Exhibit 10.1
 

 
At Market Issuance Sales Agreement
October 26, 2010
 
Wm Smith & Co.
1700 Lincoln Street, Suite 2545
Denver CO 80203
 
McNicoll, Lewis & Vlak LLC
420 Lexington Ave., Suite 628
New York, NY 10170
 
Ladies and Gentlemen:
 
XOMA Ltd.,  a Bermuda company (the “Company”), confirms its agreement (this
“Agreement”) with Wm Smith & Co., a Colorado corporation (“Wm Smith”), and
McNicoll, Lewis & Vlak LLC, a Delaware limited liability company (“MLV”), as
follows:
 
1. Issuance and Sale of Shares.  The Company agrees that, from time to time
during the term of this Agreement, on the terms and subject to the conditions
set forth herein, it may issue and sell through Wm Smith and MLV (each an
“Agent” and collectively, the “Agents”), acting as agent, an amount (the
“Shares”) of the Company’s common shares, par value $0.0075 per share (the
“Common Shares”); provided, however, that in no event shall the Company issue or
sell through Agents such number of Shares that (a) would cause the Company to
not satisfy the eligibility requirements for use of Form S-3 (including, if
applicable, Instruction I.B.6. thereof), (b) exceeds the number of Common Shares
registered on the effective registration statement pursuant to which the
offering is being made, or (c) exceeds the number of authorized but
unissued  Common Shares (the lesser of (a), (b), and (c), the “Maximum
Amount”).  Notwithstanding anything to the contrary contained herein, the
parties hereto agree that compliance with the limitations set forth in this
Section 1 on the number of Shares issued and sold under this Agreement shall be
the sole responsibility of the Company and that Agents shall have no obligation
in connection with such compliance.  The issuance and sale of Shares through
Agents will be effected pursuant to the Registration Statement (as defined
below) filed by the Company and declared effective by the Securities and
Exchange Commission (the “Commission”), although nothing in this Agreement shall
be construed as requiring the Company to use the Registration Statement to issue
Common Shares.  Wm Smith, MLV and the Company are sometimes referred to herein
individually as a “Party” and collectively as the “Parties.”
 
The Company has filed, in accordance with the provisions of the Securities Act
of 1933, as amended, and the rules and regulations thereunder (collectively, the
“Securities Act”), with the Commission a registration statement on Form S-3
(File No.  333-148342), including a base prospectus, with respect to equity and
other offerings, including the Shares, and which incorporates by reference
documents that the Company has filed or will file in accordance with the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (collectively, the “Exchange Act”), and the rules and
regulations thereunder (the “Exchange Act Regulations”).  The Company will
prepare a prospectus supplement specifically related to the Shares (the
“Prospectus Supplement”) to the base prospectus included as part of such
 

 
 

--------------------------------------------------------------------------------

 

registration statement.  The Company will furnish to Agents, for use by Agents,
copies of the prospectus included as part of such registration statement, as
supplemented by the Prospectus Supplement, relating to the Shares.  Except where
the context otherwise requires, such registration statement, including all
documents filed as part thereof or incorporated by reference therein, and
including any information contained in a Prospectus (as defined below)
subsequently filed with the Commission pursuant to Rule 424(b) under the
Securities Act Regulations or deemed to be a part of such registration statement
pursuant to Rule 430B of the Securities Act Regulations, is herein called the
“Registration Statement.”  The base prospectus, including all documents
incorporated therein by reference, included in the Registration Statement, as it
may be supplemented by the Prospectus Supplement, in the form in which such
prospectus and/or Prospectus Supplement have most recently been filed by the
Company with the Commission pursuant to Rule 424(b) under the Securities Act
Regulations, together with the then issued Issuer Free Writing Prospectus(es)
(as defined below), if any, is herein called the “Prospectus.” Any reference
herein to the Registration Statement, the Prospectus or any amendment or
supplement thereto shall be deemed to refer to and include the documents
incorporated by reference therein, and any reference herein to the terms
“amend,” “amendment” or “supplement” with respect to the Registration Statement
or the Prospectus shall be deemed to refer to and include the filing after the
execution hereof of any document with the Commission deemed to be incorporated
by reference therein.  For purposes of this Agreement, all references to the
Registration Statement, the Prospectus or to any amendment or supplement thereto
shall be deemed to include any copy filed with the Commission pursuant to its
Electronic Data Gathering Analysis and Retrieval System, or if applicable, the
Interactive Data Electronic Application system when used by the Commission
(collectively, “EDGAR”).
 
2. Placements.  Each time that the Company wishes to issue and sell Shares
hereunder (each, a “Placement”), it will notify Trading Agent (as defined in
Section 19 below), on behalf of Wm Smith and MLV, by email notice (or other
method mutually agreed to in writing by the Parties) of the number of Shares
(the “Placement Shares”) to be issued, the time period during which sales are
requested to be made, any limitation on the number of Shares that may be sold in
any one day or in any one transaction and any minimum price below which sales
may not be made (a “Placement Notice”), the form of which is attached hereto as
Schedule 1.  The Placement Notice shall originate from any of the individuals
from the Company set forth on Schedule 3 (with a copy to each of the other
individuals from the Company listed on such schedule), and shall be addressed to
each of the individuals from Agents set forth on Schedule 3, as such Schedule 3
may be amended from time to time.  The Placement Notice shall be effective
unless and until (i) Trading Agent, on behalf of Wm Smith and MLV, declines to
accept the terms contained therein as a result of any suspension or limitation
of trading in the Placement Shares or in securities generally on the Exchange
(as defined below) or any occurrence or event that causes a material adverse
change in the operation of the Company, (ii) the entire amount of the Placement
Shares have been sold, (iii) the Company suspends or terminates the Placement
Notice or (iv) this Agreement has been terminated under the provisions of
Section 12.  The amount of any discount, commission or other compensation to be
paid by the Company to Agents in connection with the sale of the Placement
Shares shall be calculated in accordance with the terms set forth in Schedule
2.  It is expressly acknowledged and agreed that neither the Company nor either
Agent will have any obligation whatsoever with respect to a Placement or any
Placement Shares unless and until the Company delivers a Placement Notice to
Trading
 

 
2

--------------------------------------------------------------------------------

 

Agent and Trading Agent does not decline such Placement Notice pursuant to the
terms set forth above, and then only upon the terms specified therein and
herein.  In the event of a conflict between the terms of this Agreement and the
terms of a Placement Notice, the terms of the Placement Notice will control.
 
3. Sale of Placement Shares by Agents.  On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, upon the Company’s issuance of a Placement Notice, and unless the sale of
the Placement Shares described therein has been declined, suspended, or
otherwise terminated in accordance with the terms of this Agreement, Agents will
use their commercially reasonable efforts consistent with their normal trading
and sales practices and applicable state and federal laws, rules and regulations
and the rules of the NASDAQ Global Market (the “Exchange”) to sell such
Placement Shares up to the amount specified, and otherwise in accordance with
the terms of, such Placement Notice.  Agents will provide written confirmation
to the Company no later than the opening of the Trading Day (as defined below)
immediately following the Trading Day on which it has made sales of Placement
Shares hereunder setting forth the number of Placement Shares sold on such day,
the compensation payable by the Company to Agents pursuant to Section 2 with
respect to such sales, and the Net Proceeds (as defined below) payable to the
Company.  Agents may sell Placement Shares by any method permitted by law deemed
to be an “at the market” offering as defined in Rule 415 of the Securities Act,
including without limitation sales made directly on the Exchange, on any other
existing trading market for the Common Shares or to or through a market
maker.  Agents may also sell Placement Shares in privately negotiated
transactions, subject to approval by the Company.  The Company acknowledges and
agrees that (i) there can be no assurance that Agents will be successful in
selling Placement Shares, and (ii) Agents will incur no liability or obligation
to the Company or any other person or entity if it does not sell Placement
Shares for any reason other than a failure by Agents to use their commercially
reasonable efforts consistent with their normal trading and sales practices to
sell such Placement Shares as required under this Section 3.  For the purposes
hereof, “Trading Day” means any day on which Common Shares are purchased and
sold on the principal market on which the Common Shares are listed or quoted.
 
4. Suspension of Sales.  The Company (for any reason) or either Agent (for any
of the reasons set forth in clause (i) of Section 2) may, upon notice (a
“Suspension Notice”) to the other parties in writing (including by email
correspondence to each of the individuals of the other Parties set forth on
Schedule 3, if receipt of such correspondence is actually acknowledged by any of
the individuals to whom the notice is sent, other than via auto-reply) or by
telephone (confirmed immediately by verifiable facsimile transmission or email
correspondence to each of the individuals of the other Parties set forth on
Schedule 3), suspend this offering and any sale of Placement Shares for a period
of time (a “Suspension Period”); provided, however, that such suspension shall
not affect or impair any party’s obligations with respect to any Placement
Shares sold hereunder prior to the receipt of such notice; and, provided,
further, that any such notice from one Agent shall have no effect on the
obligations hereunder of the other Agent.  Each of the Parties agrees that no
such notice under this Section 4 shall be effective against any other Party
unless it is made to one of the individuals named on Schedule 3 hereto, as such
Schedule may be amended from time to time.  During a Suspension Period, the
Company shall not issue any Placement Notices and the Agents shall not sell any
Placement Shares hereunder.
 

 
3

--------------------------------------------------------------------------------

 

A Suspension Period shall end five Trading Days after the Party which issued the
Suspension Notice notifies the other Parties in writing that it wishes to end
the Suspension Period.
 
5. Settlement.
 
(a) Settlement of Placement Shares.  Unless otherwise specified in the
applicable Placement Notice, settlement for sales of Placement Shares will occur
on the third (3rd) Trading Day (or such earlier day as is industry practice for
regular-way trading) following the date on which such sales are made (each, a
“Settlement Date”).  The amount of proceeds to be delivered to the Company on a
Settlement Date against receipt of the Placement Shares sold (the “Net
Proceeds”) will be equal to the aggregate sales price received by the Agents at
which such Placement Shares were sold, after deduction for (i) the Agents’
commission, discount or other compensation for such sales payable by the Company
pursuant to Section 2 hereof, and (ii) any transaction fees imposed by any
governmental or self-regulatory organization in respect of such sales.
 
(b) Delivery of Placement Shares.  On or before each Settlement Date, the
Company will, or will cause its transfer agent to, issue and electronically
transfer the Placement Shares being sold by crediting Trading Agent’s or its
designee’s account at The Depository Trust Company through its Deposit and
Withdrawal at Custodian System (“DWAC”) or by such other means of delivery as
may be mutually agreed upon by the parties hereto which in all cases shall be
freely tradable, transferable, registered shares in good deliverable form.  On
each Settlement Date, Agents will deliver the related Net Proceeds in same day
funds to the account specified on Schedule 4 or such other account designated by
the Company on, or prior to, the Settlement Date.   Trading Agent will be
responsible for obtaining DWAC instructions or instructions for delivery by
other means with regard to the transfer of Placement Shares being sold.  The
Company agrees that if the Company, or its transfer agent (if applicable),
defaults in its obligation to deliver Placement Shares on a Settlement Date, in
addition to and in no way limiting the rights and obligations set forth in
Section 10(a) (Indemnification and Contribution) here, it will (i) hold Agents
harmless against any loss, claim, damage, or expense (including reasonable legal
fees and expenses), as incurred, arising out of or in connection with such
default by the Company and (ii) pay to Agents any commission, discount, or other
compensation to which it would otherwise have been entitled absent such default
except, in each case, to the extent such failure was caused by the gross
negligence or willful misconduct of Agents.
 
(c) Limitations on Offering Size.  Under no circumstances shall the Company
cause or request the offer or sale of any Shares if, after giving effect to the
sale of such Shares, the aggregate number of Shares sold pursuant to this
Agreement would exceed the lesser of (A) together with all Shares sold under
this Agreement, the Maximum Amount, (B) the amount available for offer and sale
under the currently effective Registration Statement and (C) the amount
authorized from time to time to be issued and sold under this Agreement by the
Company’s board of directors, a duly authorized committee thereof or a duly
authorized executive committee, and notified to the Agents in writing.  Under no
circumstances shall the Company cause or request the offer or sale of any Shares
pursuant to this Agreement at a price lower than the minimum price authorized
from time to time by the Company’s board of directors, duly authorized committee
thereof or a duly authorized executive committee, and
 

 
4

--------------------------------------------------------------------------------

 

notified to the Agents in writing.  Further, under no circumstances shall the
aggregate offering amount of Shares sold pursuant to this Agreement exceed the
Maximum Amount.
 
6. Representations and Warranties of the Company.  The Company represents and
warrants to, and agrees with, Agents that as of the date of this Agreement and
as of each Representation Date (as defined in Section 7(m) below) on which a
certificate is required to be delivered pursuant to Section 7(m) of this
Agreement, as the case may be, except as may be disclosed in the Registration
Statement or a Disclosure Schedule delivered in connection herewith:
 
(a) Registration Statement and Prospectus.  The Company and, assuming no act or
omission on the part of Agents that would make such statement untrue, the
transactions contemplated by this Agreement meet the requirements for and comply
with the conditions for the use of Form S-3 under the Securities Act.  The
Registration Statement has been filed with the Commission and has been declared
effective under the Securities Act.  The Prospectus Supplement will name Agents
as underwriters, each acting as agent, that the Company might engage in the
section entitled “Plan of Distribution.”  The Company has not received any order
of the Commission preventing or suspending the use of the Registration
Statement, or threatening or instituting proceedings for that purpose.  The
Registration Statement and the offer and sale of Shares as contemplated hereby
meet the requirements of Rule 415 under the Act and comply in all material
respects with said Rule.  Copies of the Registration Statement, the Prospectus,
and any such amendments or supplements and all documents incorporated by
reference therein that were filed with the Commission on or prior to the date of
this Agreement have been delivered, or are available through EDGAR, to Agents
and their counsel.  The Company has not distributed and, prior to the later to
occur of each Settlement Date and completion of the distribution of the
Placement Shares, will not distribute any offering material in connection with
the offering or sale of the Placement Shares other than the Registration
Statement and the Prospectus and any Issuer Free Writing Prospectus (as defined
below) to which Agents have consented (such consent not to be unreasonably
withheld).  The Common Shares are currently listed on the NASDAQ Global Market
under the trading symbol “XOMA”.  Except as disclosed in the Registration
Statement, the Company has not, in the 12 months preceding the date hereof,
received notice from the Exchange to the effect that the Company is not in
compliance with the listing or maintenance requirements.
 
(b) No Misstatement or Omission.  The Registration Statement, when it became or
becomes effective, and the Prospectus, and any amendment or supplement thereto,
on the date of such Prospectus or amendment or supplement, conformed or will
conform in all material respects with the requirements of the Securities
Act.  At each Settlement Date, the Registration Statement and the Prospectus, as
of such date, will conform in all material respects with the requirements of the
Securities Act.  The Registration Statement, when it became or becomes
effective, did not, or will not,  contain an 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 not misleading.  The Prospectus and any amendment or
supplement thereto, on the date thereof and at each Applicable Time, did not or
will not include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.  The documents
incorporated by reference in the Prospectus or any Prospectus Supplement did
not, and any further documents
 

 
5

--------------------------------------------------------------------------------

 

filed and incorporated by reference therein will not, when filed with the
Commission, contain an untrue statement of a material fact or omit to state a
material fact required to be stated in such document or necessary to make the
statements in such document, in the light of the circumstances under which they
were made, not misleading.  The foregoing shall not apply to statements in, or
omissions from, any such document made in reliance upon, and in conformity with,
information furnished to the Company by either Agent specifically for use in the
preparation thereof.
 
(c) Conformity with Securities Act and Exchange Act.  The documents incorporated
by reference in the Registration Statement, the Prospectus or any amendment or
supplement thereto, when such documents were or are filed with the Commission
under the Securities Act or the Exchange Act or became or become effective under
the Securities Act, as the case may be, conformed or will conform in all
material respects with the requirements of the Securities Act and the Exchange
Act, as applicable.
 
(d) Financial Information.  The consolidated financial statements and the
related notes thereto included or incorporated by reference in the Registration
Statement and the Prospectus and the Free Writing Prospectuses, if any, comply
in all material respects with the applicable requirements of the Act and the
Exchange Act, as applicable, and present fairly, in all material respects, the
financial position of the Company as of the dates indicated and the results of
its operations and the changes in its consolidated cash flows for the periods
specified; such financial statements have been prepared in compliance in all
material respects with the requirements of the Securities Act and Exchange Act
and in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods covered thereby (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim financial statements, to the extent that they may
not include footnotes or may be condensed or summary statements), and the other
financial information included or incorporated by reference in the Registration
Statement and the Prospectus has been derived from the accounting records of the
Company and presents fairly the information shown thereby.  Any pro forma
financial statements or data included or incorporated by reference in the
Registration Statement and the Prospectus comply in all material respects with
the requirements of Regulation S-X of the Securities Act, including, without
limitation, Article 11 thereof, and the assumptions used in the preparation of
such pro forma financial statements and data are reasonable, the pro forma
adjustments used therein are appropriate to give effect to the circumstances
referred to therein and the pro forma adjustments have been properly applied to
the historical amounts in the compilation of those statements and data.  No
other financial statements or schedules of the Company or any other entity are
required by the Act to be included in the Registration Statement or the
Prospectus.  All disclosures contained in the Registration Statement, the
Pricing Disclosure Materials and the Prospectus regarding “non-GAAP financial
measures” (as such term is defined by the rules and regulations of the
Commission) comply with Regulation G of the Exchange Act and Item 10 of
Regulation S-K under the Securities Act, to the extent applicable.  The Company
does not have any material liabilities or obligations, direct or contingent
(including any off-balance sheet obligations and any “variable interest
entities” within the meaning of Financial Accounting Standards Board
Interpretation No.  46), not disclosed in the Registration Statement, the
Pricing Disclosure Materials and the Prospectus.
 

 
6

--------------------------------------------------------------------------------

 

 
(e) Conformity with EDGAR Filing.  The Prospectus delivered to Agents for use in
connection with the sale of the Placement Shares pursuant to this Agreement will
be identical to the versions of the Prospectus created to be transmitted to the
Commission for filing via EDGAR, except to the extent permitted by Regulation
S-T.
 
(f) Organization.  The Company has been duly continued into and is validly
existing as a company in good standing under the laws of Bermuda.  The Company
is, and will be, duly licensed or qualified as a foreign corporation for
transaction of business and in good standing under the laws of each other
jurisdiction in which its ownership or lease of property or the conduct of its
businesses requires such license or qualification, and has all corporate power
and authority necessary to own or hold its properties and to conduct its
business as described in the Registration Statement and the Prospectus, except
where the failure to be so qualified or in good standing or have such power or
authority would not, individually or in the aggregate, have a material adverse
effect or would reasonably be expected to have a material adverse effect on or
affecting the business, properties, consolidated financial position or results
of operations of the Company and its subsidiaries taken as a whole (a “Material
Adverse Effect”).
 
(g) Subsidiaries.  The Company has no subsidiaries (as defined in the Securities
Act) other than those listed in Section 6(g) of the Disclosure Schedule hereto.
 
(h) No Violation.  The Company is not (i) in violation of its charter or by-laws
or similar organizational documents; or (ii) in violation of any law or statute
or any judgment, order, rule or regulation of any court or arbitrator or
governmental or regulatory authority, except, in the case of clause (ii) above,
for any such violation that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
 
(i) No Material Adverse Change.  Except as set forth in, incorporated by
reference into or otherwise contemplated by the Registration Statement or the
Prospectus, since the date of the most recent financial statements of the
Company included or incorporated by reference in the Registration Statement and
the Prospectus and prior to each Settlement Date, (i) there has not been and
will not have been any change in the share capital of the Company (except for
changes in the number of issued and outstanding Common Shares of the Company due
to the issuance of shares upon the exercise or conversion of securities
exercisable for, or convertible into, Common Shares outstanding on the date
hereof) or long-term debt of the Company or any dividend or distribution of any
kind declared, set aside for payment, paid or made by the Company on any class
of capital stock, that has resulted in or that would reasonably be expected to
result in a Material Adverse Effect to the Company taken as a whole; (ii) other
than this Agreement, the Company has not entered and will not enter into any
transaction or agreement, not in the ordinary course of business, that is
material to the Company and its subsidiaries taken as a whole or incurred and
will not incur any liability or obligation, direct or contingent, not in the
ordinary course of business, that is material to the Company and its
subsidiaries taken as a whole; (iii) there has not been any material adverse
change in the business, properties, financial position, or results of operations
of the Company, taken as a whole; and (iv) the Company has not sustained any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court or arbitrator
or governmental or regulatory authority.
 

 
7

--------------------------------------------------------------------------------

 

 
(j) Capitalization.  The issued and outstanding share capital of the Company has
been validly issued, is fully paid and nonassessable and, other than as
disclosed in or contemplated by the Registration Statement or the Prospectus, is
not subject to any statutory preemptive rights or similar rights.  The Company
has an authorized, issued and outstanding capitalization as set forth in the
Registration Statement and the Prospectus as of the dates referred to therein
(other than the grant of additional options under the Company’s existing stock
option plans, or changes in the number of issued and outstanding Common Shares
of the Company due to the issuance of shares upon the exercise or conversion of
securities exercisable for, or convertible into, Common Shares outstanding on
the date hereof) and such authorized share capital conforms to the description
thereof set forth in the Registration Statement and the Prospectus.  The
description of the securities of the Company in the Registration Statement and
the Prospectus is complete and accurate in all material respects.  Except as
disclosed in or contemplated by the Registration Statement or the Prospectus, as
of the date referred to therein, the Company does not have outstanding any
options to purchase, or any rights or warrants to subscribe for, or any
securities or obligations convertible into, or exchangeable for, or any
contracts or commitments to issue or sell, any Common Shares or other
securities.
 
(k) Authorization; Enforceability.  The Company has full legal right, power and
authority to enter into this Agreement and perform the transactions contemplated
hereby.  This Agreement has been duly authorized, executed and delivered by the
Company and is a legal, valid and binding agreement of the Company enforceable
in accordance with its terms, except to the extent that (i) enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally and by general equitable principles and
(ii) the indemnification and contribution provisions of Section 10 hereof may be
limited by federal or state securities laws and public policy considerations in
respect thereof.
 
(l) Authorization of Placement Shares.  The Placement Shares, when issued and
delivered pursuant to the terms approved by the Board of Directors or a duly
designated committee thereof, against payment therefor as provided herein, will
be duly and validly authorized and issued and fully paid and nonassessable, free
and clear of any pledge, lien, encumbrance, security interest or other claim,
including any statutory or contractual preemptive rights or other similar
rights, and will be registered pursuant to Section 12 of the Exchange Act.  The
Placement Shares, when issued, will conform in all material respects to the
description thereof set forth in or incorporated into the Prospectus.
 
(m) No Consents Required.  No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority is required for the execution, delivery and performance
by the Company of this Agreement and the issuance and sale by the Company of the
Placement Shares, except for the registration of the Placement Shares under the
Act, the filing of the Registration Statement and the Prospectus and such
consents, approvals, authorizations, orders and registrations or qualifications
as may be required under applicable state securities laws or by the by-laws and
rules of the Financial Industry Regulatory Authority (“FINRA”) or the Exchange
in connection with the sale of the Placement Shares by Agents or by the Bermuda
Monetary Authority.
 

 
8

--------------------------------------------------------------------------------

 

 
(n) No Preferential Rights.  Except as set forth in, incorporated by reference
into or otherwise contemplated by the Registration Statement and the Prospectus,
(i) no person, as such term is defined in Rule 1-02 of Regulation S-X
promulgated under the Securities Act (each, a “Person”), has the right,
contractual or otherwise, to cause the Company to issue or sell to such Person
any Common Shares or other securities of the Company, (ii) no Person has any
preemptive rights, or any other rights (whether pursuant to a “poison pill”
provision or otherwise) to purchase from the Company any Common Shares or other
securities of the Company, (iii) no Person has the right to act as an
underwriter or as a financial advisor to the Company in connection with the
offer and sale of the Shares, and (iv) no Person has the right, contractual or
otherwise, to require the Company to register under the Securities Act any
Common Shares or other securities of the Company, or to include any such shares
or other securities in the Registration Statement or the offering contemplated
thereby, whether as a result of the filing or effectiveness of the Registration
Statement or the sale of the Placement Shares as contemplated thereby or
otherwise.
 
(o) Independent Public Accountant.  Ernst & Young LLP, whose report on the
consolidated financial statements of the Company is filed with the Commission as
part of the Registration Statement and the Prospectus for the period ended
December 31, 2009 (the “Accountant”), is and, during the periods covered by its
report, was an independent registered public accounting firm within the meaning
of the Securities Act and the Public Company Accounting Oversight Board (United
States).  To the Company’s knowledge, the Accountant is not in violation of the
auditor independence requirements of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”) with respect to the Company.
 
(p) Enforceability of Agreements.  Except as disclosed in the Registration
Statement and Prospectus, the Company has not sent or received any communication
regarding termination of, or intent not to renew, any of the contracts or
agreements referred to or described in, or filed as an exhibit to, the
Registration Statement and Prospectus, and no such termination or non-renewal
has been threatened by the Company or, to the Company’s knowledge, any other
party to any such contract or agreement.
 
(q) No Litigation.  Except as set forth in the Registration Statement or the
Prospectus, there are no legal, governmental or regulatory actions, suits or
proceedings pending, nor, to the Company’s knowledge, except as previously
disclosed to Agents, any legal, governmental or regulatory investigations, to
which the Company is a party or to which any property of the Company is the
subject that, individually or in the aggregate, if determined adversely to the
Company, would reasonably be expected to have a Material Adverse Effect or
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement; and to the Company’s knowledge, no such
actions, suits or proceedings are threatened or contemplated by any governmental
or regulatory authority or threatened by others.
 
(r) Licenses and Permits.  Except as set forth in the Registration Statement or
the Prospectus, the Company possesses or has obtained, and at each Settlement
Date will possess and will have obtained, all licenses, certificates, consents,
orders, approvals, permits and other authorizations issued by, and have made all
declarations and filings with, the appropriate federal, state, local or foreign
governmental or regulatory authorities that are necessary for the ownership or
lease of its properties or the conduct of its business as described in the
Registration Statement
 

 
9

--------------------------------------------------------------------------------

 

and the Prospectus (the “Permits”), except where the failure to possess, obtain
or make the same would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.  Except as disclosed in the
Registration Statement or the Prospectus, the Company has not received written
notice of any proceeding relating to revocation or modification of any such
Permit and does not have any reason to believe that such Permit will not be
renewed in the ordinary course, except where the failure to obtain any such
renewal would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
 
(s) Market Capitalization.  As of the close of trading on the Exchange on the
Trading Day on which the Company filed its most recent Annual Report on Form
10-K, the aggregate market value of the outstanding voting and non-voting common
equity (as defined in Securities Act Rule 405) of the Company held by persons
other than affiliates of the Company (pursuant to Securities Act Rule 144, those
that directly, or indirectly through one or more intermediaries, control, or are
controlled by, or are under common control with, the Company) (the
“Non-Affiliate Shares”), was equal to or greater than $75 million (calculated by
multiplying (x) the price at which the common equity of the Company was last
sold on the Exchange on such Trading Day times (y) the number of Non-Affiliate
Shares).  The Company is not a shell company (as defined in Rule 405 under the
Securities Act) and has not been a shell company for at least 12 calendar months
previously and if it has been a shell company at any time previously, has filed
current Form 10 information (as defined in Instruction I.B.6 of Form S-3) with
the Commission at least 12 calendar months previously reflecting its status as
an entity that is not a shell company.
 
(t) No Material Defaults.  The Company has not defaulted on any installment on
indebtedness for borrowed money or on any rental on one or more long-term
leases, which defaults, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.  The Company has not filed a report
pursuant to Section 13(a) or 15(d) of the Exchange Act since the filing of its
last Annual Report on Form 10-K, indicating that it (i) has failed to pay any
dividend or sinking fund installment on preferred stock or (ii) has defaulted on
any installment on indebtedness for borrowed money or on any rental on one or
more long-term leases, which defaults, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
 
(u) Certain Market Activities.  Neither the Company, nor any of its respective
directors, officers or controlling persons has taken, directly or indirectly,
any action designed, or that has constituted or might reasonably be expected to
cause or result in, under the Exchange Act or otherwise, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Placement Shares.
 
(v) Broker/Dealer Relationships.  Neither the Company nor any of its related
entities (i) is required to register as a “broker” or “dealer” in accordance
with the provisions of the Exchange Act or (ii) directly or indirectly through
one or more intermediaries, controls or is a “person associated with a member”
or “associated person of a member” (within the meaning of Article I of the NASD
Manual administered by FINRA).
 

 
10

--------------------------------------------------------------------------------

 

 
(w) No Reliance.  The Company has not relied upon Agents or legal counsel for
Agents for any legal, tax or accounting advice in connection with the offering
and sale of the Placement Shares.
 
(x) Taxes.  The Company has filed all federal, state, local and foreign tax
returns which have been required to be filed and paid all taxes shown thereon
through the date hereof, to the extent that such taxes have become due and are
not being contested in good faith.  Except as otherwise disclosed in or
contemplated by the Registration Statement or the Prospectus, no tax deficiency
has been determined adversely to the Company which has had, or would reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.  The Company has no knowledge of any federal, state or other
governmental tax deficiency, penalty or assessment which has been or might be
asserted or threatened against it which could have a Material Adverse Effect.
 
(y) Intellectual Property.  Except as set forth in the Registration Statement or
the Prospectus, the Company owns or possesses adequate enforceable rights to use
all patents, patent applications, trademarks (both registered and unregistered),
service marks, trade names, trademark registrations, service mark registrations,
copyrights, licenses and know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) (collectively, the “Intellectual Property”), necessary for the
conduct of its business as conducted as of the date hereof, except to the extent
that the failure to own or possess adequate rights to use such Intellectual
Property would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; the Company has not received any written notice
of any claim of infringement or conflict which asserted Intellectual Property
rights of others, which infringement or conflict, if the subject of an
unfavorable decision, would result in a Material Adverse Effect; to the
Company’s knowledge, there are no pending or threatened judicial proceedings or
interference proceedings challenging the Company’s rights in or to or the
validity of the scope of any of the Company’s patents, patent applications or
proprietary information; to the Company’s knowledge no other entity or
individual has any right or claim in any of the Company’s patents, patent
applications or any patent to be issued therefrom by virtue of any contract,
license or other agreement entered into between such entity or individual and
the Company or by any non-contractual obligation, other than by written licenses
granted by the Company; the Company has not received any written notice of any
claim challenging the rights of the Company in or to any Intellectual Property
owned, licensed or optioned by the Company which claim, if the subject of an
unfavorable decision would result in an Material Adverse Effect.
 
(z) Compliance Program.  The Company has established and administers a
compliance program applicable to the Company, to assist the Company and the
directors, officers and employees of the Company in complying with applicable
regulatory guidelines.
 
(aa) Environmental Laws.  Except as set forth in the Registration Statement or
the Prospectus, the Company (i) is in compliance with any and all applicable
federal, state, local and foreign laws, rules, regulations, decisions and orders
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
(collectively, “Environmental Laws”); (ii) has received and is in compliance
with all permits, licenses or other approvals required of them under applicable
Environmental Laws to
 

 
11

--------------------------------------------------------------------------------

 

conduct their respective businesses as described in the Registration Statement
and the Prospectus; and (iii) has not received notice of any actual or potential
liability for the investigation or remediation of any disposal or release of
hazardous or toxic substances or wastes, pollutants or contaminants, except, in
the case of any of clauses (i), (ii) or (iii) above, for any such failure to
comply or failure to receive required permits, licenses, other approvals or
liability as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
 
(bb) Disclosure Controls.  The Company maintains systems of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.  The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15 and 15d-15) for the Company and designed
such disclosure controls and procedures to ensure that material information
relating to the Company is made known to the certifying officers by others
within those entities, particularly during the period in which the Company’s
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be,
is being prepared.  The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of a date within 90
days prior to the filing date of the Form 10-K for the year ended December 31,
2008 (such date, the “Evaluation Date”).  The Company presented in its Form 10-K
for the fiscal year most recently ended the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation Date,
there have been no significant changes in the Company’s internal controls (as
such term is defined in Item 307(b) of Regulation S-K under the Act) or, to the
Company’s knowledge, in other factors that could significantly affect the
Company’s internal controls.
 
(cc) Sarbanes-Oxley.  To the knowledge of the Company, there is and has been no
failure on the part of the Company and any of the Company’s directors or
officers, in their capacities as such, to comply with any applicable provisions
of the Sarbanes-Oxley Act and the rules and regulations promulgated
thereunder.  Each of the principal executive officer and the principal financial
officer of the Company (or each former principal executive officer of the
Company and each former principal financial officer of the Company as
applicable) has made all certifications required by Sections 302 and 906 of the
Sarbanes-Oxley Act with respect to all reports, schedules, forms, statements and
other documents required to be filed by it or furnished by it to the
Commission.  For purposes of the preceding sentence, “principal executive
officer” and “principal financial officer” shall have the meanings given to such
terms in the Sarbanes-Oxley Act.
 
(dd) Finder’s Fees.  The Company has not incurred any liability for any finder’s
fees, brokerage commissions or similar payments in connection with the
transactions herein contemplated, except as may otherwise exist with respect to
Agents pursuant to this Agreement.
 

 
12

--------------------------------------------------------------------------------

 

 
(ee) Labor Disputes.  No labor disturbance by or dispute with employees of the
Company exists or, to the knowledge of the Company, is threatened which would
reasonably be expected to result in a Material Adverse Effect
 
(ff) Investment Company Act.  The Company, after giving effect to the offering
and sale of the Placement Shares, will not be an “investment company” or an
entity “controlled” by an “investment company,” as such terms are defined in the
Investment Company Act of 1940, as amended (the “Investment Company Act”).
 
(gg) Underwriter Agreements.  Except as set forth in, incorporated by reference
into or otherwise contemplated by the Registration Statement, the Company is not
a party to any agreement with an agent or underwriter for any other
“at-the-market” or continuous equity transaction.
 
(hh) Agent Purchases.  The Company acknowledges and agrees that Agents have
informed the Company that Agents may, to the extent permitted under the
Securities Act and the Exchange Act, purchase and sell Common Shares for their
respective own account while this Agreement is in effect, provided, that (i) no
such purchase or sales shall take place while a Placement Notice is in effect
(except to the extent Agents may engage in sales of Placement Shares purchased
or deemed purchased from the Company as a “riskless principal” or in a similar
capacity) and (ii) the Company shall not be deemed to have authorized or
consented to any such purchases or sales by Agents.
 
(ii) Margin Rules.  Neither the issuance, sale and delivery of the Shares
pursuant to this Agreement nor the application of the proceeds thereof by the
Company as described in the Registration Statement and the Prospectus will
constitute a violation by the Company of Regulation T, U or X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board of
Governors.
 
(jj) Insurance.  The Company carries, or is covered by, insurance in such
amounts and covering such risks as the Company reasonably believe are adequate
for the conduct of its properties and as is customary for companies engaged in
similar businesses in similar industries.
 
(kk) No Improper Practices.  Except as set forth in, incorporated by reference
into or otherwise contemplated by the Prospectus, there are no material
outstanding loans or advances or material guarantees of indebtedness by the
Company to or for the benefit of any of its officers or directors or any of the
members of the families of any of them.
 
(ll) Status Under the Securities Act.  The Company was not and is not an
ineligible issuer as defined in Rule 405 under the Securities Act at the times
specified in Rules 164 and 433 under the Act in connection with the offering of
the Shares.
 
(mm) No Misstatement or Omission in an Issuer Free Writing Prospectus.  Each
Issuer Free Writing Prospectus, as of its issue date and as of each Applicable
Time (as defined in Section 19 below), did not, does not and will not include
any information that conflicted, conflicts or will conflict with the information
contained in the Registration Statement or the
 

 
13

--------------------------------------------------------------------------------

 

Prospectus, including any incorporated document deemed to be a part thereof that
has not been superseded or modified.  The foregoing sentence does not apply to
statements in or omissions from any issuer Free Writing Prospectus based upon
and in conformity with written information furnished to the Company by the
Agents specifically for use therein.
 
(nn) Conformity of Issuer Free Writing Prospectus.  Each Issuer Free Writing
Prospectus conformed or will conform in all material respects to the
requirements of the Securities Act on the date of first use, and the Company has
complied or will comply with any filing requirements applicable to such Issuer
Free Writing Prospectus pursuant to the Securities Act.  Each Issuer Free
Writing Prospectus, as of its issue date and at all subsequent times through the
completion of the public offer and sale of the Shares, did not, does not and
will not include any information that conflicted, conflicts or will conflict
with the information contained in the Registration Statement or the Prospectus,
including any document incorporated by reference therein that has not been
superseded or modified.  The Company has not made any offer relating to the
Shares that would constitute an Issuer Free Writing Prospectus without the prior
written consent of Agents.  The Company has retained in accordance with the
Securities Act all Issuer Free Writing Prospectuses that were not required to be
filed pursuant to the Securities Act.
 
(oo) Disclosure Materials.  Neither the Prospectus nor any amendments or
supplements thereto, at the time the Prospectus or any such amendment or
supplement was issued, as of the date hereof, and at each Representation Date,
as the case may be, included or will include an untrue statement of a material
fact or omitted or will omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.  The preceding sentence does not apply to statements in or
omissions from the Prospectus, as amended or supplemented, in reliance upon and
in conformity with written information relating to Agents furnished to the
Company in writing (including, without limitation, electronic communications) by
Agents expressly for inclusion in any of the aforementioned documents.
 
(pp) No Conflicts.  Neither the execution of this Agreement, nor the issuance,
offering or sale of the Shares, nor the consummation of any of the transactions
contemplated herein and therein, nor the compliance by the Company with the
terms and provisions hereof and thereof will conflict with, or will result in a
breach of, any of the terms and provisions of, or has constituted or will
constitute a default under, or has resulted in or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to the terms of any contract or other agreement to which the
Company may be bound or to which any of the property or assets of the Company is
subject, except (i) such conflicts, breaches or defaults as may have been waived
and (ii) such conflicts, breaches and defaults that would not have a Material
Adverse Effect; nor will such action result (x) in any violation of the
provisions of the organizational or governing documents of the Company, or (y)
in any material violation of the provisions of any statute or any order, rule or
regulation applicable to the Company or of any court or of any federal, state or
other regulatory authority or other government body having jurisdiction over the
Company.
 
(qq) Share Transfer Taxes.  On each Settlement Date, all share transfer or other
taxes (other than income taxes) which are required to be paid in connection with
the sale and
 

 
14

--------------------------------------------------------------------------------

 

transfer of the Shares to be sold hereunder will be, or will have been, fully
paid or provided for by the Company and all laws imposing such taxes will be or
will have been fully complied with.
 
7. Covenants of the Company.  The Company covenants and agrees with Agents that:
 
(a) Registration Statement Amendments.  After the date of this Agreement and
during any period in which a Prospectus relating to any Placement Shares is
required to be delivered by Agents under the Securities Act (including in
circumstances where such requirement may be satisfied pursuant to Rule 172 under
the Securities Act): (i) the Company will notify Agents promptly of the time
when any subsequent amendment to the Registration Statement, other than
documents incorporated by reference, has been filed with the Commission and/or
has become effective or any subsequent supplement to the Prospectus has been
filed and of any request by the Commission for any amendment or supplement to
the Registration Statement or Prospectus or for additional information, (ii) the
Company will prepare and file with the Commission, promptly upon either Agent’s
request, any amendments or supplements to the Registration Statement or
Prospectus that, in such Agent’s reasonable opinion, may be necessary in
connection with the distribution of the Placement Shares by Agents (provided,
however, that the failure of either Agent to make such request shall not relieve
the Company of any obligation or liability hereunder, or affect either Agent’s
right to rely on the representations and warranties made by the Company in this
Agreement and provided, further, that the only remedy Agents shall have with
respect to the failure to make such filing shall be to cease making sales under
this Agreement until such amendment or supplement is filed); (iii) the Company
will not file any amendment or supplement to the Registration Statement or
Prospectus relating to the Placement Shares or a security convertible into the
Placement Shares unless a copy thereof has been submitted to Agents within a
reasonable period of time before the filing and neither Agent has reasonably
objected thereto (provided, however, that the failure of either Agent to make
such objection shall not relieve the Company of any obligation or liability
hereunder, or affect either Agent’s right to rely on the representations and
warranties made by the Company in this Agreement and provided, further, that the
only remedy Agents shall have with respect to the failure by the Company to
obtain such consent shall be to cease making sales under this Agreement) and the
Company will furnish to Agents at the time of filing thereof a copy of any
document that upon filing is deemed to be incorporated by reference into the
Registration Statement or Prospectus, except for those documents available via
EDGAR; and (iv) the Company will cause each amendment or supplement to the
Prospectus to be filed with the Commission as required pursuant to the
applicable paragraph of Rule 424(b) of the Securities Act or, in the case of any
document to be incorporated therein by reference, to be filed with the
Commission as required pursuant to the Exchange Act, within the time period
prescribed (the determination to file or not file any amendment or supplement
with the Commission under this Section 7(a), based on the Company’s reasonable
opinion or reasonable objections, shall be made exclusively by the Company).
 
(b) Notice of Commission Stop Orders.  The Company will advise Agents, promptly
after it receives notice or obtains knowledge thereof, of the issuance or
threatened issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement, of the suspension of the
qualification of the Placement Shares for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceeding for any such purpose; and
it
 

 
15

--------------------------------------------------------------------------------

 

will promptly use its commercially reasonable efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such a stop order should be
issued.  The Company will advise Agents promptly after it receives any request
by the Commission for any amendments to the Registration Statement or any
amendment or supplements to the Prospectus or any Issuer Free Writing Prospectus
or for additional information related to the offering of the Shares or for
additional information related to the Registration Statement, the Prospectus or
any Issuer Free Writing Prospectus.
 
(c) Delivery of Prospectus; Subsequent Changes.  During any period in which a
Prospectus relating to the Placement Shares is required to be delivered by
Agents under the Securities Act with respect to the offer and sale of the
Placement Shares, (including in circumstances where such requirement may be
satisfied pursuant to Rule 172 under the Securities Act), the Company will
comply in all material respects with all requirements imposed upon it by the
Securities Act, as from time to time in force, and to file on or before their
respective due dates all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange
Act.  If the Company has omitted any information from the Registration Statement
pursuant to Rule 430A under the Act, it will use commercially reasonable efforts
to comply with the provisions of and make all requisite filings with the
Commission pursuant to said Rule 430A and to notify Agents promptly of all such
filings.  If during such period any event occurs as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances then existing, not
misleading, or if during such period it is necessary to amend or supplement the
Registration Statement or Prospectus to comply with the Securities Act, the
Company will promptly notify Agents to suspend the offering of Placement Shares
during such period and the Company will promptly amend or supplement the
Registration Statement or Prospectus (at the expense of the Company) so as to
correct such statement or omission or effect such compliance; provided, however,
that the Company may delay any such amendment or supplement, if in the judgment
of the Company, it is in the best interests of the Company to do so.
 
(d) Listing of Placement Shares.  During any period in which the Prospectus
relating to the Placement Shares is required to be delivered by Agents under the
Securities Act with respect to the offer and sale of the Placement Shares, the
Company will use commercially reasonable efforts to cause the Placement Shares
to be listed on the Exchange and to qualify the Placement Shares for sale under
the securities laws of such jurisdictions as Agents reasonably designate and to
continue such qualifications in effect so long as required for the distribution
of the Placement Shares; provided, however, that the Company shall not be
required in connection therewith to qualify as a foreign corporation or dealer
in securities or file a general consent to service of process in any
jurisdiction.
 
(e) Delivery of Registration Statement and Prospectus.  The Company will furnish
to Agents and their counsel (at the expense of the Company) copies of the
Registration Statement, the Prospectus (including all documents incorporated by
reference therein) and all amendments and supplements to the Registration
Statement or Prospectus that are filed with the Commission during any period in
which a Prospectus relating to the Placement Shares is required to be delivered
under the Securities Act (including all documents filed with the
 

 
16

--------------------------------------------------------------------------------

 

Commission during such period that are deemed to be incorporated by reference
therein), in each case as soon as reasonably practicable and in such quantities
as either Agent may from time to time reasonably request and, at either Agent’s
request, will also furnish copies of the Prospectus to each exchange or market
on which sales of the Placement Shares may be made; provided, however, that the
Company shall not be required to furnish any document (other than the
Prospectus) to Agents to the extent such document is available on EDGAR.
 
(f) Earnings Statement.  The Company will make generally available to its
security holders as soon as practicable, but in any event not later than 18
months after the end of the Company’s current fiscal quarter, an earnings
statement covering a 12-month period that satisfies the provisions of Section
11(a) and Rule 158 of the Securities Act.
 
(g) Expenses.  The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is terminated, in accordance with
the provisions of Section 12 hereunder, will pay all expenses incident to the
performance of its obligations hereunder, including, but not limited to,
expenses relating to (i) the preparation, printing and filing of the
Registration Statement and each amendment and supplement thereto, of each
Prospectus and of each amendment and supplement thereto, (ii) the preparation,
issuance and delivery of the Placement Shares, (iii) the qualification of the
Placement Shares under securities laws in accordance with the provisions of
Section 7(d) of this Agreement, including filing fees, (iv) to the extent
required by Section 7(e), the printing and delivery to Agents of copies of the
Prospectus and any amendments or supplements thereto, and of this Agreement,
(v) the fees and expenses incurred in connection with the listing or
qualification of the Placement Shares for trading on the Exchange, (vi) filing
fees and expenses, if any, of the Commission and the FINRA Corporate Financing
Department.  Agents will pay all of their expenses incident to the performance
of its obligations hereunder.
 
(h) Use of Proceeds.  The Company will use the Net Proceeds as described in the
Prospectus in the section entitled “Use of Proceeds.”
 
(i) Notice of Other Sales.  Without the prior written consent of both Agents
(not to be unreasonably withheld), the Company will not, directly or indirectly,
offer to sell, sell, contract to sell, grant any option to sell or otherwise
dispose of any Common Shares (other than the Shares offered pursuant to the
provisions of this Agreement) or securities convertible into or exchangeable for
Common Shares, warrants or any rights to purchase or acquire, Common Shares at
any time that sales of the Shares have been made but not settled or at any time
the Company has outstanding with Agents any instructions to sell Shares but such
instructions have not been fulfilled, suspended or cancelled (or, if the
Placement Notice has been terminated or suspended prior to the sale of all
Shares covered by a Placement Notice, the date of such suspension or
termination); and will not directly or indirectly in any other “at-the-market”
or continuous equity transaction offer to sell, sell, contract to sell, grant
any option to sell or otherwise dispose of any Common Shares (other than the
Shares offered pursuant to the provisions of this Agreement) or securities
convertible into or exchangeable for Common Shares, warrants or any rights to
purchase or acquire, Common Shares prior to the later of the termination of this
Agreement and the sixtieth (60th) day immediately following the final Settlement
Date with respect to Placement Shares sold pursuant to such Placement Notice;
provided, however, that such restrictions will not be required in connection
with the Company’s
 

 
17

--------------------------------------------------------------------------------

 

issuance or sale of (i) Common Shares, options to purchase Common Shares or
Common Shares issuable upon the exercise of options, pursuant to any employee or
director share option or benefits plan, share ownership plan or dividend
reinvestment plan (but not shares subject to a waiver to exceed plan limits in
its dividend reinvestment plan) of the Company whether now in effect or
hereafter implemented, (ii) Common Shares issuable upon conversion of securities
or the exercise of warrants, options or other rights in effect or outstanding,
and disclosed in filings by the Company available on EDGAR or otherwise in
writing to Agents and (iii) Common Shares pursuant to that certain Common Share
Purchase Agreement, dated October 21, 2008, by and between Azimuth Opportunity
Ltd. and XOMA Ltd at any time that Placement Notice is pending.
 
(j) Change of Circumstances.  The Company will, at any time during the pendency
of a Placement Notice advise Agents promptly after it shall have received notice
or obtained knowledge thereof, of any information or fact that would alter or
affect in any material respect any opinion, certificate, letter or other
document required to be provided to either Agent pursuant to this Agreement.
 
(k) Due Diligence Cooperation.  The Company will cooperate with any reasonable
due diligence review conducted by either Agent or its representatives in
connection with the transactions contemplated hereby, including, without
limitation, providing information and making available documents and senior
corporate officers, during regular business hours and at the Company’s principal
offices, as such Agent may reasonably request.
 
(l) Required Filings Relating to Placement of Placement Shares.  The Company
agrees that on such dates as the Securities Act shall require, the Company will
(i) file a prospectus supplement with the Commission under the applicable
paragraph of Rule 424(b) under the Securities Act (each and every filing under
Rule 424(b), a “Filing Date”), which prospectus supplement will set forth,
within the relevant period, the maximum amount of Placement Shares to be sold
through Agents, the compensation payable by the Company to Agents with respect
to such Placement Shares and such other information that the Company deems
necessary, and (ii) deliver such number of copies of each such prospectus
supplement to each exchange or market on which such sales were effected as may
be required by the rules or regulations of such exchange or market.
 
(m) Representation Dates; Certificate.  During the term of this Agreement, on
the date of each Placement Notice given hereunder and each time the Company
(i) files the Prospectus relating to the Placement Shares or amends or
supplements the Registration Statement or the Prospectus relating to the
Placement Shares (other than a prospectus supplement filed in accordance with
Section 7(l) of this Agreement) by means of a post-effective amendment, sticker,
or supplement but not by means of incorporation of document(s) by reference to
the Registration Statement or the Prospectus relating to the Placement Shares;
(ii) files an annual report on Form 10-K under the Exchange Act; (iii) files its
quarterly reports on Form 10-Q under the Exchange Act or (iv) files a report on
Form 8-K containing amended financial information (other than an earnings
release, to “furnish” information pursuant to Items 2.02 or 7.01 of Form 8-K or
to provide disclosure pursuant to Item 8.01 of Form 8-K relating to the
reclassifications of certain properties as discontinued operations in accordance
with Statement of Financial Accounting Standards No.  144) under the Exchange
Act (each date of
 

 
18

--------------------------------------------------------------------------------

 

filing of one or more of the documents referred to in clauses (i) through (iv)
shall be a “Representation Date”); the Company shall furnish Agents with a
certificate, in the form attached hereto as Exhibit 7(m).  The requirement to
provide a certificate under this Section 7(m) shall be waived for any
Representation Date occurring at a time at which no Placement Notice is pending,
which waiver shall continue until the earlier to occur of the date the Company
delivers a Placement Notice hereunder (which for such calendar quarter shall be
considered a Representation Date), assuming no Suspension Period currently
exists, and the next occurring Representation Date; provided, however, that such
waiver shall not apply for any Representation Date on which the Company files
its annual report on Form 10-K.  Notwithstanding the foregoing, if the Company
subsequently decides to sell Placement Shares following a Representation Date
when the Company relied on such waiver and did not provide Agents with a
certificate under this Section 7(m), then before the Company delivers the
Placement Notice or either Agent sells any Placement Shares, the Company shall
provide Agents with a certificate, in the form attached hereto as Exhibit 7(m),
dated the date of the Placement Notice.
 
(n) Legal Opinion.  (i) On the date of this Agreement and (ii) within five
Trading Days of each Representation Date with respect to which the Company is
obligated to deliver a certificate in the form attached hereto as Exhibit 7(m)
for which no waiver is applicable, the Company shall cause to be furnished to
Agents a written opinion of Conyers Dill and Pearman (“Bermuda Company
Counsel”), or other counsel reasonably satisfactory to Agents, in form and
substance satisfactory to Agents and their respective counsel, dated the date of
this Agreement or the Representation Date, as applicable, substantially similar
to the form attached hereto as Exhibit 7(n)(1)(A) and a written opinion of
Cahill Gordon & Reindel LLP (“Company Counsel”), or other counsel reasonably
satisfactory to Agents, in form and substance satisfactory to Agents and their
counsel, substantially similar to the form attached hereto as Exhibit
7(n)(1)(B), respectively, modified, as necessary, to relate to the Registration
Statement and the Prospectus as then amended or supplemented; provided, however,
the Company shall be required to furnish to Agents no more than one opinion from
each Counsel hereunder per calendar quarter; provided, further, that in lieu of
such opinions for subsequent Representation Dates, counsel may furnish Agents
with a letter (a “Reliance Letter”) to the effect that Agents may rely on a
prior opinion delivered under this Section 7(n) to the same extent as if it were
dated the date of such letter (except that statements in such prior opinion
shall be deemed to relate to the Registration Statement and the Prospectus as
amended or supplemented as of the date of the Reliance Letter).
 
(o) Comfort Letter.  No later than ten Trading Days following the date the
Company files this Agreement and thereafter within five Trading Days following
each subsequent date the Company files an annual report on Form 10-K under the
Exchange Act, during any period in which the Prospectus relating to the
Placement Shares is required to be delivered by Agents (including in
circumstances where such requirement may be satisfied pursuant to Rule 172 under
the Act) and with respect to which the Company is obligated to deliver a
certificate in the form attached hereto as Exhibit 7(m) for which no waiver is
applicable, the Company shall cause its independent accountants to furnish
Agents letters (the “Comfort Letters”), dated the date the Comfort Letter is
delivered; provided, that if requested by Agents, the Company shall cause a
Comfort Letter to be furnished to Agents within ten Trading Days of the date of
occurrence of any restatement of the Company’s financial statements.  The
 

 
19

--------------------------------------------------------------------------------

 

Comfort Letter from the Company’s independent accountants shall be in a form and
substance satisfactory to Agents, (i) confirming that they are an independent
public accounting firm within the meaning of the Securities Act and the PCAOB,
(ii) stating, as of such date, the conclusions and findings of such firm with
respect to the financial information and other matters ordinarily covered by
accountants’ “comfort letters” to underwriters in connection with registered
public offerings (the first such letter, the “Initial Comfort Letter”) and
(iii) updating the Initial Comfort Letter with any information that would have
been included in the Initial Comfort Letter had it been given on such date and
modified as necessary to relate to the Registration Statement and the
Prospectus, as amended and supplemented to the date of such letter.
 
(p) Market Activities.  The Company will not, directly or indirectly, (i) take
any action designed to cause or result in, or that constitutes or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Shares or (ii) sell, bid for, or purchase the Shares, or pay anyone any
compensation for soliciting purchases of the Shares other than Agents.
 
(q) Investment Company Act.  The Company will conduct its affairs in such a
manner so as to reasonably ensure that it will not be or become, at any time
prior to the termination of this Agreement, an “investment company,” as such
term is defined in the Investment Company Act, assuming no change in the
Commission’s current interpretation as to entities that are not considered an
investment company.
 
(r) No Offer to Sell.  Other than an Issuer Free Writing Prospectus approved in
advance by the Company and both Agents in their capacity as agent hereunder,
neither of the Agents nor the Company (including its agents and representatives,
other than Agents in their capacity as such) will make, use, prepare, authorize,
approve or refer to any written communication (as defined in Rule 405 under the
Act), required to be filed with the Commission, that constitutes an offer to
sell or solicitation of an offer to buy Shares hereunder.
 
(s) Blue Sky and Other Qualifications. The Company will use its commercially
reasonable efforts, in cooperation with the Agents, to qualify the Placement
Shares for offering and sale, or to obtain an exemption for the Shares to be
offered and sold, under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Agents may designate and to maintain
such qualifications and exemptions in effect for so long as required for the
distribution of the Shares (but in no event for less than one year from the date
of this Agreement); provided, however, that the Company shall not be obligated
to file any general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is not
so qualified or to subject itself to taxation in respect of doing business in
any jurisdiction in which it is not otherwise so subject.  In each jurisdiction
in which the Placement Shares have been so qualified or exempt, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification or exemption, as the case may be, in
effect for so long as required for the distribution of the Placement Shares (but
in no event for less than one year from the date of this Agreement).
 

 
20

--------------------------------------------------------------------------------

 

 
8. Covenants of Agents.
 
(a) Each Agent, severally and not jointly, covenants and agrees that it is duly
registered as a broker-dealer under FINRA, the Exchange Act and the applicable
statutes and regulations of each state in which the Shares will be offered and
sold, except such states in which such Agent is exempt from registration or such
registration is not otherwise required.  Such Agent shall continue, for the term
of this Agreement, to be duly registered as a broker-dealer under FINRA, the
Exchange Act and the applicable statutes and regulations of each state in which
the Shares will be offered and sold, except such states in which such Agent is
exempt from registration or such registration is not otherwise required, during
the term of this Agreement.
 
(b) Each Agent, severally and not jointly, covenants and agrees that neither
such Agent nor any of its affiliates nor any entity managed or controlled by
such Agent or any of its affiliates shall enter into a short position with
respect to Common Shares of the Company, including in any account of such
Agent’s or in any account directly or indirectly managed or controlled by such
Agent or any of its affiliates or any entity managed or controlled by such Agent
or any of its affiliates.
 
9. Conditions to Each Agents’ Obligations.  The obligations of Agents hereunder
with respect to a Placement will be subject to the continuing accuracy and
completeness of the representations and warranties made by the Company herein,
to the due performance by the Company of its obligations hereunder, to the
completion by each Agent of a due diligence review satisfactory to it in its
reasonable judgment, and to the continuing satisfaction (or waiver by Agents in
its sole discretion) of the following additional conditions:
 
(a) Registration Statement Effective.  The Registration Statement shall have
become effective and shall be available for the (i) resale of all Placement
Shares issued to Agents and not yet sold by Agents and (ii) the sale of all
Placement Shares contemplated to be issued by any Placement Notice.
 
(b) No Material Notices.  None of the following events shall have occurred and
be continuing: (i) receipt by the Company of any request for additional
information from the Commission or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement, the
response to which would require any post-effective amendments or supplements to
the Registration Statement or the Prospectus; (ii) the issuance by the
Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Placement Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; or (iv) the occurrence of any event that makes any material statement
made in the Registration Statement or the Prospectus or any material document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in the Registration
Statement, related Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any materially untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and, that in the case
of the Prospectus, it will not contain any materially untrue statement of a
material fact or omit to state any material fact required to be stated therein
 

 
21

--------------------------------------------------------------------------------

 

or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
 
(c) No Misstatement or Material Omission.  The Registration Statement or
Prospectus, or any amendment or supplement thereto, shall not contain an untrue
statement of fact that in Agents’ reasonable opinion based on advice of counsel
is material, or omits to state a fact that in Agents’ reasonable opinion is
material based on advice of counsel and is required to be stated therein or is
necessary to make the statements therein not misleading.
 
(d) Material Changes.  Except as contemplated in the Prospectus, or disclosed in
the Company’s reports filed with the Commission, there shall not have been any
material adverse change, on a consolidated basis, in the amount of authorized
share capital of the Company or a downgrading in or withdrawal of the rating
assigned to any of the Company’s securities (other than asset backed securities)
by any rating organization or a public announcement by any rating organization
that it has under surveillance or review its rating of any of the Company’s
securities (other than asset backed securities), the effect of which, in the
reasonable judgment of Agents (without relieving the Company of any obligation
or liability it may otherwise have), is so material as to make it impracticable
or inadvisable to proceed with the offering of the Placement Shares on the terms
and in the manner contemplated in the Prospectus.
 
(e) Legal Opinion.  Agents shall have received the opinions of Company Counsel
and Bermuda Company Counsel required to be delivered pursuant Section 7(n) on or
before the date on which such delivery of such opinion is required pursuant to
Section 7(n).
 
(f) Comfort Letter.  Agents shall have received the Comfort Letter required to
be delivered pursuant Section 7(o) on or before the date on which such delivery
of such opinion is required pursuant to Section 7(o).
 
(g) Representation Certificate.  Agents shall have received the certificate
required to be delivered pursuant to Section 7(m) on or before the date on which
delivery of such certificate is required pursuant to Section 7(m).
 
(h) No Suspension.  Trading in the Shares shall not have been suspended on the
Exchange.
 
(i) Securities Act Filings Made.  All filings with the Commission required by
Rule 424 under the Securities Act to have been filed prior to the issuance of
any Placement Notice hereunder shall have been made within the applicable time
period prescribed for such filing by Rule 424.
 
(j) Approval for Listing.  The Company shall have submitted a notification for
listing of the Placement Shares on the Exchange at, or prior to, the issuance of
any Placement Notice.
 
(k) No Termination Event.  There shall not have occurred any event that would
permit either Agent to terminate this Agreement pursuant to Section 12(a).
 

 
22

--------------------------------------------------------------------------------

 

 
10. Indemnification and Contribution.
 
(a) Company Indemnification.  The Company agrees to indemnify and hold harmless
each Agent, the directors, officers, partners, employees and agents of each
Agent and each person, if any, who (i) controls such Agent within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, or (ii) is
controlled by or is under common control with such Agents (an “Agent Affiliate”)
from and against any and all losses, claims, liabilities, expenses and damages
(including, but not limited to, any and all reasonable investigative, legal and
other expenses incurred in connection with, and any and all reasonable amounts
paid in settlement (in accordance with Section 10(c)) of, any action, suit or
proceeding between any of the indemnified parties and any indemnifying parties
or between any indemnified party and any third party, or otherwise, or any claim
asserted), as and when incurred, to which either Agent, or any such person, may
become subject under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, liabilities, expenses or damages arise out of or are based,
directly or indirectly, on (i) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or the Prospectus or
any amendment or supplement to the Registration Statement or the Prospectus or
in any Issuer Free Writing Prospectus or in any application or other document
executed by or on behalf of the Company or based on written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify the Shares under the securities laws thereof or filed with the
Commission, (ii) the omission or alleged omission to state in any such document
a material fact required to be stated in it or necessary to make the statements
in it not misleading or (iii) any breach by any of the indemnifying parties of
any of their respective representations, warranties and agreements contained in
this Agreement; provided, however, that this indemnity agreement shall not apply
to the extent that such loss, claim, liability, expense or damage arises from
the sale of the Placement Shares pursuant to this Agreement and is caused
directly or indirectly by an untrue statement or omission made in reliance on
and in conformity with information relating to such Agent or otherwise from the
gross negligence or willful misconduct of such Agent.  This indemnity agreement
will be in addition to any liability that the Company might otherwise have.
 
(b) Agents’ Indemnification.  Each Agent, severally and not jointly, agree to
indemnify and hold harmless the Company and its directors and each officer of
the Company who signed the Registration Statement, and each person, if any, who
(i) controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act or (ii) is controlled by or is under common
control with the Company (a “Company Affiliate”) against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
Section 10(a), as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendments thereto) or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with information relating
to such Agent and furnished to the Company by such Agent or otherwise from the
gross negligence or willful misconduct of such Agent.
 
(c) Procedure.  Any party that proposes to assert the right to be indemnified
under this Section 10 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 10, notify each such
indemnifying party of the commencement of such
 

 
23

--------------------------------------------------------------------------------

 

action, enclosing a copy of all papers served, but the omission so to notify
such indemnifying party will not relieve the indemnifying party from (i) any
liability that it might have to any indemnified party otherwise than under this
Section 10 and (ii) any liability that it may have to any indemnified party
under the foregoing provision of this Section 10 unless, and only to the extent
that, such omission results in the forfeiture of substantive rights or defenses
by the indemnifying party.  If any such action is brought against any
indemnified party and it notifies the indemnifying party of its commencement,
the indemnifying party will be entitled to participate in and, to the extent
that it elects jointly with any other indemnifying party similarly notified, to
assume the defense of the action, with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party of its election to assume the defense, the indemnifying party
will not be liable to the indemnified party for any legal or other expenses
except as provided below and except for the reasonable costs of investigation
subsequently incurred by the indemnified party in connection with the
defense.  The indemnified party will have the right to employ its own counsel in
any such action, but the fees, expenses and other charges of such counsel will
be at the expense of such indemnified party unless (1) the employment of counsel
by the indemnified party has been authorized in writing by the indemnifying
party, (2) the indemnified party has reasonably concluded (based on advice of
counsel) that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the
indemnifying party, (3) a conflict or potential conflict exists (based on advice
of counsel to the indemnified party) between the indemnified party and the
indemnifying party (in which case the indemnifying party will not have the right
to direct the defense of such action on behalf of the indemnified party) or
(4) the indemnifying party has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties.  It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties.  All
such fees, disbursements and other charges will be reimbursed by the
indemnifying party promptly as they are incurred.  An indemnifying party will
not, in any event, be liable for any settlement of any action or claim effected
without its written consent.  No indemnifying party shall, without the prior
written consent of each indemnified party, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding relating to the matters contemplated by this Section 10 (whether or
not any indemnified party is a party thereto), unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising or that may arise out of such claim, action or
proceeding and does not include an admission of fault or culpability or a
failure to act by or on behalf of such indemnified party.
 
(d) Contribution.  In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 10 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or either Agent, the
Company and each Agent will contribute to the total losses, claims, liabilities,
expenses and damages (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any
 

 
24

--------------------------------------------------------------------------------

 

action, suit or proceeding or any claim asserted, but after deducting any
contribution received by the Company from persons other than Agents, such as
persons who control the Company within the meaning of the Securities Act,
officers of the Company who signed the Registration Statement and directors of
the Company, who also may be liable for contribution) to which the Company and
each Agent may be subject in such proportion as shall be appropriate to reflect
the relative benefits received by the Company on the one hand and Agents on the
other.  The relative benefits received by the Company on the one hand and Agents
on the other hand shall be deemed to be in the same proportion as the total net
proceeds from the sale of the Placement Shares (before deducting expenses)
received by the Company bear to the total compensation received by Agents
(before deducting expenses) from the sale of Placement Shares on behalf of the
Company.  If, but only if, the allocation provided by the foregoing sentence is
not permitted by applicable law, the allocation of contribution shall be made in
such proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of the
Company, on the one hand, and Agents, on the other, with respect to the
statements or omission that resulted in such loss, claim, liability, expense or
damage, or action in respect thereof, as well as any other relevant equitable
considerations with respect to such offering.  Such relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or either Agent,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or omission.  The Company
and each Agent agree that it would not be just and equitable if contributions
pursuant to this Section 10(d) were to be determined by pro rata allocation or
by any other method of allocation that does not take into account the equitable
considerations referred to herein.  The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense, or damage, or action
in respect thereof, referred to above in this Section 10(d) shall be deemed to
include, for the purpose of this Section 10(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim to the extent consistent with Section
10(c) hereof.  Notwithstanding the foregoing provisions of this Section 10(d),
Agents shall not be required to contribute any amount in excess of the
commissions received by it under this Agreement and no person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.  For purposes of this Section
10(d), any person who controls a party to this Agreement within the meaning of
the Securities Act, and any officers, directors, partners, employees or agents
of Agents, will have the same rights to contribution as that party, and each
officer of the Company who signed the Registration Statement will have the same
rights to contribution as the Company, subject in each case to the provisions
hereof.  Any party entitled to contribution, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim for
contribution may be made under this Section 10(d), will notify any such party or
parties from whom contribution may be sought, but the omission to so notify will
not relieve that party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 10(d) except to the
extent that the failure to so notify such other party materially prejudiced the
substantive rights or defenses of the party from whom contribution is
sought.  Except for a settlement entered into pursuant to the last sentence of
Section 10(c) hereof, no party will be liable for contribution with respect to
any
 

 
25

--------------------------------------------------------------------------------

 

action or claim settled without its written consent if such consent is required
pursuant to Section 10(c) hereof.
 
11. Representations and Agreements to Survive Delivery.  The indemnity and
contribution agreements contained in Section 10 of this Agreement and all
representations and warranties of the Company herein or in certificates
delivered pursuant hereto shall survive, as of their respective dates,
regardless of (i) any investigation made by or on behalf of Agents, any
controlling persons, or the Company (or any of their respective officers,
directors or controlling persons), (ii) delivery and acceptance of the Placement
Shares and payment therefor or (iii) any termination of this Agreement.
 
12. Termination.
 
(a) Each Agent shall have the right by giving notice as hereinafter specified at
any time to terminate this Agreement if (i) any Material Adverse Effect has
occurred that, in the reasonable judgment of such Agent, may materially impair
the ability of Agents to sell the Placement Shares hereunder, (ii) the Company
shall have failed, refused or been unable to perform any agreement on its part
to be performed hereunder; provided, however, in the case of any failure of the
Company to deliver (or cause another person to deliver) any certification,
opinion, or letter required under Sections 7(m), 7(n), or 7(o), Agents’ right to
terminate shall not arise unless such failure to deliver (or cause to be
delivered) continues for more than thirty days from the date such delivery was
required; or (iii) any suspension or limitation of trading in the Placement
Shares or in securities generally on the Exchange shall have occurred.  Any such
termination shall be without liability of any party to any other party except
that the provisions of Section 7(g) (Expenses), Section 9 (Indemnification),
Section 11 (Survival of Representations), Section 17 (Applicable Law; Consent to
Jurisdiction) and Section 18 (Waiver of Jury Trial) hereof shall remain in full
force and effect notwithstanding such termination.  If Agents elect to terminate
this Agreement as provided in this Section 12(a), Agents shall provide the
required notice as specified in Section 13 (Notices).
 
(b) The Company shall have the right, by giving 60 days notice as hereinafter
specified to terminate this Agreement in its sole discretion at any time after
the date of this Agreement.  Any such termination shall be without liability of
any party to any other party except that the provisions of Section 7(g), Section
10, Section 11, Section 17 and Section 18 hereof shall remain in full force and
effect notwithstanding such termination.
 
(c) Each Agent shall have the right, by giving 60 days notice as hereinafter
specified to terminate this Agreement in its sole discretion at any time after
the date of this Agreement.  Any such termination shall be without liability of
any party to any other party except that the provisions of Section 7(g), Section
10, Section 11, Section 17 and Section 18 hereof shall remain in full force and
effect notwithstanding such termination.
 
(d) Unless earlier terminated pursuant to this Section 12, this Agreement shall
automatically terminate upon the issuance and sale of the maximum amount of the
Shares set forth in Section 1 through Agents on the terms and subject to the
conditions set forth herein; provided that the provisions of Section 7(g),
Section 10, Section 11, Section 17 and Section 18 hereof shall remain in full
force and effect notwithstanding such termination.
 

 
26

--------------------------------------------------------------------------------

 

 
(e) This Agreement shall remain in full force and effect unless terminated
pursuant to Sections 12(a), (b), (c), or (d) above or otherwise by mutual
agreement of the parties; provided, however, that any such termination by mutual
agreement shall in all cases be deemed to provide that Section 7(g), Section 10,
Section 11, Section 17 and Section 18 shall remain in full force and effect.
 
(f) Any termination of this Agreement shall be effective on the date specified
in such notice of termination; provided, however, that such termination shall
not be effective until the close of business on the date of receipt of such
notice by Agents or the Company, as the case may be.  If such termination shall
occur prior to the Settlement Date for any sale of Placement Shares, such
Placement Shares shall settle in accordance with the provisions of this
Agreement.
 
13. Notices.  All notices or other communications required or permitted to be
given by any party to any other party pursuant to the terms of this Agreement
shall be in writing, unless otherwise specified, and if sent to Agents, shall be
delivered to:
 
Wm Smith & Co.
1700 Lincoln Street, Suite 2545
Denver, CO  80203
Attention:       William S. Smith
Facsimile:        303-831-0881

and
 
McNicoll, Lewis & Vlak LLC
420 Lexington Ave., Suite 628
New York, NY 10170
Attention:       Patrice McNicoll
Facsimile:        646-417-7205

 
with a copy to:
 
Holme Roberts & Owen LLP
1700 Lincoln Street, Suite 4100
Denver, CO  80203
Attention:       Garth B.  Jensen
Facsimile:        303-866-0200

 
and if to the Company, shall be delivered to:
 
XOMA Ltd.
2910 Seventh Street
Berkeley, CA 94710
Attention: Christopher J.  Margolin
Facsimile: (510) 649-7571

 

 
27

--------------------------------------------------------------------------------

 

with a copy to:
 
Cahill Gordon & Reindel LLP
80 Pine Street
New York, New York 10005
Attention: Geoffrey E. Liebmann
Facsimile: (212) 269-5420

 
Each party to this Agreement may change such address for notices by sending to
the parties to this Agreement written notice of a new address for such
purpose.  Each such notice or other communication shall be deemed given (i) when
delivered personally or by verifiable facsimile transmission (with an original
to follow) on or before 4:30 p.m., New York City time, on a Business Day or, if
such day is not a Business Day, on the next succeeding Business Day, (ii) on the
next Business Day after timely delivery to a nationally-recognized overnight
courier and (iii) on the Business Day actually received if deposited in the
U.S.  mail (certified or registered mail, return receipt requested, postage
prepaid).  For purposes of this Agreement, “Business Day” shall mean any day on
which the Exchange and commercial banks in the City of New York are open for
business.
 
An electronic communication (“Electronic Notice”) shall be deemed written notice
for purposes of this Section 13 if sent to the electronic mail address specified
by the receiving party under separate cover.  Electronic Notice shall be deemed
received at the time the party sending Electronic Notice receives verification
of receipt by the receiving party.  Any party receiving Electronic Notice may
request and shall be entitled to receive the notice on paper, in a
non-electronic form (“Non-electronic Notice”) which shall be sent to the
requesting party within ten (10) days of receipt of the written request for
Non-electronic Notice.
 
14. Successors and Assigns.  This Agreement shall inure to the benefit of and be
binding upon the Company and each Agent and their respective successors and the
affiliates, controlling persons, officers and directors referred to in Section
10 hereof.  References to any of the parties contained in this Agreement shall
be deemed to include the successors and permitted assigns of such
party.  Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.  None
of the parties may assign its rights or obligations under this Agreement without
the prior written consent of the other parties; provided, however, that each
Agent may assign its rights and obligations hereunder to an affiliate of such
Agent without obtaining any other party’s consent.
 
15. Adjustments for Stock Splits.  The parties acknowledge and agree that all
share-related numbers contained in this Agreement shall be adjusted to take into
account any stock split, share dividend, share subdivision, bonus issue or
similar event effected with respect to the Shares.
 
16. Entire Agreement; Amendment; Severability.  This Agreement (including all
schedules and exhibits attached hereto and Placement Notices issued pursuant
hereto) constitutes the entire agreement and supersedes all other prior and
contemporaneous agreements and
 

 
28

--------------------------------------------------------------------------------

 

undertakings, both written and oral, among the parties hereto with regard to the
subject matter hereof.  Neither this Agreement nor any term hereof may be
amended except pursuant to a written instrument executed by the Company and each
Agent.  In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable as written by a court of competent jurisdiction, then such
provision shall be given full force and effect to the fullest possible extent
that it is valid, legal and enforceable, and the remainder of the terms and
provisions herein shall be construed as if such invalid, illegal or
unenforceable term or provision was not contained herein, but only to the extent
that giving effect to such provision and the remainder of the terms and
provisions hereof shall be in accordance with the intent of the parties as
reflected in this Agreement.
 
17. Applicable Law; Consent to Jurisdiction.  This Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of New York
without regard to the principles of conflicts of laws.  Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection with any transaction
contemplated hereby, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper.  Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof (certified or registered mail, return
receipt requested) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.
 
18. Waiver of Jury Trial.  The Company and Agents each hereby irrevocably waives
any right it may have to a trial by jury in respect of any claim based upon or
arising out of this agreement or any transaction contemplated hereby.
 
19. Certain Definitions.  As used in this Agreement, the following terms have
the respective meanings set forth below:
 
“Applicable Time” means (i) each Representation Date and (ii) the time of each
sale of any Placement Shares pursuant to this Agreement.
 
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as
defined in Rule 433, relating to the Shares that (i) is required to be filed
with the Commission by the Company, (ii) is a “road show” that is a “written
communication” within the meaning of Rule 433(d)(8)(i) whether or not required
to be filed with the Commission, or (iii) is exempt from filing pursuant to
Rule 433(d)(5)(i) because it contains a description of the Shares or of the
offering that does not reflect the final terms, in each case in the form filed
or required to be filed with the Commission or, if not required to be filed, in
the form retained in the Company’s records pursuant to Rule 433(g) under the
Securities Act Regulations.
 
“Rule 163,” “Rule 164,” “Rule 172,” “Rule 405,” “Rule 415,” “Rule 424,”
“Rule 424(b),” “Rule 430B,” and “Rule 433” refer to such rules under the
Securities Act Regulations.
 

 
29

--------------------------------------------------------------------------------

 

 
“Trading Agent” shall be the Agent designated in the Placement Notice through
which the sale of Shares that are the subject of such Placement Notice shall be
conducted.
 
All references in this Agreement to financial statements and schedules and other
information that is “contained,” “included” or “stated” in the Registration
Statement or the Prospectus (and all other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other
information that is incorporated by reference in the Registration Statement or
the Prospectus, as the case may be.
 
All references in this Agreement to the Registration Statement, the Prospectus
or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to EDGAR; all references in
this Agreement to any Issuer Free Writing Prospectus (other than any Issuer Free
Writing Prospectuses that, pursuant to Rule 433, are not required to be filed
with the Commission) shall be deemed to include the copy thereof filed with the
Commission pursuant to EDGAR; and all references in this Agreement to
“supplements” to the Prospectus shall include, without limitation, any
supplements, “wrappers” or similar materials prepared in connection with any
offering, sale or private placement of any Placement Shares by the Agents
outside of the United States.
 
20. Counterparts.  This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.  Delivery of an executed Agreement by
one party to the other may be made by facsimile transmission.
 
[Remainder of Page Intentionally Blank]

 
30

--------------------------------------------------------------------------------

 

 
If the foregoing correctly sets forth the understanding between the Company and
Agents, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and Agents.
 
Very truly yours,
 
XOMA Ltd.
 
By:  /s/ Christopher J. Margolin
        Name:  Christopher J. Margolin
        Title:    Vice President, General
                     Counsel and Secretary

 
ACCEPTED as of the date first-above written:
 
WM SMITH & CO.
 
By:
/s/ William S. Smith
Name:
William S. Smith
Title:
President
   
McNICOLL, LEWIS & VLAK LLC
 
By:
/s/ Patrice McNicoll
Name:
Patrice McNicoll
Title:
President

 
31

--------------------------------------------------------------------------------

 

SCHEDULE 1
__________________________
 
FORM OF PLACEMENT NOTICE
__________________________
 
 
From:
[          ]
   
To:
Wm Smith & Co
Attention:  William Smith
     
McNicoll, Lewis & Vlak LLC
Attention: Patrice McNicoll
   
Subject:
At Market Issuance--Placement Notice

 
Gentlemen:
 
Pursuant to the terms and subject to the conditions contained in the At Market
Issuance Sales Agreement among XOMA Ltd.  (the “Company”) and Wm Smith & Co. and
McNicoll, Lewis & Vlak LLC (collectively, “Agents”) dated October 26, 2010, the
Company hereby requests that Agents sell up to ____________  common shares (the
“Shares”), par value $0.0075 per share, of the Company at a minimum market price
of $_______ per share, during the time period beginning [month, day, time] and
ending [month, day, time].
 
 
_____________________ shall be the Trading Agent for the sale of the Shares.
 

 
32

--------------------------------------------------------------------------------

 

SCHEDULE 2
____________________________
 
Compensation
____________________________
 
The Company shall pay to Agents, collectively, in cash, upon each sale of Shares
pursuant to this Agreement, an amount equal to 3% of the gross proceeds from
such sale of such Shares.
 

 
33

--------------------------------------------------------------------------------

 

SCHEDULE 3
 
Company

Christopher J Margolin        margolin@xoma.com

 
Fred Kurland                          kurland@xoma.com
 

 
Steve Engle
 
Agents
 
Bill Smith                                bsmith@wmsmith.com
 
Patrice McNicoll                   pmcnicoll@mlvco.com

 
34

--------------------------------------------------------------------------------

 

SCHEDULE 4

Account Information

 
35

--------------------------------------------------------------------------------

 

Disclosure Schedule
Section 6(g)

Subsidiaries
 
XOMA (Bermuda) Ltd.
XOMA CDRA LLC
XOMA Development Corporation
XOMA Ireland Limited
XOMA LS Limited
XOMA Technology Ltd.
XOMA (US) LLC
XOMA Limited (UK)

 
36

--------------------------------------------------------------------------------

 

EXHIBIT 7(m)

Form of Representation Date Certificate

This Officers Certificate (this “Certificate”) is executed and delivered in
connection with Section 7(m) of the At Market Issuance Sales Agreement (the
“Agreement”), dated October 26, 2010, and entered into between XOMA Ltd. (the
“Company”) and Wm Smith & Co. and McNicoll, Lewis & Vlak LLC, as
agents  (collectively “Agents”).  All capitalized terms used but not defined
herein shall have the meanings given to such terms in the Agreement
 
The undersigned, a duly appointed and authorized officer of the Company, having
been authorized by the Company to execute this certificate, hereby certifies as
follows:
 
1.           As of the date of this Certificate, (i) the Registration Statement
does not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading and (ii) neither the Prospectus nor the
Pricing Disclosure Materials contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading and (iii) no event has occurred as a result
of which it is necessary to amend or supplement the Prospectus in order to make
the statements therein not untrue or misleading.
 
2.           Each of the representations and warranties of the Company contained
in the Agreement were, when originally made, and are, as of the date of this
Certificate, true and correct in all material respects.
 
3.           Each of the covenants required to be performed by the Company in
the Agreement on or prior to the date of the Agreement, this Representation
Date, and each such other date as set forth in the Agreement, has been duly,
timely and fully performed in all material respects and each condition required
to be complied with by the Company on or prior to the date of the Agreement,
this Representation Date, and each such other date as set forth in the Agreement
or in the Waivers has been duly, timely and fully complied with in all material
respects.
 
4.           Except as set forth in, incorporated by reference into or otherwise
contemplated by the Registration Statement or the Prospectus, since the date of
the most recent financial statements of the Company included or incorporated by
reference in the Registration Statement and the Prospectus there has not been
any material adverse change in the business, properties, financial position, or
results of operations of the Company, taken as a whole.
 
5.           No stop order suspending the effectiveness of the Registration
Statement or of any part thereof has been issued, and no proceedings for that
purpose have been instituted or are pending or threatened by any securities or
other governmental authority (including, without limitation, the Commission).
 
6.           No order suspending the effectiveness of the Registration Statement
or the qualification or registration of the Shares under the securities or Blue
Sky laws of any jurisdiction are
 

 
37

--------------------------------------------------------------------------------

 

in effect and no proceeding for such purpose is pending before, or threatened,
to the Company’s knowledge or in writing by, any securities or other
governmental authority (including, without limitation, the Commission).
 
The undersigned has executed this Officer’s Certificate as of the date first
written above.
 
XOMA LTD.
 
By:
 
Name:
Title:

 
 
38