares (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, amalgamation,
merger, dissolution, liquidation or winding-up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall also state that the action in
question or the record date is subject to the effectiveness of a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or a favorable vote of shareholders if either is required. Such notice shall be
mailed at least ten days prior to the date specified in such notice on which any
such action is to be taken or the record date, whichever is earlier.
8. Reservation of Shares, etc., Issuable on Exercise of Warrants. The
Company will at all times reserve and keep available out of its authorized but
unissued share capital, solely for issuance and delivery on the exercise of this
Warrant, a sufficient number of Common Shares (or Other Securities) to effect
the full exercise of this Warrant and the exercise, conversion or exchange of
any other warrant or security of the Company exercisable for, convertible into,
exchangeable for or otherwise entitling the holder to acquire Common Shares (or
Other Securities), and if at any time the number of authorized but unissued
Common Shares (or Other Securities) shall not be sufficient to effect such
exercise, conversion or exchange, the Company shall take such action as may be
necessary to increase its authorized but unissued Common Shares (or Other
Securities) to such number as shall be sufficient for such purposes.
9. Transfer of Warrant. This Warrant may be transferred, in whole or in
part, only to Permitted Transferees. This Warrant shall inure to the benefit of
the successors to and permitted assigns of the Holder. This Warrant and all
rights hereunder, in whole or in part, are registrable at the office or agency
of the Company referred to below by the Holder hereof in person or by his duly
authorized attorney, upon surrender of this Warrant properly endorsed.
10. Register of Warrants. The Company shall maintain, at the principal
office of the Company (or such other office as it may designate by notice to the
Holder hereof), a register in which the Company shall record the name and
address
<PAGE>
-9-
of the person in whose name this Warrant has been issued, as well as the name
and address of each successor and prior owner of such Warrant. The Company shall
be entitled to treat the person in whose name this Warrant is so registered as
the sole and absolute owner of this Warrant for all purposes.
11. Exchange of Warrant. This Warrant is exchangeable, upon the surrender
hereof by the Holder hereof at the office or agency of the Company referred to
in Section 10, for one or more new Warrants of like tenor representing in the
aggregate the right to subscribe for and purchase the number of Common Shares
which may be subscribed for and purchased hereunder, each of such new Warrants
to represent the right to subscribe for and purchase such number of shares as
shall be designated by said Holder hereof at the time of such surrender;
provided, however, that the Holder must surrender for exchange Warrants to
purchase no less than 10,000 shares at any one time.
12. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
13. Warrant Agent. On or prior to the issuance of this Warrant, the Company
will instruct ChaseMellon Shareholder Services, L.L.C., as Transfer Agent and
Registrar (the "Transfer Agent"), to act as the exercise agent for purposes of
issuing Common Shares (or Other Securities) on the exercise of this Warrant
pursuant to Section 1, exchanging this Warrant pursuant to Section 11 and
replacing this Warrant pursuant to Section 12, or any of the foregoing, and
thereafter any such exchange or replacement, as the case may be, shall be made
at such office by such agent.
14. Remedies. The Company stipulates that the remedies at law of the Holder
in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
<PAGE>
-10-
15. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the Holder hereof to purchase Common Stock, and no mere enumeration
herein of the rights or privileges of the Holder hereof, shall give rise to any
liability of the Holder for the Purchase Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
16. Notices, etc. All notices and other communications from the Company to
the registered Holder shall be mailed by first class certified mail, postage
prepaid, at such address as may have been furnished to the Company in writing by
the Holder or at the address shown for the Holder on the register of Warrants
referred to in Section 10.
17. Transfer Restrictions. This Warrant may only be transferred as provided
in Section 9. In addition, by acceptance of this Warrant, the Holder represents
to the Company that this Warrant is being acquired for the Holder's own account
and for the purpose of investment and not with a view to, or for sale in
connection with, the distribution thereof, nor with any present intention of
distributing or selling this Warrant or the Common Shares issuable upon exercise
of the Warrant. The Holder acknowledges and agrees that this Warrant and, except
as otherwise provided in the Registration Rights Agreement, the Common Shares
issuable upon exercise of this Warrant (if any) have not been (and at the time
of acquisition by the Holder, will not have been or will not be), registered
under the Securities Act or under the securities laws of any state, in reliance
upon certain exemptive provisions of such statutes. The Holder further
recognizes and acknowledges that because this Warrant and, except as provided in
the Registration Rights Agreement, the Common Shares issuable upon exercise of
this Warrant (if any) are unregistered, they may not be eligible for resale, and
may only be resold in the future pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws, or pursuant
to a valid exemption from such registration requirements. Unless the Common
Shares issuable upon exercise of this Warrant have theretofore been registered
for resale under the Securities Act, the Company may require, as a condition to
the issuance of Common Shares upon the exercise of this Warrant (i) in the case
of an exercise in accordance with Section 1.1 hereof, a confirmation as of the
date of exercise of the Holder's representations pursuant to this Section 17, or
(ii) in the case of an
<PAGE>
-11-
exercise in accordance with Section 1.2 hereof, an opinion of counsel reasonably
satisfactory to the Company that the Common Shares to be issued upon such
exercise may be issued without registration under the Securities Act.
18. Legend. Unless theretofore registered for resale under the Securities
Act, each certificate for shares issued upon exercise of this Warrant shall bear
the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be resold, transferred or assigned
in the absence of an effective registration statement for the
securities under the Securities Act of 1933, as amended, or an opinion
of counsel that registration is not required under said Act.
19. Miscellaneous. This Warrant and any terms hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
<PAGE>
-12-
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed on
its behalf by one of its officers thereunto duly authorized.
Dated: January , 1999
XOMA LTD.
By: __________________________________
Title: ________________________________
<PAGE>
FORM OF SUBSCRIPTION
XOMA LTD.
(to be signed only on exercise of warrant)
TO: ChaseMellon Shareholder Services, L.L.C.,
as Exercise Agent
235 Montgomery Street, 23rd Floor
San Francisco, California 94104
1. The undersigned Holder of the attached original, executed Warrant hereby
elects to exercise its purchase right under such Warrant with respect to
______________ Common Shares, as defined in the Warrant, of XOMA Ltd., a Bermuda
company (the "Company").
2. The undersigned Holder (check one):
/ /
(a) elects to pay the aggregate purchase price for such Common Shares
(the "Exercise Shares") (i) by lawful money of the United States or the
enclosed certified or official bank check payable in United States dollars
to the order of the Company in the amount of $___________, or (ii) by wire
transfer of United States funds to the account of the Company in the amount
of $____________, which transfer has been made before or simultaneously
with the delivery of this Form of Subscription pursuant to the instructions
of the Company;
or
/ /
(b) elects to receive Common Shares having a value equal to the value
of the Warrant calculated in accordance with Section 1.2 of the Warrant.
S-1
<PAGE>
3. Please issue a share certificate or certificates representing the
appropriate number of Common Shares in the name of the undersigned or in such
other names as is specified below:
Name: __________________________________
Address: _______________________________
Dated: ____________, ____
---------------------------------
(Signature must conform to name
of Holder as specified on the face
of the Warrant)
Name: __________________________
Address: ______________________
----------------------
S-2
