Item 1.01 Entry into a Material Definitive Agreement
On November 19, 2019, XOMA Corporation (XOMA or the Company) entered into an Investment Agreement with certain
affiliates of BVF Partners L.P. (BVF), an existing stockholder of the Company, or its assignee/transferee (the Investment Agreement). Pursuant to the Investment Agreement, BVF agreed to purchase shares of the Companys
Common Stock or Series Z Preferred Stock having an aggregate value equal to the value of all shares (if any) offered but not purchased pursuant to the exercise of rights in the Companys rights offering, including any exercise of rights by BVF
(the Rights Offering), up to $22,000,000 (the Backstop Commitment). The Investment Agreement contains customary representations, warranties and covenants by the parties.
Each share of Series Z Preferred Stock will be convertible into 1,000 shares of registered common stock. Each share will be convertible at the
option of the holder at any time, provided that the holder will be prohibited from converting into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares above a
conversion blocker, which is initially set at 19.99% of the total common stock then issued and outstanding immediately following the conversion of such shares. In the event of the Companys liquidation, dissolution or winding up, holders of
Series Z Preferred Stock will participate pari passu with any distribution of proceeds to holders of common stock. Holders of Series Z Preferred Stock are entitled to receive dividends on shares of Series Z Preferred Stock equal (on an as if
converted to common stock basis) to and in the same form as dividends actually paid on the Companys common stock or other junior securities. Shares of Series Z Preferred Stock will generally have no voting rights, except as required by law and
except that the consent of the holders of the outstanding Series Z Preferred Stock will be required to amend the terms of the Series Z Preferred Stock.
As of September 30, 2019, BVF owned approximately 20.53% of the Companys total outstanding shares of common stock, and if all of the
Series X and Series Y convertible preferred shares were converted, BVF would own 53.66% of the Companys total outstanding shares of common stock. As of September 30, 2019, none of the preferred stock has been converted into shares of the
Companys common stock. One of the Companys directors, Matthew Perry, is President of BVF. Mr. Perry recused himself from the deliberations of the Board regarding its approval of the Investment Agreement and the purchase of the
Backstop Commitment. In addition, the Audit Committee of the Board has approved the Investment Agreement and the Backstop Commitment. The Company will not pay a fee to BVF in connection with the Backstop Commitment. The Company has agreed to
reimburse up to $50,000 of BVFs expenses in connection with the Investment Agreement and the Rights Offering.
The above description
of the Investment Agreement does not purport to be complete and is qualified in its entirety by reference to the Investment Agreement filed as Exhibit 10.1 to this Current Report
on Form 8-K which is incorporated herein by reference. A summary of the rights, preferences and privileges of the Series Z Preferred Stock described above does not purport to be complete
and is qualified in its entirety by reference to a Form of the Certificate of Designation of Preferences, Rights and Limitations of Series Z Convertible Preferred Stock, which is included as Exhibit A to the Investment Agreement.