UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant toss. 240.14a-12
XOMA Ltd.
(Name of Registrant as Specified In Its Charter)
-------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set for the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule of Registration Statement No.:
3) Filing Party:
4) Date Filed:
(XOMA LOGO)
XOMA LTD.
2910 Seventh Street
Berkeley, California 94710
(510) 644-1170
April 24, 2000
To Our Shareholders:
You are cordially invited to attend the annual general meeting of
shareholders of XOMA Ltd. on May 31, 2000 at 9:00 a.m. local time, which will be
held at The Claremont Hotel, Ashby and Domingo Avenues, Berkeley, California.
Details of business to be conducted at the annual meeting are provided in
the enclosed Notice of Annual General Meeting of Shareholders and Proxy
Statement. Also enclosed for your information is a copy of our Annual Report to
Shareholders for 1999. Some of our shareholders will be accessing these
materials and voting through the Internet and may not be receiving a paper proxy
card by mail.
We hope that you will attend the annual meeting. In any event, please
promptly sign, date and return the enclosed proxy in the accompanying reply
envelope or vote by telephone or through the Internet.
Sincerely yours,
------------------------------------
John L. Castello
Chairman of the Board,
President and Chief Executive
Officer
Enclosures
XOMA LTD.
---------------
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD AT 9:00 A.M. ON MAY 31, 2000
---------------
To the Shareholders of XOMA Ltd.:
Notice is hereby given that the annual general meeting of shareholders of
XOMA Ltd. (the "Company") will be held at The Claremont Hotel, Ashby and Domingo
Avenues, Berkeley, California, on May 31, 2000, at 9:00 a.m. local time, for the
following purposes:
1. To elect directors;
2. To ratify the appointment by the Company's Board of Directors of Ernst
& Young LLP to act as the Company's independent auditors for the 2000
fiscal year and authorize the Board to agree to such auditors' fee;
3. To receive the Company's audited financial statements for the 1999
fiscal year;
4. To approve changes to the manner in which the Company conducts itself
in order to make such conduct more consistent with its conduct when
the Company was a U.S. corporation by:
a. amending the Company's Bye-laws with respect to (i) when during a
shareholders meeting a quorum is to be established, (ii) the
manner of tabulating votes on matters requiring approval of a
simple majority, (iii) the Company's ability to postpone or
cancel general meetings of shareholders and (iv) the Board's
ability to set a maximum on its own size and fill seats up to
that maximum;
b. authorizing the Board to fill unfilled seats from time to time;
and
c. reducing the Company's share premium account under Bermuda law;
and
5. To consider and transact such other business as may properly come
before the meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 3, 2000, as
the record date for the determination of shareholders entitled to notice of, and
to vote at, this meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
Christopher J. Margolin
Secretary
April 24, 2000
Berkeley, California
YOUR VOTE IS IMPORTANT
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You are cordially invited to attend the meeting in person.
Whether or not you plan to attend the meeting, please promptly mark, sign and
date the enclosed proxy and mail it in the accompanying postage pre-paid
envelope or vote by telephone or through the Internet.
- --------------------------------------------------------------------------------
XOMA LTD.
------------
PROXY STATEMENT
------------
TO THE SHAREHOLDERS:
The enclosed proxy is solicited on behalf of the Board of Directors of XOMA
Ltd., a company organized under the laws of Bermuda ("XOMA" or the "Company"),
for use at the annual general meeting of shareholders to be held at The
Claremont Hotel, Ashby and Domingo Avenues, Berkeley, California, on May 31,
2000, at 9:00 a.m. local time, or any adjournment or postponement thereof, at
which shareholders of record on April 3, 2000 will be entitled to vote. On April
3, 2000, the Company had issued and outstanding 65,168,096 common shares, par
value US$.0005 per share ("Common Shares"). Holders of Common Shares are
entitled to one vote for each share held.
All registered shareholders can vote by paper proxy or by telephone by
following the instructions included with their proxy card. Shareholders whose
Common Shares are registered in the name of a bank or brokerage firm should
follow the instructions provided by their bank or brokerage firm on voting their
shares. Shareholders whose Common Shares are registered in the name of a bank or
brokerage firm participating in the ADP Investor Communication Services online
program may vote electronically through the Internet. Instruction forms will be
provided to shareholders whose bank or brokerage firm is participating in ADP's
program. Signing and returning the proxy card or submitting the proxy by
telephone or through the Internet does not affect the right to vote in person at
the annual meeting.
In the case of registered shareholders, a proxy may be revoked at any time
prior to its exercise by (a) giving written notice of such revocation to the
Secretary of the Company at the Company's principal office, 2910 Seventh Street,
Berkeley, California 94710, (b) appearing and voting in person at the annual
meeting, (c) properly completing and executing a later-dated proxy and
delivering it to the Company at or before the annual meeting or (d)
retransmitting a subsequent proxy by telephone before the annual meeting.
Presence without voting at the annual meeting will not automatically revoke a
proxy, and any revocation during the meeting will not affect votes previously
taken. Shareholders whose Common Shares are registered in the name of a bank or
brokerage firm should follow the instructions provided by their bank or
brokerage firm on revoking their previously voted shares. Abstentions and broker
non-votes are
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each included in the number of shares present and voting for purposes of
establishing a quorum and are both counted for purposes of determining whether a
proposal presented to shareholders has been approved.
The Company will bear the entire cost of solicitation, including
preparation, assembly, printing, and mailing of this proxy statement, the proxy
card, and any additional material furnished to shareholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding in their names shares that are beneficially owned by others
to forward to such beneficial owners. The solicitation of proxies may be
supplemented by one or more of telephone, telegram, or personal solicitation by
directors, officers, or employees of the Company for no additional compensation.
Except as described above, the Company does not intend to solicit proxies other
than by mail and through the Internet. Shareholders voting through the Internet
should understand that there may be costs associated with electronic access,
such as usage charges from Internet access providers and telephone companies,
that must be borne by the shareholder.
The Company intends to mail this proxy statement and make it available on
the Internet on or about April 24, 2000.
SHARE OWNERSHIP
The following table sets forth as of April 3, 2000, certain information
regarding all shareholders known by the Company to be the beneficial owners of
more than 5% of the Company's outstanding Common Shares and regarding each
director, each executive officer and all directors and current executive
officers as a group, together with the approximate percentages of outstanding
Common Shares owned by each of them. Unless otherwise indicated, each of the
shareholders has sole voting and investment power with respect to the shares
beneficially owned, subject to community property laws where applicable.
Number of Percentage of
Common Shares Common Shares
Name of Beneficial Owner Beneficially Owned Beneficially Owned
------------------------ ------------------ ------------------
James G. Andress(1)................................... 26,000 *
William K. Bowes, Jr.(2).............................. 60,069 *
John L. Castello(3)................................... 797,000 1.2
Peter B. Davis(4)..................................... 183,357 *
Clarence L. Dellio(5)................................. 206,143 *
Arthur Kornberg, M.D.(6).............................. 40,000 *
Christopher J. Margolin(7)............................ 174,680 *
Steven C. Mendell(8).................................. 61,000 *
Patrick J. Scannon, M.D., Ph.D.(9).................... 521,139 *
W. Denman Van Ness(10)................................ 62,931 *
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All executive officers
and directors as a
group (10 persons)(11).............................. 2,132,319 3.3
- ---------------------
* Indicates less than 1%.
(1) Represents 26,000 shares issuable upon the exercise of options exercisable
as of 60 days after the record date.
(2) Includes 30,000 shares issuable upon the exercise of options exercisable as
of 60 days after the record date.
(3) Includes 719,000 shares issuable upon the exercise of options exercisable
as of 60 days after the record date. Does not include 8,707 shares which
have vested pursuant to the Company's Deferred Savings Plan.
(4) Includes 156,498 shares issuable upon the exercise of options exercisable
as of 60 days after the record date. Does not include 6,676 shares which
have vested pursuant to the Company's Deferred Savings Plan.
(5) Includes 127,302 shares issuable upon the exercise of options exercisable
as of 60 days after the record date. Does not include 9,338 shares which
have vested pursuant to the Company's Deferred Savings Plan.
(6) Includes 30,000 shares issuable upon the exercise of options exercisable as
of 60 days after the record date.
(7) Includes 158,165 shares issuable upon the exercise of options exercisable
as of 60 days after the record date. Does not include 8,874 shares which
have vested pursuant to the Company's Deferred Savings Plan.
(8) Includes 19,000 shares issuable upon the exercise of options exercisable as
of 60 days after the record date. Does not include 631 shares which have
vested pursuant to the Company's Deferred Savings Plan and are now held in
a rollover IRA account.
(9) Includes 432,000 shares issuable upon the exercise of options exercisable
as of 60 days after the record date. Does not include 9,338 shares which
have vested pursuant to the Company's Deferred Savings Plan.
(10) Includes 32,481 shares held by The Van Ness 1983 Revocable Trust, of which
Mr. Van Ness is a trustee. Also includes 450 shares held by various trusts
of which Mr. Van Ness may be deemed the beneficial owner. Mr. Van Ness
disclaims such
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beneficial ownership. Includes 30,000 shares issuable upon the exercise of
options exercisable as of 60 days after the record date.
(11) Includes 1,727,965 shares issuable upon exercise of options exercisable as
of 60 days after the record date. Does not include 43,564 shares which have
vested pursuant to the Company's Deferred Savings Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the named executive
officers for the last three completed fiscal years of the Company:
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SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Securities
Other Annual Underlying All Other
Name and Principal Salary Bonus Compensation Options Compensation
Position Year ($) ($)(1) ($)(2) (#) ($)(3)
- ---------------------------------- ---------- --------------- ----------- ------------ ------------ ------------
John L. Castello 1999 $500,000 N/A $5,944 50,000 $29,039
(Chairman of the 1998 $500,000 N/A $18,537 50,000 $30,722
Board, President and 1997 $500,000 N/A $878 60,000 $30,472
Chief Executive Officer)
Patrick J. Scannon, M.D., Ph.D. 1999 $320,000 $62,926 $0 30,000 $15,018
(Chief Scientific and 1998 $310,000 $62,199 $13,173 25,000 $17,158
Medical Officer) 1997 $310,000 $46,714 $1,000 30,000 $17,421
Clarence L. Dellio 1999 $253,000 $49,598 $9,731 35,000 $6,687
(Senior Vice President, 1998 $243,000 $49,972 $9,346 25,000 $7,281
Operations) 1997 $233,000 $38,133 $0 30,000 $7,056
Peter B. Davis 1999 $230,000 $40,950 $0 45,000 $6,491
(Vice President, 1998 $220,000 $42,596 $0 25,000 $7,016
Finance and Chief 1997 $210,000 $37,364 $0 30,000 $6,788
Financial Officer)
Christopher J. Margolin 1999 $230,000 $49,816 $8,846 45,000 $6,491
(Vice President, 1998 $220,000 $45,084 $8,462 25,000 $7,016
General Counsel and 1997 $210,000 $34,606 $8,077 30,000 $6,788
Secretary)
- ----------------------
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(1) Each amount in this column for 1999, 1998 and 1997 represents awards under
the Company's Management Incentive Compensation Plan in the following
amounts: Dr. Scannon - $16,246 and 2,849 Common Shares in 1999 (relating to
performance in 1998); $15,306 in each of 1999 and 1998 and 1,917 Common
Shares in 1998 (relating to performance in 1997); $15,128 in each of 1999,
1998 and 1997 and 1,537 Common Shares in 1997 (relating to performance in
1996); $16,459 in each of 1998 and 1997 (relating to performance in 1995);
Mr. Dellio - $13,444 and 2,357 Common Shares in 1999 (relating to
performance in 1998); $11,522 in each of 1999 and 1998 and 1,443 Common
Shares in 1998 (relating to performance in 1997); $11,189 in each of 1999,
1998 and 1997 and 943 Common Shares in 1997 (relating to performance in
1996); 1,500 Common Shares in each of 1998 and 1997 (relating to
performance in 1995); Mr. Davis - $11,849 and 1,873 Common Shares in 1999
(relating to performance in 1998); $10,763 in each of 1999 and 1998 and
1,216 Common Shares in 1998 (relating to performance in 1997); 959 Common
Shares each of 1999, 1998 and 1997 and $11,435 in 1997 (relating to
performance in 1996); 1,211 Common Shares in each of 1998 and 1997
(relating to performance in 1995); Mr. Margolin - $13,215 and 2,317 Common
Shares in 1999 (relating to performance in 1998); $11,288 in each of 1999
and 1998 and 1,366 Common Shares in 1998 (relating to performance in 1997);
$12,098 in each of 1999, 1998 and 1997 and 956 Common Shares in 1997
(relating to performance in 1996); $10,411 in each of 1998 and 1997
(relating to performance in 1995).
(2) Mr. Castello's amounts in this column for 1999, 1998 and 1997 include
financial services provided to Mr. Castello in the amount of $3,666, $5,588
and $567, respectively. The balance of Mr. Castello's and all of Mr.
Dellio's and Mr. Margolin's amounts in this column for 1999, the balance of
Mr. Castello's and all of Dr. Scannon's, Mr. Dellio's and Mr. Margolin's
amounts in this column for 1998 and Mr. Margolin's amount in this column
for 1997 represent cash payments in lieu of earned vacation.
(3) Each amount in this column for 1999, 1998 and 1997 includes 1,681, 1,584
and 881, respectively, shares of the Company's Common Shares contributed to
the accounts of Mr. Castello, Dr. Scannon, Mr. Dellio, Mr. Davis and Mr.
Margolin under the Company's Deferred Savings Plan, valued at fiscal
year-end formula prices of $2.975, $3.16 and $5.39, respectively, per
share. Amounts for 1999, 1998 and 1997 also include group term life
insurance premiums in the following amounts: Mr. Castello -- $6,039 for
1999 and $7,722 for each of 1998 and 1997; Dr. Scannon -- $2,343 for 1999,
$3,168 for 1998 and $3,203 for 1997; Mr. Dellio--$1,687 for 1999, $2,281
for 1998 and $2,306 for 1997; Mr. Davis--$1,491 for 1999, $2,016 for 1998
and $2,038 for 1997; and Mr. Margolin--$1,491 for 1999, $2,016 for 1998 and
$2,038 for 1997. Dr. Scannon's amounts for 1999, 1998 and 1997 include
$7,675, $8,990 and $9,468 respectively, which represent the difference
between (i) the
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amount of interest Dr. Scannon would have been required to pay in interest
for each such year had the loan made to him by the Company pursuant to his
employment agreement been made at the then-prevailing market rate and (ii)
the amount of interest payable on the loan for each such year in accordance
with its terms. See "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements."
The following table contains information concerning the grant of options
under the Company's option plans to the named executive officers as of the end
of the last completed fiscal year of the Company. No share appreciation rights
("SARs") were granted during the last fiscal year and none were held at the end
of the fiscal year.
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OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Potential Realized Value
Number of % of Total of Assumed Annual Rates
Securities Options of
Underlying Granted Exercise Share Price Appreciation
Options to Employees or For Option Term (1)
Granted In Fiscal Base Price Expiration 0% 5% 10%
Name (#) Year ($/Sh) Date ($) ($) ($)
- ---- ----------- ------------ ---------- ---------- ----- ----- -----
John L. Castello....... 50,000 8.3% $3.5625 2/24/09 0 $112,022 $238,885
Patrick J. Scannon, M.D.,
Ph.D................... 30,000 4.8% $3.5625 2/24/09 0 $ 67,213 $170,331
Clarence L. Dellio..... 35,000 5.0% $3.5625 2/24/09 0 $ 78,415 $198,720
Peter B. Davis......... 35,000 5.0% $3.5625 2/24/09 0 $ 78,415 $198,720
10,000 1.7% $7.50 7/13/09 0 $ 47,167 $119,531
Christopher J. Margolin 35,000 5.0% $3.5625 2/24/09 0 $ 78,415 $198,720
10,000 1.7% $7.50 7/13/09 0 $ 47,167 $119,531
- ---------------------
(1) The amounts set forth in the three columns represent hypothetical gains
that might be achieved by the optionees if the respective options are
exercised at the end of their ten-year option terms. These gains are based
on assumed rates of share price appreciation of 0%, 5% and 10% compounded
annually from the dates the respective options were granted. The 0%
appreciation column is included because the options were granted with
exercise prices equal to the market price of the underlying Common Shares
on the date of grant, and thus will have no value unless the Company's
share price increases above the exercise prices as a result of actions by
the executives that improve the Company's performance and/or other factors
affecting such price.
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The following table sets forth information with respect to the named
executive officers concerning the exercise of options during the last completed
fiscal year of the Company and unexercised options held as of the end of the
fiscal year. No SARs were exercised during the last fiscal year and none were
held at the end of the fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Shares
Acquired Number of Securities Value of Unexercised
On Value Underlying Unexercised In-the-Money Options at
Exercise Realized Options at FY-End (1) FY-End ($)(1)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
John L. Castello....... -- -- 697,332 112,668 $270,833 $1,042
Patrick J. Scannon M.D.,
Ph.D................... -- -- 418,687 66,333 $157,292 $ 521
Clarence L. Dellio..... -- -- 188,972 70,666 $ 58,696 $ 521
Peter B. Davis......... -- -- 143,167 76,833 $ 41,354 $ 521
Christopher J. Margolin -- -- 163,167 76,833 $ 50,104 $ 521
- -------------------------
(1) The amounts listed in the two columns are based on the closing price per
share of $3.00 on December 31, 1999, as reported on the Nasdaq National
Market, less the applicable option exercise prices.
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Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company has entered into an employment agreement with Mr. Castello,
dated as of April 29, 1992, that provides for his employment as President and
Chief Executive Officer at a salary of $500,000 per year. Under this agreement,
Mr. Castello also receives all standard Company employee benefits and
supplemental life insurance for the amount that an annual premium of $18,000
provides. The agreement also provides for a grant of options for 500,000 shares
of Common Stock under the Company's 1981 Stock Option Plan, which was made in
1992.
Mr. Castello's employment may be terminated, with or without cause, at the
will of either party. If terminated by the Company for any reason other than due
cause or by Mr. Castello for good reason, Mr. Castello must be paid his then
current base salary and benefits for one year. If terminated for due cause, he
is entitled to no further compensation. Good reason includes, in the context of
a change of control, the assignment to Mr. Castello of duties inconsistent with
his prior duties; his removal from, or failure to re-elect him to, any position
he held immediately prior to the change in control; any termination by the
Company within three years of the change of control other than for due cause or
upon disability or death; a good faith determination by Mr. Castello that
changes in circumstances resulting from the change in control leave him
substantially unable to perform his duties, after notice; the failure of the
Company's successor or the transferee of its assets or business to assume its
obligations under the agreement; or, a significant relocation of the Company's
executive offices. Good reason also includes any reduction in base pay or
benefits or any breach of the agreement by the Company.
The Company has entered into an employment agreement with Dr. Scannon,
dated as of March 26, 2000, that provides for his employment as Chief Scientific
and Medical Officer at a salary of $330,000 per year. Under this agreement, Dr.
Scannon is entitled to participate in any benefit plan for which key executives
of the Company are eligible, including the Management Incentive Compensation
Plan. The agreement also provides for a one-year loan to Dr. Scannon in the
amount of $192,548.09, bearing interest at 6% per annum and secured by a pledge
of certain of the Company's Common Shares. The loan was originally made to Dr.
Scannon in 1993, has been extended for seven additional years, and $207,141 in
principal and interest payments have been received by the Company to date. The
loan will become payable on demand in the event of any early termination of Dr.
Scannon's employment. Upon termination of his employment for any reason other
than cause, or upon resignation, Dr. Scannon must be paid his then current base
salary and benefits for one year.
The Company has entered into an employment agreement with Mr. Davis dated
as of April 1, 1994 that provides for his employment as Chief Financial Officer
at a salary of $200,000 per year. Under this agreement, Mr. Davis received a
one-time transition allowance in the amount of $35,000 and is entitled to
participate in any benefit plan for which executives of the Company are
eligible. In addition,
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the agreement provides for a grant of options for 60,000 shares of Common Stock
under the Company's 1981 Stock Option Plan, which was made in 1994, as well as
participation in the Management Incentive Compensation Plan. Mr. Davis'
employment agreement provides no additional compensation in the event of a
change of control but provides a minimum severance amount equal to six months of
base salary at the time of termination.
Compensation Committee Report on Executive Compensation
The Company's compensation program for officers (including the named
executive officers) is administered by the Compensation Committee of the Board
of Directors (the "Committee"), which is composed of two non-employee directors.
Following review and approval by the Committee, all issues pertaining to officer
compensation are submitted to the full Board of Directors for approval. The
primary objectives of the Company's compensation program are to enable the
Company to attract, motivate and retain outstanding individuals and align their
success with that of the Company's shareholders through the creation of
shareholder value and achievement of strategic corporate objectives.
The level of compensation paid to an officer is determined on the basis of
the individual's overall experience, responsibility, performance and
compensation level in his or her prior position (for newly hired officers), the
individual's overall performance and compensation level at the Company during
the prior year (for current employees), the compensation levels of similarly
situated individuals in the pharmaceutical and biotechnology industries
(including, but not limited to, the biotechnology companies included in the Dow
Jones Medical and Biotechnology Index) and other labor markets in which the
Company competes for employees, the performance of the Company's Common Shares
during the prior fiscal year and such other factors as may be appropriately
considered by the Board of Directors, by the Committee and by management in
making its initial proposals to the Committee.
Mr. Castello's compensation for 1999 was determined after considering the
general factors described above and the terms of his existing employment
contract. In 1992, the Committee approved, and recommended that the Board
approve, the terms of Mr. Castello's employment contract, as more fully
described under "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements," because it felt that the terms thereof were
necessary in order to attract a candidate of Mr. Castello's experience and
reputation in the pharmaceutical industry, which in turn was deemed necessary in
order to enable the Company to advance toward its long-range goal of becoming a
pharmaceutical company with commercially viable products. Mr. Castello has not
received a salary increase since his employment contract was executed in 1992.
The principal methods for long-term incentive compensation are the
Company's 1981 Share Option Plan (the "1981 Option Plan") and Restricted Share
Plan (the "Restricted Plan"), and compensation thereunder principally takes the
form of incentive and non-qualified option
-12-
grants. These grants are designed to promote the convergence of long-term
interests between the Company's key employees and its shareholders;
specifically, the value of options granted will increase or decrease with the
value of the Company's Common Shares. In this manner, key individuals are
rewarded commensurately with increases in shareholder value. These grants also
typically include a 5-year vesting period to encourage continued employment. The
size of a particular option grant is determined based on the individual's
position with and contribution to the Company. For grants during 1999, the
number of options granted were determined based on the numbers of options
granted to such individuals in the previous fiscal year, the aggregate number of
options held by each such individual, the number of options granted to similarly
situated individuals in the pharmaceutical and biotechnology industries, the
price of the Company's Common Shares relative to other companies in such
industries and the resulting relative value of such options; no specific
measures of corporate performance were considered.
Certain employees are also compensated through the Management Incentive
Compensation Plan established effective July 1, 1993 (as amended, the "Incentive
Plan"), in which management employees (other than the Chief Executive Officer),
as well as certain additional discretionary participants chosen by the Chief
Executive Officer, are eligible to participate. Under the Incentive Plan, at the
beginning of each fiscal year, the Board of Directors (with advice from the
Committee) establishes a target incentive compensation pool, which is then
adjusted at year-end to reflect the Company's performance in achieving its
corporate objectives.
After each fiscal year, the Board of Directors and the Committee make a
determination as to the performance of the Company and Incentive Plan
participants in meeting corporate objectives and individual objectives, which
are determined from time to time by the Board of Directors in its sole
discretion and which included for 1999: a target level of cash at year end;
generation of current income; progress toward strategic alliances, potential
partnerships or financing arrangements; and various objectives tied to
development of the Company's product lines. Awards to Incentive Plan
participants vary depending upon the level of achievement of corporate
objectives, the size of the incentive compensation pool and the Incentive Plan
participants' base salaries and performance during the fiscal year as well as
their expected ongoing contribution to the Company. The Company must meet a
minimum percentage of its corporate objectives (currently 70%) before any awards
are made under the Incentive Plan.
Awards under the Incentive Plan vest over a three-year period with 50% of
each award payable on a date to be determined, expected to be in February or
March of the following fiscal year, and 25% payable on each of the next two
annual distribution dates, so long as the Incentive Plan participant continues
to participate in the Incentive Plan. The portion payable on the first
distribution date is payable 50% in cash and 50% in Common Shares (based on a
10-day average market price). Incentive Plan participants must choose prior to
the end of the first year of the three-year period whether the balance
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is to be paid in cash or Common Shares. All share issuances under the Incentive
Plan are made pursuant to the Restricted Plan.
For 1999, the Committee and the Board of Directors determined that
management had met a percentage of the corporate objectives summarized above in
excess of the 70% minimum required by the Plan in order to make awards
thereunder. In 1999, 32 individuals were eligible to participate in the
Incentive Plan, including all of the executive officers named in the "Summary
Compensation Table" above other than Mr. Castello.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") generally limits the deductible amount of annual compensation paid to
certain individual executive officers (i.e., the chief executive officer and the
four other most highly compensated executive officers of the Company) to no more
than $1 million. However, qualifying performance-based compensation will be
excluded from the $1 million cap on deductibility, and the Committee believes,
based on information currently available, that the Company's options issued to
its executive officers qualify for this exclusion. Considering the current
structure of executive officer compensation and the availability of deferral
opportunities, the Committee believes that the Company will not be denied any
significant tax deduction for 2000. The Committee will continue to review tax
consequences as well as other relevant considerations in connection with
compensation decisions.
William K. Bowes, Jr.
W. Denman Van Ness
-14-
Performance Graph
Comparison of Five Year Cumulative Total Return Among XOMA, Nasdaq
Composite Index and DJ Medical Biotech Index
As of XOMA Nasdaq Dow Jones Medical
December 31, Ltd. Composite Index and Biotechnology
------------ ---- --------------- -----------------
1994 100 100 100
1995 130.23 139.92 170.68
1996 190.70 171.69 180.55
1997 206.98 208.83 232.37
1998 118.60 291.60 315.77
1999 111.63 541.16 432.81
The comparison assumes $100 invested on December 31, 1994 in the Company's
Common Stock, the Nasdaq Composite Index, and the Dow Jones Medical and
Biotechnology Index (weighted). Total return assumes reinvestment of dividends
although the Company has never paid cash dividends. Returns for the Company are
not necessarily indicative of future performance.
-15-
ITEM 1 - ELECTION OF DIRECTORS
The Company's directors are elected annually to serve until the next annual
meeting of shareholders and until their successors are elected, or until their
death, resignation or removal. The nominees for the Board of Directors are set
forth below. Unless otherwise instructed, the proxy holders will vote all
proxies received by them in the accompanying form for the nominees for directors
listed below. In the event any nominee should become unavailable for election
due to an unexpected occurrence, the proxies will be voted for any such
substitute nominee as may be designated by the present Board of Directors to
fill the vacancy. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them for the nominees listed below. Each person nominated for election has
agreed to serve if elected, and management has no reason to believe that any of
the nominees listed below will be unable to serve. The seven candidates
receiving the highest number of affirmative votes of the shares entitled to vote
at the annual meeting will be elected as directors of the Company.
NOMINEES TO BOARD OF DIRECTORS
Name Title Age
John L. Castello Chairman of the Board, 63
President and
Chief Executive Officer
Patrick J. Scannon, M.D., Ph.D. Chief Scientific and Medical 52
Officer and Director
James G. Andress Director 61
Williams K. Bowes, Jr. Director 73
Arthur Kornberg, M.D. Director 82
Steven C. Mendell Director 58
W. Denman Van Ness Director 57
Mr. Castello became Chairman of the Board, President and Chief Executive
Officer in March 1993. From April 1992 to March 1993, Mr. Castello was
President, Chief Executive Officer and a director. Mr. Castello was President
and Chief Operating Officer of the Ares Serono Group from 1988 to 1991 and prior
to that was President of the Serono Diagnostics Division from 1986 to 1988. Ares
Serono is known in the United States for fertility drugs, and it is also the
manufacturer of a bioengineered human growth hormone which is marketed primarily
outside of the United States. Mr. Castello previously held senior management
positions at Amersham International PLC and Abbott Laboratories. Mr. Castello is
also a director of Cholestech Corporation, which is engaged in the business of
developing products for the diagnostic measurement of cholesterol and other
blood components.
Dr. Scannon is one of the founders of the Company and has served as a
director since its formation. Dr. Scannon became Chief Scientific and Medical
Officer in March 1993. He served as President of the Company from its formation
until April 1992 and as Vice Chair-
-16-
man, Scientific and Medical Affairs from April 1992 to March 1993. In 1998, Dr.
Scannon also became a director of NanoLogics, Inc., a software company. From
1979 until 1981, Dr. Scannon was a clinical research scientist at the Letterman
Army Institute of Research in San Francisco. A Board-certified internist, Dr.
Scannon holds a Ph.D. in organic chemistry from the University of California,
Berkeley, and an M.D. from the Medical College of Georgia. Dr. Scannon is also a
member of XOMA's Scientific Advisory Board.
Mr. Andress has been a director since November 1995 and is a former
Chairman of the Pharmaceuticals Group, Beecham Group, plc and Chairman,
Healthcare Products and Services of SmithKline Beecham, plc and the former
President and Chief Operating Officer of Sterling Drug, Inc. Since November 1,
1996, he has served as Chairman and CEO of Warner Chilcott, plc, a specialty
pharmaceuticals company. From 1989 to 1995, he served as CEO and director of
Information Resources, Inc., a decision support software and consumer packaged
goods research company and currently serves as a director. Mr. Andress is also a
director of The Liposome Company, Inc., a biotechnology company. He also serves
as a director of Sepracor, Inc., a separations technology company, O.P.T.I.O.N.
Care, Inc., a home health care company, and Allstate Insurance Company.
Mr. Bowes has been a director since February 1986 and has been a General
Partner of U.S. Venture Partners since 1981. Mr. Bowes is also a director of
Amgen Inc., Applied Micro-Circuits Corporation, Lynx Therapeutics, Inc. and one
private company.
Dr. Kornberg has been a director since April 1991 and is a member of XOMA's
Scientific Advisory Board. He is a distinguished author and researcher who was
chairman and founder of the Department of Biochemistry at the Stanford
University School of Medicine. Dr. Kornberg received the Nobel Prize in 1959 for
his discovery of the enzymatic synthesis of DNA. His present research is on the
genetics, biochemistry, physiology and clinical relevance of inorganic
polyphosphate. He is the author of "DNA Replication," one of the basic textbooks
of biochemistry. Dr. Kornberg was a founder and is a member of the Boards of
Scientific Advisors of DNAX, now a wholly owned subsidiary of Schering-Plough
Corporation, and Regeneron Pharmaceuticals, Inc., a biotechnology company
focused on neurobiology, and is a member of the Board of Scientific Advisors of
Maxygen, Inc., a biotechnology company focused on molecular evolution
technology.
Mr. Mendell has been a director of the Company since 1984. From April 1992
to March 1993, he was Chairman of the Board. Mr. Mendell was also Chief
Executive Officer of the Company from 1986 until April 1992. From April 1993 to
February 1998, Mr. Mendell was President and Chief Executive Officer of
Selective Genetics, Inc. (formerly Prizm Pharmaceuticals, Inc.), a private
company engaged in the development of gene therapy products for tissue
regeneration and repair. From February 1998 to June 1999, he was Chairman and
President of Selective Genetics, Inc. Mr. Mendell is currently President and
Chief Executive Officer of LMA North America Inc., a leading medical device
company focused on the marketing and sale of products for airway management and
anesthesia. Mr. Mendell is also a director of Ciblex Cor-
-17-
poration and from November 1997 to December 1998, he served as President and
Chief Executive Officer of that company. Ciblex is a private company engaged in
the development of small molecules to block the release of disease-causing
proteins. Mr. Mendell is also a director of StressGen Biotechnologies Corp., a
biopharmaceutical company engaged in the development of pharmaceutical products
for treatment of cancer and the prevention of infectious disease, and Wells
Publishing Corporation.
Mr. Van Ness has been a director since October 1981. He is Chairman of
Hidden Hill Advisors, a venture capital consulting firm. From April 1996 through
October 1999, he was a Managing Director of CIBC Capital Partners, an
international merchant banking organization. From 1986 through March 31, 1996,
Mr. Van Ness was a General Partner of Olympic Venture Partners II and Rainier
Venture Partners, venture capital funds, and from 1977 until 1985, he was a
General Partner of the venture capital group at Hambrecht & Quist, the manager
of several venture capital funds.
BOARD MATTERS
Board Meetings and Committees
During the fiscal year ended December 31, 1999, the Board of Directors held
eight meetings. Each Board member attended at least 75% of the aggregate number
of meetings of the Board and the committees of the Board on which he served that
were held during the last fiscal year.
The Board of Directors has standing audit, compensation and nominating
committees. The nominating committee performs the functions of director
evaluation and selection. The committee currently consists of Messrs. Bowes,
Castello and Van Ness. The committee will not accept unsolicited director
nominations by shareholders. The committee held no meetings during 1999.
The audit committee is primarily responsible for approving the services
performed by the Company's independent auditors and reviewing the Company's
accounting practices and system of internal accounting controls. This committee,
currently consisting of Mr. Mendell and Mr. Andress, held two meetings during
1999.
The compensation committee is responsible for recommending and reviewing
the compensation, including options and perquisites, of the Company's officers
and other employees. This committee, currently consisting of Messrs. Bowes and
Van Ness, held one meeting during 1999.
Board Compensation and Related Matters
Each non-employee director receives a quarterly retainer of $1,000, $1,000
for each meeting of the Board of Directors attended and $500 for each committee
meeting attended in person on a date other than on the date of a meeting of the
Board of Directors. Additionally, each non-employee director is granted options
to purchase 15,000
-18-
Common Shares pursuant to the 1992 Directors Stock Option Plan (the "Directors
Plan") upon initial election to the Board of Directors and is annually granted
7,500 Common Shares pursuant to the Directors Plan upon reelection to the Board
of Directors, each at an exercise price per share equal to the closing market
price of the Common Shares on the date of grant, which for 1999 was $4.25.
Directors who are employees of the Company are neither paid any fees or
other remuneration nor awarded options or Common Shares of the Company for
services as members of the Board of Directors or its committees.
ITEM 2 - RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of its audit committee, has
selected Ernst & Young LLP ("Ernst & Young") to serve as the Company's
independent auditors for 2000. Ernst & Young has been acting as the Company's
independent auditors since fiscal year 1998.
From fiscal 1983 through fiscal 1997, Arthur Andersen LLP ("Arthur
Andersen") acted as the Company's independent auditors. Arthur Andersen was
dismissed on March 19, 1998. The decision to change auditors was approved by the
audit committee of the Board of Directors. The reports of Arthur Andersen on the
financial statements of the Company for the two most recent fiscal years
preceding such dismissal did not contain any adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles. During the Company's two most recent fiscal years
preceding such dismissal, there were no disagreements with Arthur Andersen on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Arthur Andersen, would have caused it to make a reference
to the subject matter of the disagreements in connection with its reports; nor
has Arthur Andersen ever presented a written report, or otherwise communicated
in writing to the Company or the Board of Directors or the audit committee
thereof the existence of any "disagreement" or "reportable event" within the
meaning of Item 304 of Regulation S-K. The Company has authorized Arthur
Andersen to respond fully to the inquiries of Ernst & Young. The letter from
Arthur Andersen addressed to the Securities and Exchange Commission (the "SEC"),
as required by Item 304(a)(3) of Regulation S-K, to the effect that it agrees
with the Company's disclosure regarding its dismissal, has been filed as an
exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as amended.
The ratification of the appointment of Ernst & Young and the authorization
of the Board to agree to Ernst & Young's fee are being submitted to the
shareholders at the annual meeting. If such appointment is not ratified, the
Board of Directors will consider the appointment of other auditors. The Board of
Directors recommends a vote "FOR" the ratification of the appointment of Ernst &
Young as the Company's independent auditors for the 2000 fiscal year and the
authorization of the Board to agree to Ernst & Young's fee.
-19-
A representative of Ernst & Young is expected to be present at the meeting
with an opportunity, if desired, to make a statement and to respond to your
questions.
ITEM 3 - RECEIPT OF AUDITED FINANCIAL STATEMENTS
In accordance with Bermuda company law and practice, the Company's audited
financial statements for fiscal year 1999 will be laid before the annual
meeting. No shareholder action is required in connection therewith.
ITEM 4 - APPROVAL OF CHANGES TO THE COMPANY'S CONDUCT
Background and Reasons for the Proposed Changes
When the Company changed its legal domicile from Delaware to Bermuda
effective December 31, 1998, it did so with the express intention of limiting
any changes in the rights and privileges of its shareholders to those changes
which were the result of differences between the laws of Delaware and Bermuda.
Since the change in legal domicile became effective, the Company has become
aware of two provisions in its bye-laws which, although worded identically to
the corresponding provisions of its certificate of incorporation when it was a
U.S. company, are subject to different interpretation under Bermuda law and
therefore have a different effect than intended. In addition, the Bermuda
Companies Act has recently been amended to permit companies to include in their
bye-laws provisions regarding a maximum number of directors that are closer to
the provisions in effect immediately prior to the Company's change of legal
domicile.
The amendments to the Company's bye-laws and the express authorization of
the Board to fill unfilled seats are being proposed in order to make the
provisions of the Company's bye-laws more consistent with the practices followed
when the Company was a U.S. corporation with respect to (a) when during a
shareholders meeting a quorum is to be established, (b) the manner of tabulating
votes on matters requiring approval of a simple majority, (c) the Company's
ability to postpone or cancel general meetings of shareholders, and (d) the
Board's ability to set a maximum on its own size and fill seats up to that
maximum.
In addition, under the laws of Bermuda, the Company is required to record
its "share premium account," which is the aggregate amount of funds raised
through the sale of equity since the Company's inception minus the aggregate par
value of its issued shares and as of February 23, 2000 had a balance of
approximately $462 million. As a result of certain Bermuda law restrictions not
applicable to U.S. companies, the size of this account limits the Company's
ability in certain circumstances to offer certain customary, incidental terms
and provisions to potential investors which are typically included in financings
by companies such as the Company. Balances in the share premium account can be
reduced by resolution of the Board of Directors, approved by the shareholders,
transferring amounts to the Company's contributed surplus. On February 23, 2000,
the Board of Directors
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unanimously approved the reduction of the Company's common share premium account
to $0, with the amount of such reduction to be transferred to the Company's
contributed surplus.
Description and Effects of Adoption
of the Proposed Changes
The shareholders are being asked to approve amendments to the Company's
bye-laws which would (1) require that a quorum be established only at the
commencement of a shareholders meeting as was the case when the Company was a
U.S. company, rather than prior to each proposal to be acted on; (2) permit
tabulation of votes on proposals requiring approval by a simple majority based
on "votes cast," rather than based on the number of shares "entitled to vote" at
the meeting or on the proposal, so that broker non-votes can be treated as they
were when the Company was a U.S. company; (3) permit the Company to postpone or
cancel a general meeting of the Company's shareholders, as it could have under
Delaware law and (4) permit the Board of Directors to determine a maximum number
of directors and fill unfilled seats up to that maximum, as it could when the
Company was a U.S. company. The precise wording of each of these changes can be
found in Annex I attached to this proxy statement. The shareholders are also
being asked to authorize the Board to fill unfilled seats from time to time.
Under Delaware law, a quorum need only be established at the beginning of a
meeting; that is, a stockholder who is counted in reaching a quorum cannot
defeat the quorum, once established, by leaving the meeting. Under Bermuda law,
a quorum is required during each proposal, unless a company's bye-laws expressly
provide otherwise. The effect of the proposed amendment would be to so provide.
Similarly, before it changed its legal domicile, the Company, applying
relevant case law, did not count broker non-votes as votes against a particular
proposal under consideration because they were not "entitled to vote" (the
phrase from the Company's previous certificate of incorporation) on the
proposal; the Company accordingly excluded non-votes from its vote tabulations
where a simple majority was required and routinely disclosed this manner of
tabulation. Bermuda case law does not address this issue. The effect of the
proposed amendment would be to allow the Company to tabulate votes based on
"votes cast."
In Delaware, the authority to postpone or cancel a stockholders meeting is
deemed to lie with the entity or persons having the authority to call the
meeting. In the Company's case, this was the Board of Directors and, in the case
of special meetings, the Chief Executive Officer. In Bermuda, this implicit
authority is not recognized but must instead be stated in the Bye-laws, and the
proposed amendment does just that.
When it was a U.S. corporation, the Company's Board of Directors could
change its size by amendment to the Company's by-laws, which did not require
stockholder approval. When the Company changed its legal domicile to Bermuda,
the terms of the Company's previous certificate of incorporation and by-laws
were combined (with some
-21-
modifications) into its Bermuda bye-laws, the amendment of which requires
shareholder approval. In addition, Bermuda law generally provides that the size
of the Board is to be established by the shareholders. Recently, the Bermuda
Companies Act was amended to permit a company's bye-laws to provide that the
Board can establish a maximum number of directors from time to time and fill
unfilled seats up to that maximum, in a manner similar to the provisions in
effect when the Company was a U.S. corporation. The effect of the proposed
amendment and the related authorization of the Board to exercise this power
would be to implement this change in the Bermuda statute.
The shareholders are also being asked to adopt the following resolution:
RESOLVED, that the share premium account of the Company in respect of
premium which has arisen from the issuance of Common Shares be reduced to
$0, with the amount of such reduction to be transferred to the contributed
surplus of the Company.
If the proposed resolution is approved by the shareholders, the Company's share
premium account will be reduced on the Company's accounts under Bermuda law and
in the Company's annual filing with the Bermuda Registrar of Companies by
transferring the relevant amount to the Company's contributed surplus. This
reduction would have no effect on the rights and privileges of current or future
holders of the Company's Common Shares as such and in no way reflects any change
in the Company's or any other party's estimation of the Company's value.
Furthermore, this reduction would have no impact on the Company's reported
financial statements under either U.S. generally accepted accounting principles
or the rules and regulations of the Securities and Exchange Commission.
The effect of each of these changes is to make the manner in which the
Company conducts itself more consistent with its conduct before the Company's
change in legal domicile.
Vote Required
The affirmative vote of the holders of a majority of the shares present in
person or by proxy and entitled to vote is required for the approval of the
amendments to the Company's bye-laws, the authorization of the Board to fill
unfilled seats and the approval of the reduction of the Company's share premium
account.
The Board of Directors unanimously recommends a vote "FOR" adoption of the
proposed changes.
CERTAIN TRANSACTIONS
Pursuant to his employment agreement, in 1993 the Company made a loan to
Dr. Scannon, its Chief Scientific and Medical Officer and a Director, in the
initial amount of $290,000. See "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements." As of April 3, 2000, $192,548.09
of principal and interest on
-22-
the loan remained outstanding and $207,141 in principal and interest payments
have been received by the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC") and
the Nasdaq National Market. Such executive officers and directors are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based on a review of the copies of the forms furnished to the Company
and written representations from the Company's executive officers and directors,
all persons subject to the reporting requirements of Section 16(a) filed the
required reports with respect to 1999 on a timely basis.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at this
annual meeting other than those set forth in this proxy statement and in the
notice accompanying this proxy statement. If other matters should properly come
before the meeting, it is intended that the proxy holders will vote on such
matters in accordance with their best judgment.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to promptly
execute and return the accompanying proxy in the postage prepaid envelope which
has been enclosed for your convenience or vote by telephone or through the
Internet.
SHAREHOLDER PROPOSALS
A shareholder who intends to present a proposal at the 2001 meeting of
shareholders must submit such proposal by November 30, 2000, to the Company for
inclusion in the Company's 2001 proxy statement and proxy card relating to such
meeting. The proposal must be mailed to the Company's principal office, at 2910
Seventh Street, Berkeley, California, 94710, Attention: Secretary.
By Order of the Board of Directors,
Christopher J. Margolin
Secretary
April 24, 2000
Berkeley, California
Annex I
Text of the first sentence of Article II, Section 8 of existing bye-laws:
"The holders of a majority of the shares issued and entitled to vote
thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the shareholders for the transaction of business
(including the approval of an amalgamation) except as otherwise provided by
the Act."
Text of the first sentence of Article II, Section 8 as proposed to be amended:
"The holders of a majority of the shares issued and entitled to vote
thereat, present in person or represented by proxy at the commencement of
the meeting, shall constitute a quorum at all meetings of the shareholders
for the transaction of all business (including the approval of an
amalgamation) except as otherwise required by the Act."
Text of Article II, Section 9 of existing bye-laws:
"When a quorum is present at any meeting, the vote of the holders of a
majority of the shares present in person or represented by proxy and
entitled to vote thereat shall decide any question brought before such
meeting (including an amalgamation not covered by Section 10 hereof),
unless the question is one upon which by express provision of the Act or
these Bye-laws a different vote is required, in which case such express
provision shall govern and control the decision of such question."
Text of Article II, Section 9 as proposed to be amended:
"When a quorum is present at any meeting, any question brought before such
meeting (including an amalgamation not covered by Section 10 hereof) shall
be decided by a majority of the votes cast, unless the question is one upon
which by express provision of the Act or these Bye-laws a different vote is
required, in which case such express provision shall govern and control the
decision of such question."
Text of new Article II, Section 15 of bye-laws as proposed to be added:
Section 15. The Board of Directors or, in the case of a special general
meeting, the Chief Executive Officer may, or the Secretary on instruction
from either (i) the Board of Directors or (ii) in the case of a special
general meeting,
the Chief Executive Officer shall, postpone or cancel any general meeting
called in accordance with provisions of the Bye-laws provided that notice
of postponement or cancellation is given to the shareholders entitled to
vote at such meeting before the time of such meeting. New notice of the
date, time and place for a postponed meeting shall be given to the
shareholders entitled to vote at such meeting in accordance with the
provisions of these Bye-laws.
Text of the first sentence of Article III, Section 1 of existing bye-laws:
"The Board of Directors shall consist of not less than two directors or
such number in excess thereof as the shareholders may from time to time
determine."
Text of the first sentence (and a new second sentence) of Article III, Section 1
as proposed to be amended:
"The Board of Directors shall consist of not less than two directors or
such number in excess thereof as the shareholders may from time to time
determine. The Board of Directors may from time to time determine a maximum
number of directors."
Text of the first sentence of Article III, Section 2 of existing bye-laws:
"Vacancies and (with the authorization of the shareholders in general
meeting) newly created directorships resulting from any increase in the
authorized number of directors may be filled by the Board of Directors, and
the directors so chosen shall hold office until the next annual election
and until their successors are duly elected and shall qualify, unless
sooner removed."
Text of the first sentence of Article III, Section 2 as proposed to be amended:
"Vacancies and newly created directorships resulting from any increase in
the maximum number of directors may be filled by the Board of Directors,
and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify,
unless sooner removed."
I-2
[FORM OF PROXY CARD/INSTRUCTIONS]
XOMA LTD.
2910 Seventh Street
Berkeley, CA 94710
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JOHN L. CASTELLO and PATRICK J. SCANNON,
and each of them, with full power of substitution, as the proxy or proxies of
the undersigned to vote all Common Shares of XOMA Ltd. which the undersigned is
entitled to vote at the annual meeting of shareholders of XOMA Ltd. to be held
at The Claremont Hotel, Ashby and Domingo Avenues, Berkeley, California 94623 on
May 31, 2000, at 9:00 a.m. local time, and at any adjournment or postponement
thereof, with all powers that the undersigned would have if personally present
thereat:
1. Election of Directors
01 James G. Andress 02 William K. Bowes, Jr. 03 John L. Castello
04 Arthur Kornberg, M.D. 05 Steven C. Mendell 06 Patrick J. Scannon, M.D., Ph.D.
07 W. Denman Van Ness
/ / FOR all nominees / / WITHHOLD AUTHORITY to
(except as marked to the contrary below) vote for all nominees
(The Board of Directors recommends a vote FOR.)
This proxy will be voted in the election of directors in the manner
described in the proxy statement for the 2000 annual meeting of shareholders.
(INSTRUCTION: To withhold authority to vote for one or more individual nominees,
write such name or names in the space provided below.)
- --------------------------------------------------------------------------------
2. Proposal to ratify the appointment of Ernst & Young LLP to act as the
Company's independent auditors for the 2000 fiscal year and authorize
the Board to agree to such auditors' fee.
(The Board of Directors recommends a vote FOR.)
FOR / / AGAINST / / ABSTAIN / /
- --------------------------------------------------------------------------------
3. Proposal to approve changes to the manner in which the Company conducts
itself in order to make such conduct more consistent with its conduct
when the Company was a U.S. corporation by:
a. amending the Company's Bye-laws with respect to (i) when
during a shareholders meeting a quorum is to be established,
(ii) the manner of tabulating votes on matters requiring
approval of a simple majority, (iii) the Company's ability to
postpone or cancel general meetings of shareholders and (iv)
the Board's ability to set a maximum on its own size and fill
seats up to that maximum;
b. authorizing the Board to fill unfilled seats from time to
time; and
c. reducing the Company's share premium account under Bermuda
law.
(The Board of Directors recommends a vote FOR.)
FOR all changes / / AGAINST all changes / / ABSTAIN / /
- --------------------------------------------------------------------------------
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and at any adjournment
or postponement thereof.
(Continued, and to be marked, dated and signed, on other side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOU CAN VOTE IN ONE OF TWO WAYS:
1. Call TOLL FREE 1-800-840-1208 on a touch tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this
call.
2. Mark, sign and date your proxy card and return it promptly in the
enclosed envelope.
(Continued from other side)
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR Proposals 1 through 3.
- -------------------------------------------------------------------------------
*** IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW ***
- -------------------------------------------------------------------------------
Dated: _______________________, 2000
----------------------------------------------------
Signature of Shareholder
----------------------------------------------------
Signature if held jointly
Please sign exactly as name appears above. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name
by President or other authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
VOTE BY TELEPHONE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and return your proxy card.
You will be asked to enter a Control Number which is located in the box in the
lower right hand corner of this form.
- --------------------------------------------------------------------------------
OPTION 1: To vote as the Board of Directors recommends on ALL proposals: Press 1
- --------------------------------------------------------------------------------
Your vote will be confirmed and cast as you directed. END OF CALL.
- --------------------------------------------------------------------------------
OPTION 2: If you choose to vote on each proposal separately, press 0. You will
hear these instructions:
- --------------------------------------------------------------------------------
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9.
To withhold FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Proposal 3: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
The instructions are the same for all remaining proposals.
Your vote will be confirmed as cast as you directed. END OF CALL.
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If you vote by telephone, there is no need for you to mail back your proxy.
THANK YOU FOR VOTING.
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Call TOLL FREE on a touch tone telephone
1-800-840-1208 24 hours/day
There is NO CHARGE to you for this call
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