[GRAPHIC OMITTED]
August 12, 2002
Xx. Xxxxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Via FEDEX
Dear Xxx:
On July 31, 2002, you were granted an option to purchase 15,000 XOMA Ltd.
Common Shares. Enclosed are two original copies of a Share Option Agreement (the
"Agreement") with a copy of a sample exercise form. A copy of the Form 3 Initial
Statement of Beneficial Ownership that has been filed with the SEC to report the
grant has been sent to you under separate cover.
Please review the enclosed documents and let us know if you have any
questions. If not, please sign and date both copies of the Agreement, have them
signed and dated by your spouse, retain one for yourself and return the other to
me at your early convenience.
When you decide to exercise your option, please complete an exercise form
and transmit it to me for review prior to initiating the exercise. The completed
exercise form also may be sent to me along with payment for the full purchase
price of the shares being purchased.
If you have questions on this letter, the option, any of the enclosed
documents or the exercise process in general, please let me know.
With best wishes,
Xxxxxxxxxxx X. Xxxxxxxx
Vice President, General Counsel
and Secretary
CJM/jh
Enclosures:
Share Option Agreement (2)
Exercise Form
cc: X. Xxxxxxxx
X. Xxxxx
XOMA Ltd.
Share Option Agreement
(A) Optionee:
Xxxxxxx X. Xxxxxx
(B) Grant Date: (E) Expiration Date:
July 31, 2002 July 31, 2012
(C) Shares: (F) Exercise Price:
15,000 shares $4.699 per share
(D) Share Installments: (G) Option Type:
Option is fully exercisable Non-Qualified Share Option
Subject to the terms and conditions set forth in this agreement (the
"Agreement"), XOMA Ltd. (the "Company") has granted you, as of the Grant Date
shown in item (B) above, a nonqualified share option (not entitled to special
tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code")) to purchase the number of Common Shares of the Company shown in
item (C) above (the "Optioned Shares") at the Exercise Price shown in item (F)
above.
The details of your option are as follows:
1. Term. This option has a maximum term of ten years measured from the
Grant Date and will, unless sooner terminated in accordance with Section 4 or
Subsection 6(a) hereof, expire on the Expiration Date shown in item (E) above.
Upon the Expiration Date or upon the sooner termination of this option under
Section 4 or Subsection 6(a), this option will cease to be exercisable and have
no further force or effect whatsoever.
2. Transferability. This option is transferable and assignable by you to
your spouse or descendent (any such spouse or descendent, an "Immediate Family
Member") or a corporation, partnership, limited liability company or trust so
long as all of the shareholders, partners, members or beneficiaries thereof, as
the case may be, are either you or an Immediate Family Member, provided that
there may be no consideration for any such transfer, and, following transfer,
(i) subsequent transfers of this option will be prohibited other than by will or
the laws of descent and distribution, and (ii) this option will continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of this Agreement any references to "you"
will refer to the transferee.
3. Exercise Schedule. The option granted herein is exercisable with respect
to 100% of the Optioned Shares beginning on the Grant Date and may be exercised
in whole or in part, and to the extent not exercised, will be exercisable at any
time on or before the Expiration Date or sooner termination of the option term.
4. Accelerated Termination of Option Term. The option term specified in
Section 1 will terminate (and this option will cease to be exercisable) prior to
the Expiration Date should one of the following provisions become applicable:
(a) Except as otherwise provided in Subsections (b), (c) and (d)
below, if you cease to be a member of the Board of Directors of the Company
who is not a full or part-time employee of the Company or of any subsidiary
or affiliate of the Company (a "Director") at any time during the option
term, then you will have up to three months commencing with the date of
such cessation of Director status in which to exercise this option, but in
no event will this option be exercisable at any time after the Expiration
Date. Upon the expiration of such limited period of exercisability or (if
earlier) upon the Expiration Date, this option will terminate and cease to
be outstanding.
(b) If you die while this option is outstanding, then the personal
representative of your estate or the person or persons to whom the option
is transferred pursuant to your will or in accordance with the laws of
descent and distribution will have the right to exercise this option. Such
right will lapse and this option will cease to be exercisable upon the
earlier of (i) the expiration of the one-year period measured from the date
of your death or (ii) the Expiration Date.
(c) If you become permanently disabled and cease by reason thereof to
be a Director at any time during the option term, then you will have a
period of twelve months (commencing with the date of such cessation of
Director status) during which to exercise this option; provided, however,
that in no event will this option be exercisable at any time after the
Expiration Date. Upon the expiration of such limited period of
exercisability or (if earlier) upon the Expiration Date, this option will
terminate and cease to be outstanding. You will be deemed to be permanently
disabled if you are, by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous
duration of not less than twelve consecutive months or more, unable to
perform your usual duties as a Director of the Company.
(d) If your status as a Director is terminated on account of any act
of (i) fraud or intentional misrepresentation or (ii) embezzlement,
misappropriation or conversion of assets or opportunities of the Company,
or any unauthorized disclosure of confidential information or trade secrets
of the Company, this option will terminate and cease to be exercisable
immediately upon the date of such termination of Director status.
5. Adjustment Upon Changes in Capitalization.
(a) if the number of shares of the Company as a whole is increased,
decreased or changed into, or exchanged for, a different number or kind of
shares or securities of the Company, whether through reclassification, share
dividend, share split, combination of shares, exchange of shares, change in
corporate structure or the like, an appropriate and proportionate adjustment
will be made in the number, kind, and per share exercise price of shares subject
to un-exercised options or portions thereof granted prior to any such change.
Any such adjustment in an outstanding portion, however, will be made without a
change in the total price applicable to
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the unexercised portion of the option, but with a corresponding adjustment in
the price of each share covered by the option.
(b) If the Company is the surviving or continuing entity in any merger,
amalgamation or other business combination, then this option will be
appropriately adjusted to apply and pertain to the number and class of
securities which the holder of the number of Common Shares of the Company
subject to this option immediately prior to such merger, amalgamation or other
business combination would have been entitled to receive in the consummation of
such merger, amalgamation or other business combination, and an appropriate
adjustment will be made to the Exercise Price payable per share, provided the
aggregate Exercise Price will remain the same.
6. Corporate Transaction.
(a) In the event of one or more of the following transactions ("Corporate
Transaction"):
(i) a merger, amalgamation or acquisition in which the Company is not
the surviving or continuing entity, except for a transaction the principal
purpose of which is to change the jurisdiction of the Company's
incorporation,
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company, or
(iii) any other business combination in which fifty percent (50%) or
more of the Company's outstanding voting shares is transferred to different
holders in a single transaction or a series of related transactions,
then the exercisability of this option will automatically be accelerated so that
such option may be exercised simultaneously with the consummation of such
Corporate Transaction for any or all of the Common Shares of the Company subject
to this option. No such acceleration of exercise dates will occur, however, if
and to the extent the terms of any agreement relating to such Corporate
Transaction provide as a prerequisite to the consummation of such Corporate
Transaction that outstanding options to purchase the Company's Common Shares
(including this option) are to be assumed by the successor corporation or parent
thereof or are to be replaced with options to purchase shares of capital stock
of the successor corporation or parent thereof. In any such case, an appropriate
adjustment as to the number and kind of shares and the per share exercise prices
will be made. No fractional shares will be issued on account of any adjustment
specified above. Immediately following the consummation of the Corporate
Transaction, this option will, to the extent not previously exercised or assumed
by the successor corporation or its parent company, terminate and cease to be
exercisable.
(b) This Agreement will not in any way affect the right of the Company to
adjust, reclassify, reorganize or otherwise make changes in its capital or
business structure or to merge, amalgamate, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
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7. Privilege of Share Ownership. You will not have any rights of a
shareholder of the Company with respect to the Optioned Shares until you have
exercised the option, paid the Exercise Price and been issued the purchased
shares.
8. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any part of the
Optioned Shares for which this option is at the time exercisable, you (or in the
case of exercise after your death, your executor, administrator, heir or
legatee, as the case may be) must take the following actions:
(i) Provide the Secretary of the Company with written notice of such
exercise, specifying the number of Optioned Shares with respect to which
the option is being exercised.
(ii) Pay the Exercise Price in full, in cash or by check payable to
the Company's order, for the Optioned Shares being purchased.
(iii) Furnish to the Company appropriate documentation that the person
or persons exercising the option, if other than you, have the right to
exercise this option.
(b) In no event may this option be exercised for any fractional shares.
9. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of Optioned Shares upon
such exercise will be subject to compliance by the Company and by you with all
applicable requirements of law relating thereto and with all applicable
regulations of any stock exchange on which Common Shares of the Company may be
listed at the time of such exercise and issuance.
(b) In connection with the exercise of this option, you will execute and
deliver to the Company such representations in writing as may be requested by
the Company in order for it to comply with the applicable requirements of
Federal and State securities law.
10. Restrictive Legends. If and to the extent any Optioned Shares acquired
under this option are not registered under the Securities Act of 1933, the share
certificates for such Optioned Shares will be endorsed with restrictive legends,
including (without limitation) the following:
"The Shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares have been acquired for
investment and may not be sold or offered for sale in the absence of (a) an
effective registration statement for the shares under such Act, (b) a `no
action' letter of the Securities and Exchange Commission with respect to
such sale or offer, or (c) an opinion of counsel to the Company that
registration under such Act is not required with respect to such sale or
offer."
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11. Successors and Assigns. Except to the extent otherwise provided in
Section 2 and Subsection 6(a), the provisions of this Agreement will inure to
the benefit of, and be binding upon, your successors, administrators, heirs,
legal representatives and assigns and the successors and assigns of the Company.
12. Liability of the Company. The inability of the Company to obtain
approval from any regulatory body having authority deemed by the Company to be
necessary to the lawful issuance and sale of any Common Shares pursuant to this
option will relieve the Company of any liability in respect of the non-issuance
or sale of such shares as to which such approval will not have been obtained.
13. No Right to Nomination. Neither this Agreement nor any action taken
hereunder will be construed as giving you any right to be nominated for
re-election to the Board of Directors of the Company.
14. Notices. Any notice required to be given or delivered to the Company
under the terms of this Agreement will be in writing and addressed to the
Company in care of its Secretary at its corporate offices. Any notice required
to be given or delivered to you will be in writing and addressed to you at the
address indicated below your signature line herein. All notices will be deemed
to be given or delivered upon personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified.
15. Governing Law. The interpretation, performance, and enforcement of this
Agreement will be governed by the laws of the State of California.
XOMA LTD.
By: /s/Xxxx X. Xxxxxxxx
------------------------------------
Xxxx X. Xxxxxxxx
Chairman of the Board,
President and
Chief Executive Officer
Dated: August 12, 2002
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I hereby agree to be bound by the terms and conditions of this Agreement.
By: /s/Xxxxxxx X. Xxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Dated: 8/23/02
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If the optionee resides in California or another community property
jurisdiction, I, as the optionee's spouse, also agree to be bound by the terms
and conditions of this Agreement.
By: /s/Xxxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Dated: 8/23/02
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