EXHIBIT 10.47

U.S. $35,000,000

LOAN AGREEMENT

Dated as of November 9, 2006

between

GOLDMAN SACHS SPECIALTY LENDING HOLDINGS, INC.

as Lender,

XOMA LTD.

as Guarantor,

and

XOMA (US) LLC

as Borrower

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TABLE OF CONTENTS

 

          Page

ARTICLE I         CERTAIN DEFINITIONS

   1

Section 1.01.

  

Definitions

   1

Section 1.02.

  

Interpretation; Headings

   10

ARTICLE II         COMMITMENT; DISBURSEMENT; FEES

   10

Section 2.01.

  

Commitment to Lend

   10

Section 2.02.

  

Notice of Borrowing

   10

Section 2.03.

  

Disbursement

   11

Section 2.04.

  

Commitment Not Revolving

   11

Section 2.05.

  

Upfront Structuring Fee

   11

ARTICLE III         REPAYMENT

   11

Section 3.01.

  

Amortization

   11

Section 3.02.

  

Optional Prepayment; Prepayment Premium

   11

Section 3.03.

  

Illegality

   12

ARTICLE IV         INTEREST; EXPENSES

   12

Section 4.01.

  

Interest Rate

   12

Section 4.02.

  

Payment Account

   13

Section 4.03.

  

Interest Reserve Account

   13

Section 4.04.

  

Interest on Late Payments

   13

Section 4.05.

  

Initial Expenses

   13

Section 4.06.

  

Administration and Enforcement Expenses

   13

ARTICLE V         TAXES

   14

Section 5.01.

  

Taxes

   14

Section 5.02.

  

Receipt of Payment

   15

Section 5.03.

  

Other Taxes

   15

Section 5.04.

  

Indemnification

   15

ARTICLE VI         PAYMENTS; COMPUTATIONS

   15

Section 6.01.

  

Making of Payments

   15

Section 6.02.

  

Computations

   16

Section 6.03.

  

Setoff or Counterclaim

   16

ARTICLE VII         CONDITIONS PRECEDENT

   16

Section 7.01.

  

Conditions Precedent to the Loan

   16

ARTICLE VIII         REPRESENTATIONS AND WARRANTIES

   18

Section 8.01.

  

Representations and Warranties of the Borrower

   18

 

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TABLE OF CONTENTS

(continued)

 

Section 8.02.

  

Survival of Representations and Warranties

   23

ARTICLE IX         AFFIRMATIVE COVENANTS

   23

Section 9.01.

  

Maintenance of Existence

   23

Section 9.02.

  

Maintenance of Single Owner and Status as Disregarded Entity for Tax Purposes

   24

Section 9.03.

  

Treatment of U.S. Domestic Source Income

   24

Section 9.04.

  

Use of Proceeds

   24

Section 9.05.

  

Financial Statements and Information

   24

Section 9.06.

  

Books and Records

   25

Section 9.07.

  

Inspection Rights; Access

   25

Section 9.08.

  

Payment Account

   25

Section 9.09.

  

Maintenance of Insurance and Properties

   25

Section 9.10.

  

Governmental Authorizations

   25

Section 9.11.

  

Compliance with Laws and Contracts

   26

Section 9.12.

  

Plan Assets

   26

Section 9.13.

  

Notices

   26

Section 9.14.

  

Payment of Taxes

   26

Section 9.15.

  

Waiver of Stay, Extension or Usury Laws

   26

Section 9.16.

  

Further Assurances

   27

ARTICLE X         NEGATIVE COVENANTS

   27

Section 10.01.

  

Activities of the Borrower

   27

Section 10.02.

  

Merger; Sale of Assets

   27

Section 10.03.

  

Liens

   28

Section 10.04.

  

No Subsidiaries

   29

Section 10.05.

  

Investment Company Act

   29

Section 10.06.

  

Limitation on Additional Indebtedness

   29

Section 10.07.

  

Limitation on Transactions with Affiliates

   29

Section 10.08.

  

Interest Coverage Ratio

   29

Section 10.09.

  

ERISA

   30

ARTICLE XI         EVENTS OF DEFAULT

   30

Section 11.01.

  

Events of Default

   30

Section 11.02.

  

Default Remedies

   32

Section 11.03.

  

Right of Set-off

   33

Section 11.04.

  

Rights Not Exclusive

   33

ARTICLE XII         GUARANTEE

   33

Section 12.01.

  

Guarantee

   33

Section 12.02.

  

Guarantee Absolute

   33

 

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TABLE OF CONTENTS

(continued)

 

Section 12.03.

  

Waivers and Acknowledgments

   34

Section 12.04.

  

Subrogation

   35

Section 12.05.

  

Continuing Guarantee

   35 ARTICLE XIII         INDEMNIFICATION    36

Section 13.01.

  

Funding Losses

   36

Section 13.02.

  

Increased Costs

   36

Section 13.03.

  

Other Losses

   36

Section 13.04.

  

Assumption of Defense; Settlements

   37 ARTICLE XIV         MISCELLANEOUS    37

Section 14.01.

  

Assignments

   37

Section 14.02.

  

Participations

   38

Section 14.03.

  

Successors and Assigns

   38

Section 14.04.

  

Notices

   38

Section 14.05.

  

Entire Agreement

   40

Section 14.06.

  

Modification

   40

Section 14.07.

  

No Delay; Waivers; etc

   40

Section 14.08.

  

Severability

   40

Section 14.09.

  

Determinations

   40

Section 14.10.

  

Replacement of Note

   40

Section 14.11.

  

Governing Law

   40

Section 14.12.

  

Jurisdiction

   40

Section 14.13.

  

Waiver of Jury Trial

   41

Section 14.14.

  

Waiver of Immunity

   41

Section 14.15.

  

Counterparts

   41

Section 14.16.

  

Limitation on Rights of Others

   41

Section 14.17.

  

No Partnership

   41

Section 14.18.

  

Survival

   41

Section 14.19.

  

Patriot Act Notification

   41

 

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TABLE OF CONTENTS

(continued)

 

Exhibit A.    Form of Promissory Note Exhibit B.    Form of Notice of Borrowing
Exhibit C.    Form of Security Agreement Exhibit D-1.    Form of Certificate of
the Borrower Exhibit D-2.    Form of Certificate of XOMA Exhibit D-3.    Form of
Certificate of XOMA Bermuda Exhibit E.    Existing Liens and Related
Indebtedness Exhibit F.    Revenue Milestones Exhibit G.    Form of Assignment
and Acceptance Exhibit H-1.    [*] Exhibit H-2.    [*] Exhibit I.    Acquisition
Agreement Exhibit J.    XOMA BCE/HE Intellectual Property

 

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This LOAN AGREEMENT is dated as of November 9, 2006, by and between Goldman
Sachs Specialty Lending Holdings, Inc., a Delaware corporation (the “Lender”),
as Lender, XOMA (US) LLC, a Delaware limited liability company (the “Borrower”),
as Borrower, and XOMA Ltd., a Bermuda company (“XOMA”), as guarantor. The
Lender, the Borrower and XOMA are hereinafter referred to collectively as the
“Parties” or individually as a “Party”.

W I T N E S S E T H:

WHEREAS, the Borrower is a Delaware limited liability company that was formed on
May 31, 1999 and having its principal place of business at 2910 Seventh Street,
Berkeley, California 94710;

WHEREAS, the Payment Rights (as defined below) were assigned to the Borrower by
XOMA (Bermuda) Ltd. (“XOMA Bermuda”) pursuant to the Acquisition Agreement,
dated November 9, 2006 (the “Acquisition Agreement”);

WHEREAS, the Borrower entered into the Second Amended and Restated Collaboration
Agreement (the “Collaboration Agreement”), effective as of January 1, 2005, with
Genentech, Inc., a Delaware corporation, with respect to certain payment rights
in relation to RAPTIVA® (the “Raptiva Rights”);

WHEREAS, the Borrower proposes to borrow from the Lender, and the Lender
proposes to lend to the Borrower, an aggregate principal amount of $35,000,000;

WHEREAS, in order to induce the Lender to enter into this Agreement and to
extend credit hereunder, the Borrower has agreed to grant Lender a security
interest in the Payment Rights and all of the Borrower’s rights under the
Acquisition Agreement and the Raptiva Rights as collateral for the Borrower’s
obligations hereunder; and

WHEREAS, XOMA has agreed to guarantee the Borrower’s obligations hereunder;

NOW, THEREFORE, in consideration of the mutual promises of the Parties, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is mutually agreed by the Parties as follows:

ARTICLE I

CERTAIN DEFINITIONS

SECTION 1.01. Definitions. As used herein:

“Account Bank” means The Northern Trust Company.

“Acquisition Agreement” has the meaning specified in the second recital hereof.

“Act of Insolvency” shall mean, with respect to any Person, such Person shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors (or the

 

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equivalent); or any proceeding shall be instituted by or against such Person
seeking to adjudicate it a bankrupt or insolvent (or the equivalent), or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, moratorium or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or the like, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any substantial part of its
property, or such Person shall take any corporate action to authorize any of the
actions set forth above in this definition.

“Affiliate” with respect to any Person means any Person directly or indirectly
controlling, controlled by or under common control with, such Person. For the
purposes of this Agreement, “control” (including, with correlative meaning, the
terms “controlling” and “controlled”) shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.

“Agreement” shall mean this Loan Agreement.

“Assignee” has the meaning specified in Section 14.01(b).

“Assignment and Acceptance” has the meaning specified in Section 14.01(c).

“Banking Day” means any day, except a Saturday, Sunday or other day on which
commercial banks in New York are required or authorized by law to close, which
is also a day on which commercial banks are open for international business
(including dealing in Dollar deposits) in London.

“BCE Program” has the meaning specified in Section 8.01(gg).

“Borrower” has the meaning specified in the first paragraph hereof.

“Borrower Change of Control” means any change of control of the Borrower that
results in the Borrower not being directly controlled by XOMA.

“Borrower Documents” means the Borrower’s Limited Liability Company Agreement,
dated May 31, 1999, and the certificate of formation of the Borrower.

“Capital Stock” of any Person means any and all shares, interests, ownership
interest units, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any preferred stock, but excluding any debt securities convertible
into such equity.

“CIMZIA License Agreement” has the meaning specified in the definition of
“License Agreements”.

“Closing Date” means the date upon which the conditions precedent under Article
VII have been satisfied to the satisfaction of the Lender.

 

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“Code” means the Internal Revenue Code of 1986 and applicable U.S. Department of
Treasury regulations issued pursuant thereto in temporary or final form.

“Collaboration Agreement” has the meaning specified in the third recital hereof.

“Collaboration Intellectual Property” means any intellectual property jointly
made or jointly owned by a XOMA Party and a third-party collaboration partner in
the course of conducting research and development activities pursuant to a
collaboration agreement.

“Commitment” means $35,000,000.

“Contract” has the meaning specified in Section 8.01(e).

[*]

“Default” means any condition or event which constitutes an Event of Default or
which, with the giving of notice or the lapse of time or both would, unless
cured or waived, become an Event of Default.

“Default Rate” means, for any period for which an amount is overdue, a rate per
annum equal for each day in such period to the sum of (i) the applicable Margin,
(ii) 3.00% and (iii) LIBOR determined by the Lender for such period as the
Lender determines to be reasonable in the circumstances.

“Designated Excess” has the meaning specified in Section 3.01(a).

“Dispute” means any dispute, deduction, claim, offset, defense or counterclaim
of any kind between XOMA Bermuda or the Borrower on the one hand and any Obligor
(or any of its Affiliates) on the other hand relating to any Payment Right,
Raptiva Right or any License Agreement, as applicable; provided, however, that
“Dispute” shall not mean (a) any such dispute, deduction, claim, offset, defense
or counterclaim [*], (ii) that is not reasonably expected to have an adverse
effect on either the Raptiva Rights or the Payments Rights or (iii) where the
amount in dispute does not exceed $100,000; or (b) an Act of Insolvency on the
part of any Obligor or any Affiliate of any Obligor.

“Dollars” or “$” means lawful money of the United States of America.

“ERISA” means the Employee Retirement Income Security Act of 1974 and the
regulations promulgated thereunder.

“ERISA Affiliate” at any time means each trade or business (whether or not
incorporated) that would, at any time, be treated, together with XOMA, the
Borrower or any of their respective Subsidiaries, as a single employer under
Title IV or Section 302 of ERISA or Section 412 of the Code or any similar
provision under non-U.S. law.

“Event of Default” has the meaning specified in Section 11.01.

 

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“Exchange Act” means the Securities Exchange Act of 1934 and the regulations
promulgated thereunder.

“Excluded Taxes” means (i) any Taxes imposed on (or measured by) net income
(including branch profits Taxes) of the Lender, or any franchise or similar
Taxes imposed in lieu thereof, by any Governmental Authority or taxing authority
by the jurisdiction under the laws of which the Lender is organized or any
jurisdiction in which the Lender is a resident, has an office, conducts business
or has another connection (other than a business or connection resulting from
the Lender being a party to, performing its obligations or receiving payments
under, or enforcing, this Agreement, or otherwise arising out of the
transactions contemplated by this Agreement) and (ii) in the case of a Foreign
Lender, any withholding tax that is imposed on amounts payable to such Foreign
Lender (a) under law in effect at the time such Foreign Lender becomes a party
to this Agreement (or designates a new Lending Office), except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new Lending Office (or assignment), to receive additional
amounts from the Borrower with respect to such withholding tax pursuant to
Section 5.01(a) or (b) that is attributable to such Foreign Lender’s failure to
comply with Section 5.01(b).

“Existing Disputes” has the meaning specified in the definition of “Dispute”.

“Foreign Lender” has the meaning specified in Section 5.01(b).

“GAAP” means the generally accepted accounting principles in the United States
of America in effect from time to time.

“Genentech” means Genentech, Inc., a Delaware corporation.

[*].

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to,
government.

“Guaranteed Obligations” has the meaning specified in Section 12.01.

“Indebtedness” with respect to any Person means any amount (absolute or
contingent) payable by such Person as debtor, borrower, issuer, guarantor or
otherwise (i) pursuant to an agreement or instrument involving or evidencing
money borrowed, the advance of credit, a conditional sale or a transfer with
recourse or with an obligation to repurchase, (ii) pursuant to a lease with
substantially the same economic effect as any such agreement or instrument,
(iii) pursuant to any equity interest with a mandatory obligation to repurchase,
(iv) pursuant to indebtedness of a third party secured by (or for which the
holder of such indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien on assets owned or acquired by such Person, whether or
not the indebtedness secured thereby has been assumed, (v) pursuant to an
interest rate protection agreement, foreign currency exchange agreement or other
hedging arrangement or (vi) pursuant to a letter of credit issued for the
account of such Person. For the avoidance of doubt, the Indebtedness of any
Person shall include the Indebtedness of any other entity to the extent such
Person is directly liable therefor as

 

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a result of such Person’s ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.

“Indemnified Liabilities” means, collectively, any and all liabilities,
obligations, losses, damages, penalties, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel for Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto, and any fees or expenses incurred by Indemnitees in
enforcing the indemnity provided herein), whether direct, indirect or
consequential and whether based on any federal, state or foreign laws, statutes,
rules or regulations (including securities and commercial laws, statutes, rules
or regulations), on common law or equitable cause or on contract or otherwise,
that may be imposed on, incurred by, or asserted against any such Indemnitee, in
any manner relating to or arising out of this Agreement or the other Loan
Documents or the transactions contemplated hereby or thereby (including any
enforcement of any of the Loan Documents (including any sale of, collection
from, or other realization upon any of the Collateral (as defined in the
Security Agreement)).

“Indemnified Taxes” has the meaning specified in Section 5.01.

“Indemnitee” has the meaning specified in Section 13.03.

“Interest Coverage Ratio” means, with respect to any Interest Payment Date, the
ratio of (i) all payments received (net of any withholding taxes) with respect
to the Payment Rights and the Raptiva Rights during the preceding two quarters
to (ii) the amount of interest due and payable on the Loan on such Interest
Payment Date.

“Interest Payment Date” means the last day of each Interest Period.

“Interest Period” means the period beginning on the Closing Date (in the case of
the initial Interest Period) or on the last day of the next preceding Interest
Period (in the case of any subsequent Interest Period) and ending on the day
numerically corresponding to the first day of that Interest Period in the sixth
month thereafter; provided, that the initial Interest Period shall end on
March 31, 2007 and any Interest Period which would otherwise end after the
Maturity Date shall end on the Maturity Date.

“Interest Rate” means with respect to any day during any Interest Period the sum
of the Margin and LIBOR for such day.

“Interest Reserve Account” means the interest reserve account, which may be a
sub-account of the Payment Account, established in the name of the Lender and
for the benefit, and under the control, of the Lender with account no.
1885042193 maintained with the Account Bank.

“Law” means any federal, state, local or foreign law, including common law, and
any regulation, rule, requirement, policy, judgment, order, writ, decree,
ruling, award, approval, authorization, consent, license, waiver, variance,
guideline or permit of, or any agreement with, any Governmental Authority.

 

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“Lender” means the Lender (as defined in the first paragraph hereof) and any
assignee under Section 14.01(b).

“Lending Office” means, with respect to the Lender, its New York office, and
with respect to any other Lender, the office of such Lender designated as its
“Lending Office” in an Assignment and Acceptance, or such other office as may be
otherwise designated in writing from time to time by such Lender to the
Borrower.

“LIBOR” with respect to any Interest Period (or other period determined by the
Lender with respect to any overdue amount) means the per annum rate for deposits
in Dollars for a term coextensive with such Interest Period (or other period)
which appears on Telerate Page 3750 as of 11:00 a.m., London time, on the day
that is two Banking Days preceding the first day of such Interest Period (or
other period). (For purposes of the preceding sentence, LIBOR for any Interest
Period (or other period) of a length for which rates do not appear on Telerate
Page 3750 shall be determined through the use of straight line interpolation by
reference to two LIBOR rates appearing on Telerate Page 3750, one of which shall
be the rate for the period of time next shorter than the length of the Interest
Period (or other period) and the other of which shall be the rate for the period
of time next longer than the length of the Interest Period (or other period).)
If no such rate appears on Telerate Page 3750, LIBOR shall mean the per annum
rate, determined on the basis of the rates at which deposits in Dollars for a
term coextensive with such Interest Period (or other period) and in an amount
approximately equal to the principal amount of the Loan or overdue amount are
offered by four major banks in the London interbank market, selected by the
Lender, at approximately 11:00 a.m., London time, on the day that is two Banking
Days preceding the first day of such Interest Period (or other period). If at
least two such quotations are provided, LIBOR for such Interest Period (or other
period) shall be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, LIBOR for such Interest Period (or other
period) shall be the arithmetic mean of the per annum rates quoted by major
banks in New York City, selected by the Lender, at approximately 11:00 a.m., New
York City time, on such day for loans in Dollars to leading European banks for a
term coextensive with such Interest Period (or other period) and in an amount
approximately equal to the principal amount of the Loan or overdue amount.

“License Agreements” means:

(i) the Collaboration Agreement;

(ii) the Non-Exclusive Genentech License Agreement, effective as of December 30,
1998, between XOMA Bermuda (as successor in interest to XOMA Corporation) and
Genentech, Inc. (the “LUCENTIS License Agreement); and

(iii) the Non-Exclusive License Agreement, effective as of December 23, 1998,
between XOMA Bermuda (as successor in interest to XOMA Corporation) and UCB (as
successor in interest to Celltech Therapeutics Ltd.) (the “CIMZIA License
Agreement”).

“Lien” means any mortgage or deed of trust, pledge, hypothecation, lien, charge,
attachment, set-off, encumbrance or other security interest in the nature
thereof (including any

 

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conditional sale agreement, equipment trust agreement or other title retention
agreement, a lease with substantially the same economic effect as any such
agreement or a transfer or other restriction) or other encumbrance of any nature
whatsoever.

“Loan” at any time means the aggregate principal amount advanced to the Borrower
hereunder then outstanding.

“Loan Documents” means this Agreement, the Note and the Security Agreement.

“LUCENTIS License Agreement” has the meaning specified in the definition of
“License Agreements”.

“Margin” means, with respect to any day during an Interest Period, 5.25%.

“Material Adverse Effect” means (i) a material adverse effect on the business,
results of operations, assets or financial condition of the Borrower, (ii) a
reduction or other impairment of the value of the Payment Rights, the Raptiva
Rights, the Payment Rights-Related Intellectual Property, the Raptiva
Rights-Related Intellectual Property or the XOMA US Intellectual Property or
(iii) an impairment of the ability of the Borrower to perform its obligations
under, or affect the validity or enforceability of, any Transaction Document to
which it is party.

“Maturity Date” means the earlier of (i) the fifth anniversary of the Closing
Date and (ii) the date of any prepayment in full of the Loan.

“Note” means a promissory note, substantially in the form set forth in Exhibit
A, in the amount of the Loan, evidencing such Loan.

“Notice of Borrowing” has the meaning specified in Section 2.02.

“Notices” has the meaning specified in Section 14.04.

“Obligations” means, without duplication, the Loan and all present and future
Indebtedness, taxes, liabilities, obligations, covenants, duties, and debts,
owing by the Borrower to the Lender, arising under or pursuant to the Loan
Documents, including all principal, interest, charges, expenses, fees and any
other sums chargeable to the Borrower hereunder and under the other Loan
Documents (and including any interest, fees and other charges that would accrue
but for the filing of a bankruptcy action with respect to the Borrower, whether
or not such claim is allowed in such bankruptcy action).

“Obligors” means, together, Genentech and UCB.

“Participant” has the meaning specified in Section 14.02.

“Party” and “Parties” have the meanings specified in the first paragraph hereof.

 

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“Payment Account” means the lock-box account established in the name of the
Lender and for the benefit, and under the control, of the Lender with account
no. 1885042193 maintained with the Account Bank.

“Payment Rights” has the meaning specified in the Acquisition Agreement as in
effect on the Closing Date.

“Payment Rights-Related Intellectual Property” means all intangible legal rights
owned or controlled by XOMA Bermuda in relation to the Payment Rights pursuant
to the License Agreements, whether or not filed, perfected, registered or
recorded and whether now or hereafter existing, filed, issued or acquired and
any rights in or to any applications for any of the foregoing.

“Permitted Liens” has the meaning specified in Section 10.03.

“Person” means an individual, corporation, association, limited liability
company, limited liability partnership, partnership, estate, trust,
unincorporated organization or a government or any agency or political
subdivision thereof.

“Plan” has the meaning specified in Section 10.09(a).

“Plan Assets” means assets of any (i) employee benefit plan (as defined in
Section 3(3) of ERISA) subject to Title I of ERISA, (ii) plan (as defined in
Section 4975(e)(1) of the Code) subject to Section 4975 of the Code or
(iii) entity whose underlying assets include assets of any such employee benefit
plan or plan by reason of the investment by an employee benefit plan or other
plan in such entity.

“Prepayment Premium” with respect to any prepayment of principal of the Loan
made on any day means an amount equal to (i) 3.00% of the amount of the Loan to
be prepaid, if such prepayment occurs prior to the first anniversary of the
Closing Date, (ii) [*]% of the amount of the Loan to be prepaid, if such
prepayment occurs on or after the first anniversary of the Closing Date but
prior to the second anniversary of the Closing Date and (iii) zero, if such
prepayment occurs on or after the second anniversary of the Closing Date.

“Proceeding” has the meaning specified in Section 14.12.

“Raptiva Rights” has the meaning specified in the third recital hereof.

“Raptiva Rights-Related Intellectual Property” means all intangible legal rights
owned or controlled by the Borrower in relation to the Raptiva Rights and the
Collaboration Agreement, whether or not filed, perfected, registered or recorded
and whether now or hereafter existing, filed, issued or acquired and any rights
in or to any applications for any of the foregoing.

“Required Consents” means, [*].

 

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“Security Agreement” means the Security Agreement, dated the Closing Date,
substantially in the form of Exhibit C hereto, between the Lender and the
Borrower securing the Obligations of the Borrower hereunder.

“Subsidiary” means, with respect to any Person, at any time, any entity of which
more than fifty percent (50%) of the outstanding voting stock or other equity
interest entitled ordinarily to vote in the election of the directors or other
governing body (however designated) is at the time beneficially owned or
controlled directly or indirectly by such Person, by one or more such entities
or by such Person and one or more such entities.

“Taxes” has the meaning specified in Section 5.01.

“Telerate Page 3750” means the display page so designated on Bridge’s Telerate
Service (or such other page as may replace that page on that service, or such
other service as may be designated by the Lender as the information vendor for
the purpose of displaying rates comparable to LIBOR).

“Third Party Intellectual Property Rights” shall mean any intellectual property
owned by a third party.

“Transaction Documents” means the Loan Documents, the Acquisition Agreement, the
License Agreements and the Borrower Documents.

[*].

“UCB” means UCB Celltech, a branch of UCB S.A., a Belgian company, registered in
the United Kingdom.

“U.S.” means the United States of America.

“Voting Stock” means Capital Stock issued by a company, or equivalent interests
in any other Person, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even if the right so to vote has
been suspended by the happening of such contingency.

“XOMA” means has the meaning set forth in the first paragraph hereof.

“XOMA BCE/HE Intellectual Property” means the patents and patent applications
listed in Exhibit J.

“XOMA Bermuda” has the meaning set forth in the second recital hereof.

“XOMA Bermuda Change of Control” means any change of control of XOMA Bermuda
that results in XOMA Bermuda not being directly controlled by XOMA.

“XOMA Change of Control” means that (i) any Person or two or more Persons acting
in concert shall have acquired beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Exchange Act),
directly or indirectly, of

 

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Voting Stock of XOMA (or other securities convertible into such Voting Stock)
representing 30% or more of the combined voting power of all Voting Stock of
XOMA; or (ii) during any period of up to 24 consecutive months, commencing after
the Closing Date, individuals who at the beginning of such period were directors
of XOMA shall cease for any reason to constitute a majority of the board of
directors of XOMA unless the election or nomination for election by XOMA’s
shareholders of each new director was approved by the vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period.

“XOMA Ireland” has the meaning specified in Section 8.01(gg).

“XOMA Party” means each of XOMA, XOMA Bermuda and the Borrower.

“XOMA US Intellectual Property” means all of the following worldwide intangible
legal rights owned or controlled by the Borrower (other than with respect to
Raptiva® brand anti-CD11a), whether or not filed, perfected, registered or
recorded and whether now or hereafter existing, filed, issued or acquired:
(i) patents, patent disclosures, patent rights, including any and all
continuations, continuations-in-part, divisionals, reissues, reexaminations,
utility, model and design patents or any extensions of these items;
(ii) trademarks, service marks, trade names and copyrights; (iii) trade secrets
and rights in know-how; and (iv) any rights in or to any applications for any of
the foregoing.

SECTION 1.02. Interpretation; Headings. Each term used in any Exhibit to this
Agreement and defined in this Agreement but not defined therein shall have the
meaning set forth in this Agreement. Unless the context otherwise requires,
(a) “including” means “including, without limitation” and (b) words in the
singular include the plural and words in the plural include the singular. A
reference to any party to this Agreement, any other Transaction Document or any
other agreement or document shall include such party’s successors and permitted
assigns. A reference to any agreement or order shall include any amendment of
such agreement or order from time to time in accordance with the terms herewith
and therewith. A reference to any legislation, to any provision of any
legislation or to any regulation issued thereunder shall include any amendment
thereto, any modification or re-enactment thereof, any legislative provision or
regulation substituted therefore and all regulations and statutory instruments
issued thereunder or pursuant thereto. The headings contained in this Agreement
are for convenience and reference only and do not form a part of this Agreement.
Section, Article and Exhibit references in this Agreement refer to sections or
articles of, or exhibits to, this Agreement unless otherwise specified.

ARTICLE II

COMMITMENT; DISBURSEMENT; FEES

SECTION 2.01. Commitment to Lend. On the terms and subject to the conditions set
forth herein, the Lender shall, on the Closing Date, make a loan hereunder to
the Borrower in a principal amount equal to the Commitment.

SECTION 2.02. Notice of Borrowing. Subject to Section 2.01, the Borrower shall,
on or before the Banking Day prior to the Closing Date, give the Lender notice,
substantially in the form set forth in Exhibit B (the “Notice of Borrowing”) of
the date the

 

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Borrower wishes to borrow hereunder and the amount of the Commitment the
Borrower wishes to borrow on such Closing Date.

SECTION 2.03. Disbursement. Subject to the conditions set forth herein, the
Lender shall, on the Closing Date, credit, in same day funds, an amount equal to
(i) the amount specified in the Notice of Borrowing to the account of the
Borrower which the Borrower shall have designated for such purpose in the Notice
of Borrowing less (ii) the sum of the upfront structuring fee referred to in
Section 2.05 and the initial expenses referred to in Section 4.05 for which
invoices have been received by the Borrower less (iii) the initial deposit in to
the Interest Reserve Account pursuant to Section 4.03(a).

SECTION 2.04. Commitment Not Revolving. The Lender’s commitment to lend
hereunder is not revolving in nature, and any amount of the Loan repaid or
prepaid may not be reborrowed.

SECTION 2.05. Upfront Structuring Fee. The Borrower shall pay the Lender an
upfront structuring fee equal to 2.00% of the Commitment. This fee shall be
payable on the Closing Date as provided in Section 2.03.

ARTICLE III

REPAYMENT

SECTION 3.01. Amortization. (a) On each Interest Payment Date, any cash received
or held in the Payment Account in excess of (i) the interest payable on such
Interest Payment Date pursuant to Section 4.01 and (ii) the amount to be
transferred into the Interest Reserve Account on such Interest Payment Date
pursuant to Section 4.03 shall be applied by the Lender to pay down the
outstanding principal amount of the Loan at par unless the Lender notifies the
Borrower otherwise in writing. The Lender shall have the right to specify in
such notice that all or a portion of such excess amount held in the Payment
Account need not be used for the repayment of principal (the “Designated
Excess”). Upon notice by the Borrower, the Designated Excess shall be
transferred on the related Interest Payment Date to an account of the Borrower
specified in such notice.

(b) Except as otherwise expressly provided herein, the Borrower shall repay the
outstanding principal amount of the Loan, together with any accrued and unpaid
interest thereon, on the Maturity Date. Any amounts on deposit in the Payment
Account on the Maturity Date after full repayment of the outstanding principal
amount of, and the accrued unpaid interest on, the Loan together with all other
amounts then payable hereunder shall be transferred to an account of the
Borrower.

(c) Notwithstanding anything to the contrary herein, if amounts on deposit in
the Payment Account and the Interest Reserve Account are insufficient to pay any
amounts due under the Loan Documents to the Lender, the Borrower shall remain
fully liable for any deficiency.

SECTION 3.02. Optional Prepayment; Prepayment Premium. (a) The Borrower may,
subject to Section 13.01 hereof, prepay the Loan in whole or in part, together
with accrued and unpaid interest on the amount prepaid plus, if applicable, the
Prepayment

 

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Premium plus, if the prepayment date is on any day other than the last day of an
Interest Period, any amounts payable under Section 13.01, at any time; provided,
that any prepayment in part be made in a minimum amount of $1,000,000. If the
Borrower wishes to make such a prepayment, it shall give the Lender Notice to
that effect not later than the 30th day before the date of the prepayment,
specifying the date on which the prepayment is to be made and the amount to be
prepaid. Such Notice shall constitute the Borrower’s irrevocable commitment to
prepay that amount on that date, together with interest accrued on the amount
prepaid to but excluding the prepayment date plus, if applicable, the Prepayment
Premium, plus, if the prepayment date is on any day other than the last day of
an Interest Period, any amounts payable under Section 13.01.

(b) If an Event of Default occurs (i) prior to the first anniversary of the
Closing Date or (ii) on or after the first anniversary of the Closing Date but
prior to the second anniversary of the Closing Date, then the applicable
Prepayment Premium for each such period specified for optional redemptions by
the Borrower pursuant to Section 3.02(a) shall be due and payable hereunder, to
the extent permitted by law, and shall be deemed part of the amounts due and
payable hereunder subject to acceleration (either declared or immediate as
provided in Section 11.02).

SECTION 3.03. Illegality. If the Lender determines at any time that any Law or
treaty or any change therein or in the interpretation or application thereof
makes or will make it unlawful for the Lender to fulfill its commitment in
accordance with Section 2.01, to maintain the Loan or to claim or receive any
amount payable to it hereunder, the Lender shall give Notice of that
determination to the Borrower, whereupon the obligations of the Lender hereunder
shall terminate. If any such Notice is given after the disbursement of the Loan,
the Borrower shall prepay the Loan in full on the Interest Payment Date
following the date the Notice is given; provided, however, that, if the Lender
certifies to the Borrower that earlier prepayment is necessary in order to
enable the Lender to comply with the relevant Law, treaty or change and
specifies an earlier date for the prepayment, the Borrower shall make the
prepayment on the date so specified. Prepayment pursuant to this Section 3.03
shall be made together with interest accrued and unpaid on the Loan to the date
of prepayment and all other amounts then payable to the Lender hereunder. Each
Notice delivered pursuant to this Section 3.03 shall be effective when sent.

ARTICLE IV

INTEREST; EXPENSES

SECTION 4.01. Interest Rate. (a) Except as otherwise expressly provided in
Section 4.04, interest shall accrue on the unpaid principal amount of the Loan
for each day during each Interest Period, from and including the first day of
that Interest Period to but excluding the last day thereof, at a rate per annum
equal to the Interest Rate for each such day.

(b) The Lender shall give Notice to the Borrower of LIBOR for each Interest
Period after each determination thereof.

(c) Except as otherwise expressly provided herein, accrued interest on the Loan
shall be payable on each Interest Payment Date.

 

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SECTION 4.02. Payment Account. Amounts deposited in the Payment Account shall be
available solely for (i) payment of any interest on and the amortization of the
Loan pursuant to Sections 3.01, 4.01 and 4.03, (ii) withdrawal and deposit into
the Interest Reserve Account and (iii) reimbursement to the Lender of all other
costs and expenses hereunder, including reimbursements pursuant to Sections 4.05
and 4.06.

SECTION 4.03. Interest Reserve Account. (a) On the Closing Date, the Lender
shall transfer pursuant to Section 2.03(iii) into the Interest Reserve Account
an amount out of the Loan proceeds equal to the amount of interest due and
payable on the Loan on the first Interest Payment Date.

(b) Thereafter, on each Interest Payment Date, amounts on deposit in the Payment
Account shall first be transferred into the Interest Reserve Account such that
the amount on deposit therein shall equal the amount of interest payable on the
Loan on the immediately following Interest Payment Date (calculated on the
assumption that there shall not be any intervening prepayments and after giving
effect to any amortization payment being made in accordance with Section 3.01 on
the Interest Payment Date on which such transfer occurs).

(c) Amounts on deposit in the Interest Reserve Account shall be withdrawn solely
for the payment of interest on the Loan on any Interest Payment Date to the
extent that amounts on deposit in the Payment Account are insufficient therefor.

SECTION 4.04. Interest on Late Payments. If any amount payable by the Borrower
to the Lender hereunder is not paid when due (whether at stated maturity, by
acceleration or otherwise), interest shall accrue on any such unpaid amounts,
both before and after judgment, to the fullest extent permitted by applicable
Law, during the period from and including the applicable due date, to but
excluding the day the overdue amount is paid in full, at a rate per annum equal
to the Default Rate. Interest accruing under this Section 4.04 shall be payable
from time to time on demand of the Lender.

SECTION 4.05. Initial Expenses. The Borrower shall reimburse the Lender, on the
Closing Date as provided in Section 2.03, for all (a) reasonable costs and
expenses incurred by the Lender (including all reasonable fees and expenses of
outside counsel to the Lender), supported by reasonable documentation, in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the other Transaction Documents including any amendment or waiver
with respect thereto and (b) reasonable costs and expenses, supported by
reasonable documentation, of due diligence conducted by the Lender or other
parties (including outside counsel to the Lender) at the request of the Lender.

SECTION 4.06. Administration and Enforcement Expenses. The Borrower shall
promptly reimburse the Lender on demand for all reasonable costs and expenses
incurred by the Lender (including the reasonable fees and expenses of outside
counsel to the Lender) as a consequence of or in connection with (i) the
negotiation, preparation or execution of any amendment to this Agreement and/or
the other Transaction Documents, (ii) the administration of the Loan, (iii) any
Default or Event of Default or (iv) the preservation or enforcement of any right
or remedy of the Lender under the Transaction Documents.

 

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ARTICLE V

TAXES

SECTION 5.01. Taxes. (a) Except as otherwise required by law, any and all
payments by the Borrower under this Agreement or the Note (including payments
with respect to the Loan) shall be made free and clear of and without deduction
for any and all present and future taxes, levies, duties, imposts, deductions,
charges, fees or withholdings, and all interest, penalties and other liabilities
with respect thereto (collectively, “Taxes”) imposed by any Governmental
Authority or taxing authority in any jurisdiction. If any Taxes other than
Excluded Taxes (“Indemnified Taxes”) shall be required by Law to be deducted
from or in respect of any sum payable under this Agreement or the Note to a
Lender, (i) the sum payable by the Borrower shall be increased as may be
necessary so that after making all required deductions of Indemnified Taxes the
Lender shall receive an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority or taxing authority in accordance with applicable Law.

(b) If a Lender is not a “United States person” within the meaning of
Section 7701(a)(30) of the Code (a “Foreign Lender”), then such Foreign Lender
shall provide to the Borrower (i) in the case of a Foreign Lender claiming
exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of
the Code with respect to payments of “portfolio interest,” (x) two accurate and
complete original signed copies of IRS Form W-8BEN (or successor form) properly
completed and duly executed by such Foreign Lender and (y) a certificate to the
effect that such Foreign Lender is not (A) a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code or (C) a “controlled
foreign corporation” described in Section 881(c)(3)(C) of the Code, (ii) if the
payments receivable by the Foreign Lender are effectively connected with the
conduct of a trade or business in the United States, two accurate and complete
original signed copies of IRS Form W-8ECI (or successor form), (iii) in the case
of a Foreign Lender that is entitled to benefits under an income tax treaty to
which the United States is a party that reduces the rate of withholding tax on
payments of interest, two accurate and complete original signed copies of IRS
Form W-8BEN (or successor form) indicating that such Foreign Lender is entitled
to receive payments under this Agreement and the Note with reduced or no
deduction of any United States federal income withholding tax or (iv) in the
case of a Foreign Lender acting as an intermediary, two accurate and complete
original signed copies of IRS Form W-8IMY (or successor form). Such forms shall
be delivered by such Foreign Lender on or prior to the date that it becomes a
Lender under this Agreement, at any time thereafter when a change in the Foreign
Lender’s circumstances renders an existing form obsolete or invalid or requires
a new form to be provided, and within fifteen Banking Days after a reasonable
written request of the Borrower from time to time thereafter. Notwithstanding
any other provision of this Section 5.01(b), no Foreign Lender shall be required
to deliver any form pursuant to this Section 5.01(b) that such Foreign Lender is
not legally able to deliver.

 

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(c) Each Lender that is not a Foreign Lender shall provide two properly
completed and duly executed copies of Form W-9 (or successor form) at the times
specified for delivery of forms under Section 5.01(b).

SECTION 5.02. Receipt of Payment. Within thirty days after the date of any
payment of Taxes withheld by the Borrower in respect of any payment to the
Lender, the Borrower shall furnish to the Lender the original or a certified
copy of a receipt evidencing payment thereof or other evidence reasonably
satisfactory to the Lender.

SECTION 5.03. Other Taxes. The Borrower shall promptly pay any registration or
transfer taxes, stamp duties or similar levies, and any penalties or interest
that may be due with respect thereto, that may be imposed in connection with the
execution, delivery, registration or enforcement of this Agreement, the Note
issued hereunder or any other Transaction Document or the filing, registration,
recording or perfecting of any security interest contemplated by this Agreement.

SECTION 5.04. Indemnification. If the Lender pays any Taxes that the Borrower is
required to pay pursuant to this Article V, the Borrower shall indemnify it on
demand in full in the currency in which such Taxes are paid, whether or not such
Taxes were correctly or legally asserted, together with interest thereon from
and including the date of payment to, but excluding, the date of reimbursement
at the Default Rate; provided that if the Borrower believes that any Taxes for
which the Borrower has indemnified the Lender were not correctly or legally
asserted, the Lender will cooperate with the Borrower (at the Borrower’s cost
and expense) in pursuing a refund of such Taxes. The Lender shall promptly
notify the Borrower if any claim is made against the Lender for any Taxes for
which the Borrower would be responsible to indemnify the Lender pursuant to this
Section 5.04.

ARTICLE VI

PAYMENTS; COMPUTATIONS

SECTION 6.01. Making of Payments. (a) Each payment required to be made by the
Borrower under this Agreement or under the Note shall be made in Dollars, by
deposit in same day funds by 3:00 p.m. New York time on the date the payment is
due, to the Payment Account, for the account of the Lending Office, or to any
other account designated by the Lender by Notice to the Borrower.

(b) Notwithstanding anything to the contrary contained herein, any payment
stated to be due hereunder or under the Note on a given day in a specified month
and any Interest Period stated to end on a day numerically corresponding to a
given day in a specified month thereafter shall be made or shall end (as the
case may be), (i) if there is no such given day or corresponding day, on the
last Banking Day of such month or (ii) if such given day or corresponding day is
not a Banking Day, on the next succeeding Banking Day, unless such next
succeeding Banking Day falls in a different calendar month, in which case such
payment shall be made or such Interest Period shall end (as the case may be) on
the next preceding Banking Day.

 

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SECTION 6.02. Computations. Interest shall be computed on the basis of a 360-day
year and actual days elapsed.

SECTION 6.03. Setoff or Counterclaim. Each payment by the Borrower under this
Agreement or under the Note shall be made without setoff or counterclaim. Lender
shall have the right to charge to the Payment Account and setoff any and all
amounts owed by the Borrower under this Agreement.

ARTICLE VII

CONDITIONS PRECEDENT

SECTION 7.01. Conditions Precedent to the Loan. The obligation of the Lender to
make the Loan on the Closing Date is subject to the fulfillment, to the
satisfaction of the Lender, of all of the following conditions precedent in
addition to the conditions specified in Article II:

(a) The Borrower shall have executed and delivered to the Lender the Note, dated
the Closing Date.

(b) The Lender shall have received on or before the Closing Date an executed
copy of:

(i) a certificate of the Borrower, dated the Closing Date, substantially in the
form set forth in Exhibit D-1 hereto together with the attachments specified
therein;

(ii) a certificate of XOMA, dated the Closing Date, substantially in the form
set forth in Exhibit D-2 hereto together with the attachments specified therein;

(iii) a certificate of XOMA Bermuda, dated the Closing Date, substantially in
the form set forth in Exhibit D-3 hereto together with the attachments specified
therein;

(iv) an opinion of Conyers Dill & Pearman, special Bermuda counsel to XOMA and
XOMA Bermuda, dated the Closing Date, in form and substance satisfactory to the
Lender;

(v) an opinion of Cahill Gordon & Reindel LLP, U.S. counsel to the XOMA Parties,
dated the Closing Date, in form and substance satisfactory to the Lender;

(vi) an opinion of Christopher J. Margolin, Vice President, General Counsel and
Secretary of XOMA, dated the Closing Date, in form and substance satisfactory to
the Lender; and

(vii) an opinion of Anne Dollard, Senior Director of Intellectual Property of
XOMA, dated the Closing Date, in form and substance satisfactory to the Lender.

(c) The Borrower shall have delivered to the Lender certified true copies of the
Borrower Documents.

 

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(d) The Borrower shall have executed and delivered to the Lender the Loan
Documents and such other documents as the Lender may reasonably request, in each
case, in form and substance satisfactory to the Lender.

(e) The Borrower and XOMA Bermuda shall have executed and delivered to the
Lender the Acquisition Agreement in the form set forth in Exhibit I.

(f) The Transaction Documents shall be in full force and effect.

(g) The Lender shall have received the upfront structuring fee set forth in
Section 2.05 and all other fees and expenses due and payable to the Lender on
the Closing Date under this Agreement and the other Transaction Documents.

(h) The organizational structure and capital structure of the Borrower shall be
to the satisfaction of the Lender.

(i) No event shall have occurred and be continuing that constitutes a Default or
an Event of Default under this Agreement or a similar event under the other
Transaction Documents and no such event will occur or will have occurred by
reason of the Loan.

(j) The representations and warranties made by the Borrower in Article VIII
hereof and in the other Transaction Documents shall be true and correct as of
the Closing Date, before and after giving effect to the Loan.

(k) The Borrower shall have delivered to the Lender certified true copies of the
License Agreements, including all amendments, supplements or other modifications
thereto, and each License Agreement and amendment, supplement or other
modification thereto shall be in full force and effect.

(l) All filings, recordings and other actions that are necessary or reasonably
requested by the Lender in order to establish, protect, preserve and perfect the
security interest in the assets of the Borrower as provided in the Security
Agreement as a valid and perfected first priority security interest with respect
to such assets shall have been duly effected.

(m) All necessary governmental and third-party approvals, consents and filings,
including in connection with the Loan and the acquisition of the Payment Rights
by the Borrower pursuant to the Acquisition Agreement shall have been obtained
or made and be in full force and effect.

(n) The acquisition by the Borrower and the assignment by XOMA Bermuda of the
Payment Rights shall have been consummated pursuant to the Acquisition
Agreement, and no provision thereof shall have been waived, amended,
supplemented or otherwise modified in connection with such acquisition without
the written consent of the Lender.

(o) The Lender shall have conducted a background check of the officers of the
XOMA Parties and the results shall be to the satisfaction of the Lender.

 

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(p) The Borrower and the Obligors shall have executed and the Borrower shall
have delivered the Required Consents.

(q) The Lender shall have received from the Borrower (i) an executed copy of the
Release of Security Agreement in Patents between XOMA and Genentech,
(ii) evidence to the satisfaction of the Lender that such release was filed with
the U.S. Patent and Trademark Office and (iii) evidence to the satisfaction of
the Lender that a UCC-3 termination statement was filed with the office of the
Secretary of State of the State of Delaware.

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES

SECTION 8.01. Representations and Warranties of the Borrower. The Borrower makes
the representations and warranties set forth below to the Lender. Except as
otherwise noted, the Borrower makes the representations and warranties set forth
below as of the Closing Date:

(a) The Borrower is a limited liability company duly organized, validly existing
and in good standing under the laws of Delaware and has the power and authority
(including any required license, permit or other approval from any Governmental
Authority) to own its assets, to carry on its business as currently conducted
and to consummate the transactions contemplated in, and to perform its
obligations under, this Agreement and the other Transaction Documents to which
it is party or by which it is bound.

(b) The Borrower has taken all necessary action to authorize its execution and
delivery of this Agreement and the other Transaction Documents to which it is
party, the performance of its obligations under this Agreement and the other
Transaction Documents to which it is party or by which it is bound and the
consummation of the transactions contemplated hereby and thereby.

(c) This Agreement and each other Transaction Document to which the Borrower is
party has been duly executed and delivered by the Borrower, and each constitutes
a valid and binding obligation of the Borrower, enforceable against the Borrower
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium and similar laws affecting creditors’ rights generally, and subject
to general principles of equity (regardless of whether enforcement is sought in
a proceeding in equity or at law).

(d) No authorization or action of any kind by any Governmental Authority is
necessary to authorize the transactions contemplated by this Agreement and each
other Transaction Document or required for the validity or enforceability
against the Borrower of this Agreement and each other Transaction Document,
except any filings with a Governmental Authority required to perfect the
Lender’s security interest under the Security Agreement.

(e) Except for the Required Consents, no consent or approval of, or notice to,
any Person is required by the terms of any agreement, contract, lease,
commitment, license

 

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and other arrangement (each a “Contract”) for the execution or delivery of, or
the performance of the obligations of the Borrower under, this Agreement and the
other Transaction Documents to which the Borrower is party or the consummation
of the transactions contemplated hereby or thereby, and such execution,
delivery, performance and consummation will not result in any breach or
violation of, or constitute a default under the Borrower Documents or any
material Contract, instrument or Law applicable to the Borrower or any of its
assets.

(f) There are no actions, proceedings or claims pending or, to the knowledge of
the Borrower, threatened the adverse determination of which could reasonably be
expected to have a Material Adverse Effect.

(g) Since the acquisition of the Payment Rights and the Raptiva Rights by the
Borrower there have been no events that could reasonably be expected to reduce
or otherwise impair the value of such rights.

(h) No Default or Event of Default has occurred and is continuing, and no such
event will occur upon the making of the Loan.

(i) The Borrower has good title to its assets free and clear of all Liens, other
than Liens created hereby and by the Security Agreement and the Permitted Liens.

(j) With respect to each Contract that is material to the business of the
Borrower, (i) each such Contract is a valid and binding agreement and each such
Contract is in full force and effect, and (ii) the Borrower is in compliance
with each such Contract and has no knowledge of any default under any such
Contract which default has not been cured or waived.

(k) All written information heretofore, herein or hereafter supplied to the
Lender by or on behalf of the Borrower or any other XOMA Party in connection
with the Loan and the other transactions contemplated hereby has been, is and
will be accurate and complete. All representations and warranties made by the
Borrower or any other XOMA Party in any of the other Transaction Documents to
which it is party are true and correct.

(l) The consolidated balance sheet of XOMA and its consolidated Subsidiaries as
of December 31, 2005 and the related consolidated statement of operations and
cash flows for the fiscal year then ended, accompanied by an opinion of Ernst &
Young LLP, independent registered public accountants, set forth in XOMA’s 2005
Form 10-K, and unaudited consolidated balance sheet of XOMA and its consolidated
Subsidiaries as of June 30, 2006 and the related consolidated statement of
operations and cash flows for the two fiscal quarters then ended duly certified
by the chief financial officer of XOMA, copies of which have been furnished to
the Lender, fairly present the consolidated financial condition of XOMA and its
consolidated Subsidiaries for the periods ended on such dates, all in accordance
with GAAP consistently applied. Since the consolidated balance sheet of XOMA and
its consolidated Subsidiaries as at December 31, 2005, there has been no
material adverse change in the business, financial position or results of
operations of the XOMA and its consolidated Subsidiaries.

 

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(m) The Borrower has no Indebtedness other than the Loan and the loans of up to
$50,000,000 pursuant to the secured note agreement, dated May 26, 2005, between
the Borrower and Chiron Corporation.

(n) As of the date hereof and after giving effect to the Loan:

(i) The aggregate value of the assets of the Borrower, at fair value and present
fair salable value, exceeds (i) its total liabilities and (ii) the amount
required to pay such liabilities as they become absolute and matured in the
normal course of business;

(ii) The Borrower has the ability to pay its debts and liabilities as they
become absolute and matured in the normal course of business; and

(iii) The Borrower does not have an unreasonably small amount of capital with
which to conduct its business.

(o) The Borrower has no Subsidiaries.

(p) The Borrower is in compliance with all applicable Laws.

(q) None of the transactions contemplated in this Agreement (including, without
limitation, the borrowing hereunder and the use of proceeds thereof) will
violate or result in a violation of Section 7 of the Exchange Act, including,
without limitation, Regulations T, U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter II.

(r) The Borrower is not an investment company subject to regulation under the
Investment Company Act of 1940.

(s) The Borrower has timely filed all tax returns required to be filed by it and
has paid all taxes due reported on such returns or pursuant to any assessment
received by the Borrower, except for failures to file tax returns or pay taxes
that, individually, and in the aggregate, are not reasonably expected to result
in a Material Adverse Effect. Any charges, accruals or reserves on the books of
the Borrower in respect of taxes are adequate except for inadequacies that,
individually, and in the aggregate, are not reasonably expected to result in a
Material Adverse Effect. The Borrower has had no material liability for any
taxes imposed on or with respect to its net income (except for state or local
income or franchise taxes). The fact that the income of the Borrower has been
subject to taxes in the hands of XOMA is not a breach of this representation
provided the Borrower has had, and will have, no liability for those taxes. The
Borrower has fulfilled all of its obligations with respect to withholding taxes
except for failures that, individually, and in the aggregate, are not reasonably
expected to result in a Material Adverse Effect.

(t) XOMA has timely filed all tax returns required to be filed by it and has
paid all taxes due reported on such returns or pursuant to any assessment
received by XOMA except for failures to file tax returns or pay taxes that,
individually, and in the aggregate,

 

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are not reasonably expected to result in a Material Adverse Effect. Any charges,
accruals or reserves on the books of XOMA in respect of taxes are adequate
except for inadequacies that, individually, and in the aggregate, are not
reasonably expected to result in a Material Adverse Effect. XOMA has treated all
its U.S. domestic source income attributable to income of the Borrower and XOMA
Bermuda, as effectively connected with its conduct of a U.S. trade or business
within the meaning of Section 864 of the Code.

(u) The transfer of the Payment Rights from XOMA Bermuda to the Borrower
pursuant to the Acquisition Agreement will not result in any tax under
Section 884 of the Code.

(v) At the end of its taxable year ending December 31, 2005, XOMA had net
operating losses for U.S. federal income tax purposes of at least $80,000,000 of
which at least $40,000,000 will not be subject to limitation under Section 382
of the Code and will be available to offset income effectively connected with a
trade or business engaged in by XOMA in the United States for taxable years
beginning on or after January 1, 2006 and on or prior to the Maturity Date.

(w) The Borrower shall have no liability for net income taxes (except for state
or local income or franchise taxes, or foreign income taxes not related to the
Payment Rights or Raptiva Rights). Payments with respect to the Payment Rights
or Raptiva Rights shall not be subject to any taxes imposed on or with respect
to gross or net income (except state or local income or franchise taxes) or
withheld or deducted from such payments and the Borrower will have no liability
as a withholding agent with respect to such payments, provided that this
representation shall not be breached if such taxes (i) are imposed by a
Governmental Authority or taxing authority outside of the United States,
(ii) result from a change in Law after the date hereof and (iii) do not exceed
in the aggregate $75,000 in any calendar year. The foregoing representations
(x) shall not be violated solely by the fact that the income of the Borrower is
subject to taxes in the hands of XOMA provided the Borrower has no liability for
those taxes and (y) shall survive the Closing Date and be made on a continuous
basis until the Loan is repaid in full.

(x) The terms (not including economic terms) of the Collaboration Agreement,
dated November 1, 2006, between the Borrower and Takeda Pharmaceutical Company
Limited, are substantially similar to the terms (not including economic terms)
of the Schering Collaboration Agreement, dated May 22, 2006, between the
Borrower and Schering Corporation, acting through its Schering-Plough Research
Institute division.

(y) Neither XOMA, the Borrower nor any ERISA Affiliate has ever incurred or
expects to incur any liability under Title IV or Section 302 of ERISA or
Section 412 of the Code or any similar non-U.S. law or maintains or contributes
to, or is or has been required to maintain or contribute to, any employee
benefit plan (as defined in Section 3(3) of ERISA) subject to Title IV or
Section 302 of ERISA or Section 412 of the Code or any non-U.S. law. The
consummation of the transactions contemplated by this Agreement will not
constitute or result in any non-exempt prohibited transaction under Section 406
of ERISA, Section 4975 of the Code or substantially similar provisions under

 

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any foreign or U.S. federal, state or local laws, rules or regulations. Neither
XOMA, the Borrower nor any ERISA Affiliate has incurred any liability with
respect to any obligation to provide benefits, including death or medical
benefits, with respect to any person beyond their retirement or the termination
of service other than coverage mandated by law.

(z) XOMA Technology Ltd. (a) owns and has good and exclusive title to, free and
clear of any Lien, and has independently developed or acquired all XOMA BCE/HE
Intellectual Property, or (b) has the valid right or license, free and clear of
any Lien, to all BCE/HE Intellectual Property.

(aa) Neither the execution and delivery or effectiveness of this Agreement nor
the performance of the Borrower’s obligations hereunder will cause the
forfeiture or termination of, or give rise to a right of forfeiture or
termination of, any XOMA US Intellectual Property (other than Collaboration
Intellectual Property), or impair the right of the Borrower or any licensee
(including any Obligor) to use, possess, sell or license any XOMA US
Intellectual Property (other than Collaboration Intellectual Property) or
portion thereof, or require payment of any kind to any third party.

(bb) Each item of XOMA BCE/HE Intellectual Property is valid and subsisting (or
in the case of applications, applied for), all registration, maintenance and
renewal fees currently due in connection with such XOMA BCE/HE Intellectual
Property have been paid, and all documents, recordations and certificates in
connection with such XOMA BCE/HE Intellectual Property required to be filed have
been filed with the relevant patent authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of prosecuting, maintaining
and perfecting such XOMA BCE/HE Intellectual Property.

(cc) Other than [*], there are no legal actions, suits or proceedings pending
(or, to the knowledge of the Borrower, threatened) against the Borrower, XOMA or
any of its Subsidiaries alleging that it or they have infringed or are currently
infringing any Third Party Intellectual Property or alleging that the XOMA
BCE/HE Intellectual Property is not valid or unenforceable.

(dd) The Borrower has not received any written opinion of counsel that CIMZIA™,
RAPTIVA® or LUCENTIS™ infringes or misappropriates any Third Party Intellectual
Property Rights.

(ee) To the knowledge of the Borrower, no current or former employee, consultant
or independent contractor of the Borrower has any right, license, claim or
interest whatsoever in or with respect to any BCE/HE Intellectual Property.

(ff) The Borrower, by ownership, license or covenant not to sue, has the right
to use all XOMA US Intellectual Property (other than Collaboration Intellectual
Property) which is necessary for use in connection with its business as
presently conducted and as proposed to be conducted.

 

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(gg) To the knowledge of Borrower, there is no existing infringement by any
third party of any of the XOMA US Intellectual Property (other than
Collaboration Intellectual Property) that is necessary for use in connection
with the Borrower’s business as presently conducted, other than infringement by
third parties of the patent rights listed in Exhibit J under the heading “XOMA
Patent Rights — Bacterial Expression” of which the Borrower is aware as a result
of the efforts of its Affiliate, XOMA Ireland Ltd. (“XOMA Ireland”), in
connection with XOMA Ireland’s on-going bacterial cell expression technology
out-licensing program (the “BCE Program”), which third parties XOMA Ireland has
approached, or intends to approach, as part of the BCE Program to determine
whether such third parties will take a license to such patent rights, pay for a
release from past infringement thereof and/or reach some other appropriate form
of accommodation.

(hh) Other than [*], there are no legal actions, suits or proceedings pending
(or, to the knowledge of the Borrower, threatened) against the Borrower, XOMA or
any of its Subsidiaries challenging their rights in or to, or the validity or
enforceability of, the XOMA US Intellectual Property (other than Collaboration
Intellectual Property).

(ii) There are no legal actions, suits or proceedings pending (or, to the
knowledge of the Borrower, threatened) against the Borrower, XOMA or any of its
Subsidiaries alleging that the business of the Borrower infringes or otherwise
violates, or that the commercialization of any of the products under development
by the Borrower would infringe or otherwise violate, any patent, trademark,
copyright, trade secret or other proprietary rights of others.

(jj) All of the XOMA US Intellectual Property (other than Collaboration
Intellectual Property) was filed and is being maintained or prosecuted in
accordance with the applicable rules and regulations relating thereto.

SECTION 8.02. Survival of Representations and Warranties. All representations
and warranties of the Borrower contained in this Agreement shall survive the
execution, delivery and acceptance thereof by the Parties and the closing of the
transactions described in this Agreement.

ARTICLE IX

AFFIRMATIVE COVENANTS

SECTION 9.01. Maintenance of Existence. The Borrower shall at all times
(a) preserve, renew and maintain in full force and effect its legal existence
and good standing as a limited liability company under the Laws of the
jurisdiction of its organization; (b) take all reasonable action to maintain all
rights, privileges, permits, licenses and franchises necessary or desirable in
the normal conduct of its business, except to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect; and
(c) preserve or renew all XOMA US Intellectual Property, the non-preservation of
which could reasonably be expected to have a Material Adverse Effect.

 

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SECTION 9.02. Maintenance of Single Owner and Status as Disregarded Entity for
Tax Purposes. The Borrower shall at all times be a “disregarded entity” for U.S.
federal income tax purposes owned by XOMA.

SECTION 9.03. Treatment of U.S. Domestic Source Income. XOMA will treat all
payments with respect to the Payment Rights and the Raptiva Rights as
effectively connected with its conduct of a U.S. trade or business within the
meaning of Section 864 of the Code.

SECTION 9.04. Use of Proceeds. The Borrower shall use the net proceeds of the
Loan received by it (i) for general corporate purposes, (ii) to fund the
acquisition of the Payment Rights pursuant to the Acquisition Agreement and
(iii) to pay all fees and expenses payable by the Borrower pursuant to the
Transaction Documents.

SECTION 9.05. Financial Statements and Information. (a) In the event that any
such information need not to be filed with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Exchange Act, the Borrower
shall furnish to the Lender, on or before the thirtieth day after the close of
each quarter of each fiscal year, the unaudited consolidated balance sheet of
XOMA as at the close of such quarter and unaudited consolidated statement of
operations and cash flows of XOMA for such quarter, duly certified by the chief
financial officer of XOMA as having been prepared in accordance with GAAP.
Concurrently with the delivery or filing of the documents described in the
preceding sentence, the Borrower shall furnish to the Lender a certificate of
the chief financial officer, chief accounting officer or treasurer of XOMA,
which certificate shall (A) include a statement that such officer has no
knowledge, except as specifically stated, of any condition, event or act which
constitutes a Default or Event of Default and (B) set forth in reasonable detail
the calculations necessary to demonstrate compliance with Section 10.08 on the
date of such balance sheet. In the event that generally accepted accounting
principles used in the preparation of such financial statements described in the
first sentence above shall differ from GAAP, XOMA shall also provide, if
necessary for the determination of compliance with Section 10.08, a statement of
reconciliation conforming such financial statements to GAAP.

(b) In the event that any such information need not be filed with the Securities
and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act, the
Borrower shall furnish to the Lender, on or before the forty-fifth day after the
close of each fiscal year, XOMA’s audited financial statements as at the close
of such fiscal year, including the consolidated balance sheet as at the end of
such fiscal year and consolidated statement of operations and cash flows of XOMA
for such fiscal year, in each case accompanied by the report thereon of
independent registered public accountant of nationally recognized standing.
Concurrently with the delivery or filing of the documents described in the
preceding sentence, the Borrower shall furnish to the Lender a certificate of
the chief financial officer, chief accounting officer or treasurer of XOMA,
which certificate shall (A) include a statement that such officer has no
knowledge, except as specifically stated, of any condition, event or act which
constitutes a Default or Event of Default and (B) set forth in reasonable detail
the calculations necessary to demonstrate compliance with Section 10.08 on the
date of such financial statements. In the event that generally accepted
accounting principles used in the preparation of such financial

 

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statements described in the first sentence above shall differ from GAAP, XOMA
shall also provide, if necessary for the determination of compliance with
Section 10.08, a statement of reconciliation conforming such financial
statements to GAAP.

(c) The Borrower shall, promptly upon receipt thereof, forward or cause to be
forwarded to the Lender copies of all notices, reports, updates and other
information regarding the License Agreements, the Payment Rights and the Raptiva
Rights received from the Obligors.

(d) The Borrower shall furnish or cause to be furnished to the Lender from time
to time such other information regarding the financial position, assets or
business of the Borrower or any other XOMA Party or its compliance with any
Transaction Document to which it is a party as the Lender may from time to time
reasonably request.

SECTION 9.06. Books and Records. The Borrower shall keep proper books, records
and accounts in which entries in conformity with sound business practices and
all requirements of Law applicable to it shall be made of all dealings and
transactions in relation to its business, assets and activities and as shall
permit the preparation of the consolidated financial statements of XOMA in
accordance with GAAP.

SECTION 9.07. Inspection Rights; Access. The Borrower shall, one occasion per
year, or, if a Default or Event of Default shall have occurred and be
continuing, at all times permit representatives of the Lender to examine its
assets, books and records upon reasonable Notice during normal business hours.
The Borrower shall allow the Lender reasonable access to its managers and/or
officers.

SECTION 9.08. Payment Account. Borrower shall use commercially reasonable
efforts to ensure that at all times the Obligors shall make all payments with
respect to the Payment Rights and the Raptiva Rights directly into the Payment
Account. In the event that payments with respect to the Payment Rights or
Raptiva Rights are directed to the Borrower, the Borrower shall promptly
transfer all such payments to the Payment Account.

SECTION 9.09. Maintenance of Insurance and Properties. The Borrower shall
maintain and preserve all of its properties that are used and useful in the
conduct of its business in good working order and condition, ordinary wear and
tear excepted. The Borrower shall maintain and preserve the value as of the
Closing Date, without any reduction or impairment, of the Payment Rights and the
Raptiva Rights. The Borrower shall maintain with financially sound and reputable
insurance companies, insurance on all of its assets in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business. The Borrower shall
furnish to the Lender from time to time upon written request full information as
to the insurance carried.

SECTION 9.10. Governmental Authorizations. The Borrower shall obtain, make and
keep in full force and effect all authorizations from and registrations with
Governmental Authorities that may be required for the validity or enforceability
against the Borrower of this Agreement and the other Transaction Documents to
which it is a party.

 

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SECTION 9.11. Compliance with Laws and Contracts. (a) The Borrower shall comply
with all applicable Laws and perform its obligations under all Contracts
relative to the conduct of its business, including the Transaction Documents to
which it is party.

(b) The Borrower shall at all times comply with the margin requirements set
forth in Section 7 of the Exchange Act and any regulations issued pursuant
thereto, including, without limitation, Regulations T, U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II.

(c) The Borrower shall use commercially reasonable efforts to enforce the
obligations of the Obligors in respect of the Payment Rights and the Raptiva
Rights and shall, upon receipt of reasonable instruction from the Lender,
exercise all rights and remedies available to it against the Obligors in respect
of the Payment Rights, the Raptiva Rights and the Collaboration Agreement.

SECTION 9.12. Plan Assets. Neither XOMA, Borrower nor any ERISA Affiliate shall
take any action that causes it to be deemed to be or hold Plan Assets at any
time.

SECTION 9.13. Notices. (a) The Borrower shall promptly give written Notice to
the Lender of each Default or Event of Default and each other event that has or
could reasonably be expected to have a Material Adverse Effect or that could
reduce or otherwise impair the value of the Payment Rights or the Raptiva
Rights.

(b) The Borrower shall promptly give written Notice to the Lender upon receiving
notice, or otherwise becoming aware, of any default or event of default under
the License Agreements or the Acquisition Agreement.

(c) The Borrower shall, promptly after becoming aware thereof, give written
Notice to the Lender of any litigation or proceedings to which the Borrower is a
party or which could reasonably be expected to have a Material Adverse Effect or
that could reduce or otherwise impair the value of the Payment Rights or the
Raptiva Rights.

(d) The Borrower shall, promptly after becoming aware thereof, give written
Notice to the Lender of any litigation or proceedings challenging the validity
of the Payment Rights, the Raptiva Rights, the License Agreements, the
Acquisition Agreement, the Payment Rights-Related Intellectual Property or the
Raptiva Rights-Related Intellectual Property or any of the transactions
contemplated therein.

SECTION 9.14. Payment of Taxes. The Borrower shall pay all material taxes of any
kind imposed on or in respect of its income or assets before any penalty or
interest accrues on the amount payable and before any Lien on any of its assets
exists as a result of nonpayment.

SECTION 9.15. Waiver of Stay, Extension or Usury Laws. The Borrower will not at
any time, to the extent that it may lawfully not do so, insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law or any usury law or other law that would prohibit or forgive
the Borrower from paying all or any portion of the principal of or premium, if
any, or interest on the Loan as contemplated herein, wherever enacted, now or at
any time hereafter in force, or that may affect the covenants or the

 

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performance of this Agreement; and, to the extent that it may lawfully do so,
the Borrower hereby expressly waives all benefit or advantage of any such law
and expressly agrees that it will not hinder, delay or impede the execution of
any power herein granted to the Lender, but will suffer and permit the execution
of every such power as though no such law had been enacted.

SECTION 9.16. Further Assurances. The Borrower shall promptly, at its sole cost
and expense, execute and deliver to the Lender such further instruments and
documents, and take such further action, as the Lender may, at any time and from
time to time, reasonably request in order to carry out the intent and purpose of
this Agreement and the other Transaction Documents to which it is a party and to
establish and protect the rights, interests and remedies created, or intended to
be created, in favor of the Lender hereby and thereby. The Borrower shall pay,
or reimburse the Lender for, any and all reasonable fees, costs and expenses of
whatever kind or nature incurred in connection with the creation, preservation
and protection of the Lender’s Lien on the assets of the Borrower under the
Security Agreement, including reasonable legal and other fees in connection with
the recording or filing of instruments and documents in public offices, payment
or discharge of any Liens upon or in respect of such assets of the Borrower,
other fees, costs and expenses in connection with protecting, maintaining or
preserving such assets of the Borrower and the Lender’s interest therein,
whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or related to such
assets of the Borrower; and all such amounts that are paid by the Lender shall,
until reimbursed by the Borrower, constitute Obligations secured by such assets
of the Borrower.

ARTICLE X

NEGATIVE COVENANTS

SECTION 10.01. Activities of the Borrower. (a) The Borrower shall not enter into
any business either directly or through any Subsidiary except for businesses in
which the Borrower is engaged on the date of this Agreement.

(b) The Borrower shall not amend, modify or waive or terminate any provision of,
or permit or agree to the amendment, modification, waiver or termination of any
provision of, any of the Loan Documents, License Agreements or the Acquisition
Agreement without the prior written consent of the Lender (it being understood
that the Lender shall be entitled to withhold its consent if such amendment,
modification or waiver is or would be adverse in any respect to the Lender, as
determined by the Lender in its sole discretion).

SECTION 10.02. Merger; Sale of Assets. (a) The Borrower shall not merge or
consolidate with or into any other Person.

(b) The Borrower shall not directly or indirectly sell, lease, license, transfer
or otherwise dispose of all or any part of its assets, except (i) for the sale
of or licensing of rights to one or more of the Borrower’s or its Affiliates’
existing or future products and related assets to one or more third parties for
fair value in an arm’s-length transaction in the ordinary course of business;
(ii) in connection with additional product development, collaboration or
commercialization agreements (other than with respect to the Raptiva

 

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Rights-Related Intellectual Property or the Payment Rights-Related Intellectual
Property) for research, development or commercialization activities with one or
more third parties for fair value in an arm’s-length transaction in the ordinary
course of business; (iii) licenses of intellectual property rights of the
Borrower in connection with services provided by the Borrower for fair value in
an arm’s-length transaction in the ordinary course of its business; (iv) sales
of equipment not needed for the Borrower’s business to one or more third parties
for fair value in an arm’s-length transaction; (v) sales of equipment to one or
more third parties for fair value in an arm’s-length transaction, the proceeds
of which are used to purchase replacement or other assets useful in the
Borrower’s business within twelve months of such sale and (vi) other sales,
leases, licenses, transfers or other dispositions in an aggregate amount not to
exceed $1,000,000 during the term of the agreement.

SECTION 10.03. Liens. The Borrower shall not create or suffer to exist any Lien
on or with respect to any of its assets, whether now owned or hereafter
acquired, other than the following (collectively, “Permitted Liens”):

(a) Liens created pursuant to this Agreement and the Security Agreement;

(b) Liens existing on the date hereof set forth in Exhibit E to the extent and
in the manner such Liens are in effect on the date hereof;

(c) any Lien granted to collaboration or development partners of the Borrower or
its Affiliates in connection with funded research, development and
commercialization activities (other than on or with respect to the Raptiva
Rights, the Payment Rights, the Raptiva Rights-Related Intellectual Property or
the Payment Rights-Related Intellectual Property); provided, that any such Lien
is limited to the Borrower’s interest in products developed in such
collaboration;

(d) any Lien on any asset securing Indebtedness incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset;
provided that such Lien attaches to such asset concurrently with or within 90
days after the acquisition thereof;

(e) any Lien existing on any asset prior to the acquisition thereof by the
Borrower and not created in contemplation of such acquisition;

(f) any Lien created after the Closing Date in connection with capitalized lease
obligations, but only to the extent that such Lien encumbers property financed
by such capital lease obligation and the principal component of such capitalized
lease obligation is not increased; provided that capital lease obligations
secured by Liens pursuant to this clause (f) shall not exceed in the aggregate
$2,000,000;

(g) Liens arising in the ordinary course of its business which (i) do not secure
Indebtedness and (ii) do not in the aggregate materially impair the operation of
the business of the Borrower or impair the value of the Payment Rights and the
Raptiva Rights; provided that the assets secured by Liens pursuant to this
clause (g) shall not exceed in the aggregate $2,000,000;

 

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(h) easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering with the ordinary
conduct of the business of the Borrower;

(i) any Lien arising out of the refinancing, extension, renewal or refunding of
any Indebtedness secured by any Lien permitted by any of the foregoing clauses
of this Section 10.03; provided that such Indebtedness is not increased and is
not secured by any additional assets; and

(j) Liens securing taxes, assessments, fees or other governmental charges or
levies, Liens securing the claims of materialmen, mechanics, carriers’
landlords, warehousemen and similar Persons, Liens in the ordinary course of
business in connection with workmen’s compensation, unemployment insurance and
other similar Laws, Liens to secure surety, appeal and performance bonds and
other similar obligations not incurred in connection with the borrowing of
money, and attachment, judgment and other similar Liens arising in connection
with court proceedings so long as the enforcement of such Liens is effectively
stayed and the claims secured thereby are being contested in good faith by
appropriate proceedings.

SECTION 10.04. No Subsidiaries. The Borrower shall not form any Subsidiaries or
conduct any business or hold any assets through any Subsidiary.

SECTION 10.05. Investment Company Act. The Borrower shall not be or become an
investment company subject to registration under the Investment Company Act of
1940.

SECTION 10.06. Limitation on Additional Indebtedness. The Borrower shall not,
directly or indirectly, incur or suffer to exist any Indebtedness; provided that
the Borrower may incur:

(a) Indebtedness under this Agreement;

(b) Indebtedness secured by Liens permitted under Section 10.03; or

(c) any other Indebtedness relating to a collaboration or development agreement
of the type contemplated in Section 10.03(c), which by its terms (or by the
terms of any agreement governing such Indebtedness) is fully subordinated in
right of payment.

SECTION 10.07. Limitation on Transactions with Affiliates. The Borrower shall
not, directly or indirectly, enter into any transaction or series of related
transactions or participate in any arrangement (including any purchase, sale,
lease or exchange of assets or the rendering of any service) with, or for the
benefit of, any Affiliate other than the Transaction Documents or in the
ordinary course of business of the Borrower upon fair and reasonable terms no
less favorable to the Borrower than it would obtain in a comparable arm’s-length
transaction with a non-Affiliate.

SECTION 10.08. Interest Coverage Ratio. As of the second Interest Payment Date
following the Closing Date and each subsequent Interest Payment Date, the
Borrower shall

 

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not permit, for any period of two consecutive fiscal quarters, the Interest
Coverage Ratio to be less than 3.0.

SECTION 10.09. ERISA. (a) Neither XOMA nor the Borrower shall maintain or
contribute to, or agree to maintain or contribute to or otherwise incur any
liability with respect to, any employee benefit plan (as defined in Section 3(3)
of ERISA) subject to Title IV or Section 302 of ERISA or Section 412 of the Code
or any similar plan under non-U.S. law (a “Plan”). Neither XOMA nor the Borrower
shall incur any liability under Title IV or Section 302 of ERISA or Section 412
of the Code or any similar non-U.S. law in respect of any Plan that is
maintained by an ERISA Affiliate.

(b) Neither XOMA, the Borrower nor any ERISA Affiliate shall engage in a
non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of
the Code, or substantially similar provisions under foreign or U.S. federal,
state or local laws, rules or regulations or in any transaction that would cause
any obligation or action taken or to be taken hereunder (or the exercise by the
Lender of any of its rights under the Note, this Agreement or the Security
Agreement) to be a non-exempt prohibited transaction under such provisions.

(c) Neither XOMA, the Borrower nor any ERISA Affiliate will incur any liability
with respect to any obligation to provide benefits, including death or medical
benefits, with respect to any person beyond their retirement or other
termination of service other than coverage mandated by law.

ARTICLE XI

EVENTS OF DEFAULT

SECTION 11.01. Events of Default. If one or more of the following events of
default (each, an “Event of Default”) occurs and is continuing, the Lender shall
be entitled to the remedies set forth in Section 11.02:

(a) The Borrower fails to pay any principal of the Loan when due, whether at the
Maturity Date or otherwise.

(b) The Borrower fails to pay any interest on the Loan or make payment of any
other amounts payable under this Agreement within three Banking Days after the
same becomes due and payable.

(c) Any representation or warranty of the Borrower in this Agreement or any
other Transaction Document to which it is party or in any certificate, financial
statement or other document delivered by the Borrower in connection with this
Agreement proves to have been incorrect, incomplete or misleading in any
material respect at the time it was made or repeated.

(d) The Borrower fails to perform or observe any covenant or agreement contained
in Section 9.01, Section 9.04, Section 9.11(b), Section 9.11(c), Section 9.12,
Section 9.13 or Article X of this Agreement or Section 4.08 or Section 4.12 of
the Security Agreement.

 

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(e) The Borrower fails to perform or observe any other covenant or agreement
contained in this Agreement, the Note or the Security Agreement (other than
those referred to in the preceding clauses of this Section 11.01) if such
failure is not remedied on or before the thirtieth day after Notice thereof from
the Lender.

(f) The Borrower (i) fails to pay any of its Indebtedness as and when that
Indebtedness becomes payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) or (ii) fails to perform or
observe any covenant or agreement to be performed or observed by it contained in
any other agreement or in any instrument evidencing any of its Indebtedness and,
as a result of such failure, any other party to that agreement or instrument is
entitled to exercise the right to accelerate the maturity of any amount owing
thereunder or any such amount is accelerated; provided, however, that a failure
to pay Indebtedness shall not constitute an Event of Default under this clause
(f) if (x) the overdue amounts in the aggregate do not exceed $3,000,000 (or the
equivalent in another currency or currencies), (y) the obligation to pay the
overdue amounts has not resulted from acceleration and (z) the failure is
remedied on or before the thirtieth day after it occurs.

(g) XOMA Bermuda shall sell, assign, lease, license, transfer or otherwise
dispose of the Payment Rights-Related Intellectual Property with respect to the
Payment Rights, the LUCENTIS License Agreement and/or the CIMZIA License
Agreement or any XOMA Party takes any action which could reasonably be expected
to impair the value of or Lender’s access to the security provided by the
foregoing.

(h) Any judgment, decree or order shall be rendered against the Borrower and
either (i) enforcement proceedings shall have been commenced upon such judgment,
decree or order or (ii) such judgment, decree or order shall not have been
vacated or discharged within thirty days from entry.

(i) Any XOMA Party or any Obligor (i) is dissolved or commences proceedings for
dissolution, (ii) fails or is unable to pay its debts generally as they become
due, (iii) commences a voluntary case in bankruptcy or any other action or
proceeding for any other relief under any law affecting creditors’ rights that
is similar to a bankruptcy law or (iv) consents by answer or otherwise to the
commencement against it of an involuntary case in bankruptcy or any other such
action or proceeding; or a court enters an order for relief or a decree in an
involuntary case in bankruptcy or any other such action or proceeding in respect
of any such Person or any of the assets of any such Person if such order or
decree is not dismissed or withdrawn on or before the sixtieth day after the
entry thereof or if any such dismissal or withdrawal ceases to remain in effect.

(j) Any of the Transaction Documents shall cease to be in full force and effect
or its validity or enforceability is disaffirmed or challenged in writing by any
Person other than the Lender or the Security Agreement shall cease to give the
Lender the rights purported to be created thereby (including a first priority
perfected Lien on the assets of the Borrower).

 

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(k) Any of a Borrower Change of Control, a XOMA Bermuda Change of Control or a
XOMA Change of Control occurs.

(l) (i) Any representation or warranty of the Borrower or XOMA Bermuda in the
Acquisition Agreement proves to have been incorrect, incomplete or misleading in
any respect at the time it was made; (ii) the Borrower or XOMA Bermuda fails to
perform or observe any covenant or agreement contained in the Acquisition
Agreement, any License Agreement or the Borrower Documents, as applicable, and
such failure is not cured or waived within any applicable grace period or
(iii) any Obligor fails to perform or observe any covenant or agreement
contained in any License Agreement and such failure is not cured or waived
within any applicable grace period or asserts a Dispute with respect to the
Payment Rights, the Raptiva Rights or the Collaboration Agreement.

(m) In connection with a challenge to the validity of the Payment Rights, the
Raptiva Rights or any Payment Rights-Related Intellectual Property or Raptiva
Rights-Related Intellectual Property or any transaction contemplated under the
License Agreements or the Acquisition Agreement, any judgment, decree or order
is issued that (i) halts or suspends the payment by any Obligor or XOMA Bermuda
of any amount payable in respect of the Payment Rights or under the
Collaboration Agreement, or (ii) otherwise determines that the Payment Rights or
the Collaboration Agreement have not been duly authorized or validly issued or
that the Payment Rights or the Collaboration Agreement are not enforceable in
accordance with the terms of the applicable License Agreement or the Acquisition
Agreement, and such judgment, decree or order shall not have been vacated or
discharged within 10 days from entry.

(n) Any of the revenue milestones set forth in Exhibit F shall not have been
achieved by the date indicated.

(o) Any provision of Article XII shall for any reason cease to be valid and
binding or enforceable against XOMA or XOMA shall so state in writing.

SECTION 11.02. Default Remedies. If any Event of Default shall occur, the Lender
may, by Notice to the Borrower, (a) exercise all rights and remedies available
to the Lender hereunder and under the Security Agreement, including enforcement
of the security interests created thereby, (b) declare the Loan, all interest
thereon and all other amounts payable hereunder and under the Note by the
Borrower to be immediately due and payable, whereupon all such amounts shall
become immediately due and payable, all without diligence, presentment, demand
of payment, protest or further notice of any kind, which are expressly waived by
the Borrower and (c) declare the obligations of the Lender hereunder to be
terminated, whereupon such obligations shall terminate, provided, however, that
if any event of any kind referred to in Section 11.01(i) occurs, the obligations
of the Lender hereunder shall immediately terminate, all amounts payable
hereunder by the Borrower shall become immediately due and payable and the
Lender shall be entitled to exercise rights and remedies under the Security
Agreement without diligence, presentment, demand of payment, protest or notice
of any kind, all of which are hereby expressly waived by the Borrower. Each
Notice delivered pursuant to this Section 11.02 shall be effective when sent.

 

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SECTION 11.03. Right of Set-off. If any amount payable hereunder is not paid as
and when due, the Borrower irrevocably authorizes the Lender and each Affiliate
of the Lender (i) to proceed, to the fullest extent permitted by applicable Law,
without prior notice, by right of set-off, bankers’ lien, counterclaim or
otherwise, against any assets of the Borrower in any currency that may at any
time be in the possession of the Lender or such Affiliate, to the full extent of
all amounts payable to the Lender hereunder or (ii) to charge to the Payment
Account the full extent of all amounts payable by the Borrower to the Lender
hereunder; provided, however, that the Lender shall notify the Borrower of the
exercise of such right promptly following such exercise.

SECTION 11.04. Rights Not Exclusive. The rights provided for herein are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by Law.

ARTICLE XII

GUARANTEE

SECTION 12.01. Guarantee. XOMA hereby absolutely, unconditionally and
irrevocably guarantees, as a guarantee of payment and not of collection, the
punctual payment when due, whether at scheduled maturity or on any date of a
required prepayment or by acceleration, demand or otherwise, of all obligations
of the Borrower now or hereafter existing under or in respect of this Agreement
and the Loan Documents (including any extensions, modifications, substitutions,
amendments or renewals of any or all of the foregoing obligations), whether
direct or indirect, absolute or contingent, and whether for principal, interest,
premiums, fees, indemnities, contract causes of action, costs, expenses or
otherwise (such obligations being the “Guaranteed Obligations”), and agrees to
pay any and all expenses (including fees and expenses of counsel) incurred by
the Lender in enforcing any rights under this Article XII. Without limiting the,
generality of the foregoing, XOMA’s liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed by the Borrower
to the Lender under or in respect of this Agreement or any Loan Document but for
the fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Borrower.

SECTION 12.02. Guarantee Absolute. (a) XOMA guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of this Agreement
and the Loan Documents regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lender with respect thereto. The obligations of XOMA under or in
respect of this Article XII are independent of the Guaranteed Obligations or any
other obligations of the Borrower under or in respect of this Agreement and any
Loan Documents and a separate action or actions may be brought and prosecuted
against XOMA to enforce this Article XII, irrespective of whether any action is
brought against the Borrower or whether the Borrower is joined in any such
action or actions. The liability of XOMA under this Article XII shall be
irrevocable, absolute and unconditional irrespective of, and XOMA hereby
irrevocably waives any defenses it may now have or hereafter acquire in any way
relating to, any or all of the following:

 

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(i) any lack of validity or enforceability of this Agreement (other than this
Article XII), the Note or any agreement or instrument relating thereto;

(ii) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Guaranteed Obligations or any other obligations of the
Borrower under or in respect of this Agreement or the Loan Documents or any
other amendment or waiver of or any consent to departure from this Agreement or
the Loan Documents, including any increase in the Guaranteed Obligations
resulting from the extension of additional credit to the Borrower or otherwise;

(iii) any taking, exchange, release or non-perfection of any Collateral (as
defined under the Security Agreement), or any taking, release or amendment or
waiver of, or consent to departure from, any other guaranty, for all or any of
the Guaranteed Obligations;

(iv) any manner of application of Collateral, or proceeds thereof, to all or any
of the Guaranteed Obligations, or any manner of sale or other disposition of any
Collateral for all or any of the Guaranteed Obligations or any other obligations
of the Borrower under this Agreement or the Loan Documents or any other assets
of the Borrower;

(v) any change, restructuring or termination of the corporate structure or
existence of the Borrower or any of its Subsidiaries; or

(vi) any other circumstance (including any statute of limitations) or any
existence of or reliance on any representation by the Lender that might
otherwise constitute a defense available to, or a discharge of, the Borrower or
any other guarantor or surety.

(b) This Article XII shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Lender or any other Person upon
the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all
as though such payment had not been made.

SECTION 12.03. Waivers and Acknowledgments. (a) XOMA unconditionally and
irrevocably waives promptness, diligence, notice of acceptance, presentment,
demand for performance, notice of nonperformance, default, acceleration, protest
or dishonor and any other notice with respect to any of the Guaranteed
Obligations and this Article XII and any requirement that the Lender protect,
secure, perfect or insure any Lien or any property subject thereto or exhaust
any right or take any action against the Borrower or any other Person or any
collateral.

(b) XOMA hereby unconditionally and irrevocably waives any right to revoke this
Article XII and acknowledges that the guaranty under this Article XII is
continuing in nature and applies to all Guaranteed Obligations, whether existing
now or in the future.

 

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(c) XOMA hereby unconditionally and irrevocably waives (i) any defense arising
by reason of any claim or defense based upon an election of remedies by the
Lender that in any manner impairs, reduces, releases or otherwise adversely
affects the subrogation, reimbursement, exoneration, contribution or
indemnification rights of XOMA or other rights of XOMA to proceed against the
Borrower, any other guarantor or any other Person or any Collateral and (ii) any
defense based on any right of set-off or counterclaim against or in respect of
the obligations of XOMA hereunder.

(d) XOMA hereby unconditionally and irrevocably waives any duty on the part of
the Lender to disclose to XOMA any matter, fact or thing relating to the
business, financial condition, operations, performance, properties or prospects
of the Borrower now or hereafter known by the Lender.

(e) XOMA acknowledges that it will receive substantial direct and indirect
benefits from the financing arrangements contemplated by this Agreement and the
Loan Documents and that the waivers set forth in Section 12.02 and this
Section 12.03 are knowingly made in contemplation of such benefits.

SECTION 12.04. Subrogation. XOMA hereby unconditionally and irrevocably agrees
not to exercise any rights that it may now have or hereafter acquire against the
Borrower or any other insider guarantor that arise from the existence, payment,
performance or enforcement of XOMA’s obligations under or in respect of this
Article XII, including any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy of the Lender against the Borrower or any other insider guarantor or any
collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including the right to take or receive from the
Borrower or any other insider guarantor, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim, remedy or right, unless and until all of the Guaranteed
Obligations and all other amounts payable under this Article XII shall have been
paid in full in cash. If any amount shall be paid to XOMA in violation of the
immediately preceding sentence at any time prior to the payment in full in cash
of the Guaranteed Obligations and all other amounts payable under this Article
XII, such amount shall be received and held in trust for the benefit of the
Lender, shall be segregated from other property and funds of XOMA and shall
forthwith be paid or delivered to the Lender in the same form as so received
(with any necessary endorsement or assignment) to be credited and applied to the
Guaranteed Obligations and all other amounts payable under this Article XII,
whether matured or unmatured, in accordance with the terms of this Agreement, or
to be held as collateral for any Guaranteed Obligations or other amounts payable
under this Article XII thereafter arising.

SECTION 12.05. Continuing Guarantee. The guarantee under this Article XII is a
continuing guarantee and shall (a) remain in full force and effect until the
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Article XII, (b) be binding upon XOMA, its successors and
assigns and (c) inure to the benefit of and be enforceable by the Lender and its
successors, transferees and assigns. XOMA shall not have the right to assign its
obligations hereunder without the prior written consent of the Lender and any
purported assignment in violation of this Section 12.05 shall be null and void.

 

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ARTICLE XIII

INDEMNIFICATION

SECTION 13.01. Funding Losses. If the Borrower makes any payment of principal
with respect to the Loan on any day other than the last day of an Interest
Period applicable thereto, or if the Borrower fails to borrow any amount on the
Closing Date after Notice of Borrowing has been given to the Lender in
accordance with Section 2.02, the Borrower shall reimburse the Lender within
three Banking Days after demand for any resulting loss or expense incurred by
the Lender including any loss incurred in obtaining, liquidating or redeploying
deposits from third parties; provided that the Lender shall have delivered to
the Borrower a certificate as to the amount of such loss or expense.

SECTION 13.02. Increased Costs. Except as to Taxes (it being understood that the
Borrower’s liability for Taxes will be exclusively determined under Article V),
the Borrower shall reimburse the Lender on demand for all increases in costs
incurred by the Lender and all reductions in amounts received or receivable by
the Lender or in the rate of return on the Lender’s capital, as reasonably
determined by the Lender, that are attributable to the Loan or the performance
by the Lender of its obligations under this Agreement and that occur by reason
of the promulgation after the date hereof of any Law or treaty or any change
after the date hereof in any Law or treaty or in the interpretation thereof or
by reason of compliance by the Lender with any direction, requirement or request
(whether or not having the force of Law) of any Governmental Authority,
including any such cost or reduction resulting from the imposition or amendment
of any capital adequacy requirement or any reserve, special deposit or similar
requirement against assets of, liabilities of, deposits with or for the account
of, or loans by, the Lender; provided that the Lender shall not be entitled to
be reimbursed for such increased costs or reductions in amount receivable or the
rate of return incurred more than 180 days prior to the date on which it gives
notice to the Borrower of such increased costs or reduction in amount receivable
or rate of return.

SECTION 13.03. Other Losses. (a) The Borrower agrees to defend (subject to
Indemnitees’ selection of counsel), indemnify, pay and hold harmless, the Lender
and its Affiliates and their respective officers, partners, directors, trustees,
employees and agents (each, an “Indemnitee”), from and against any and all
Indemnified Liabilities, in all cases, whether or not caused by or arising, in
whole or in part, out of the comparative, contributory or sole negligence of
such Indemnitee; provided, the Borrower shall not have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent
such Indemnified Liabilities arise from the gross negligence or willful
misconduct of such Indemnitee. To the extent that the undertakings to defend,
indemnify, pay and hold harmless set forth in this Section 13.03 may be
unenforceable in whole or in part because they are violative of any law or
public policy, the Borrower shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of
them.

(b) To the extent permitted by applicable law, no Party shall assert, and each
Party hereby waives, any claim against each other Party and such Party’s
Affiliates, directors, employees, attorneys or agents, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) (whether or

 

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not the claim therefor is based on contract, tort or duty imposed by any
applicable legal requirement) arising out of, in connection with, as a result
of, or in any way related to, this Agreement or any Loan Document or any
agreement or instrument contemplated hereby or thereby or referred to herein or
therein, the transactions contemplated hereby or thereby, the Loan or the use of
the proceeds thereof or any act or omission or event occurring in connection
therewith, and each Party hereby waives, releases and agrees not to sue upon any
such claim or any such damages, whether or not accrued and whether or not known
or suspected to exist in its favor.

SECTION 13.04. Assumption of Defense; Settlements. If the Lender is entitled to
indemnification under this Article XIII with respect to any action or proceeding
brought by a third party that is also brought against the Borrower, the Borrower
shall be entitled to assume the defense of any such action or proceeding with
counsel reasonably satisfactory to the Lender. Upon assumption by the Borrower
of the defense of any such action or proceeding, the Borrower shall have the
right to participate in such action or proceeding and to retain its own counsel
but the Borrower shall not be liable for any legal expenses of other counsel
subsequently incurred by the Lender in connection with the defense thereof
unless (i) the Borrower has otherwise agreed to pay such fees and expenses,
(ii) the Borrower shall have failed to employ counsel reasonably satisfactory to
the Lender in a timely manner or (iii) the Lender shall have been advised by
counsel that there are actual or potential conflicting interests between the
Borrower and the Lender, including situations in which there are one or more
legal defenses available to the Lender that are different from or additional to
those available to the Borrower; provided, however, that the Borrower shall not,
in connection with any one such action or proceeding or separate but
substantially similar actions or proceedings arising out of the same general
allegations, be liable for the fees and expenses of more than one separate firm
of attorneys at any time for the Lender, except to the extent that local
counsel, in addition to its regular counsel, is required in order to effectively
defend against such action or proceeding. The Borrower shall not consent to the
terms of any compromise or settlement of any action defended by the Borrower in
accordance with the foregoing without the prior written consent of the Lender
unless such compromise or settlement (x) includes an unconditional release of
the Lender from all liability arising out of such action and (y) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the Lender. The Borrower shall not be required to
indemnify the Lender for any amount paid or payable by the Lender in the
settlement of any action, proceeding or investigation without the written
consent of the Borrower, which consent shall not be unreasonably withheld.

ARTICLE XIV

MISCELLANEOUS

SECTION 14.01. Assignments. (a) The Borrower shall not be permitted to assign
this Agreement without the prior written consent of the Lender and any purported
assignment in violation of this Section 14.01(a) shall be null and void.

(b) The Lender may at any time assign all its rights and obligations hereunder
in whole or in part to a financial institution, institutional investor or
commercial paper conduit (each an “Assignee”); provided that, at any time, there
shall be no more than three Lenders.

 

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(c) The parties to each assignment shall execute and deliver to the Borrower a
written instrument of assignment in the form set forth in Exhibit G, containing
the agreement of the assignee to be bound by the terms of this Agreement (an
“Assignment and Acceptance”). Upon the effectiveness of a permitted assignment
hereunder, (i) each reference in this Agreement to “Lender” shall be deemed to
be a reference to the assignor and the assignee to the extent of their
respective interests, (ii) such assignee shall be a Lender party to this
Agreement and shall have all the rights and obligations of a Lender and
(iii) the assignor shall be released from its obligations hereunder to a
corresponding extent of the assignment, and no further consent or action by any
party shall be required.

(d) The Borrower shall, from time to time at the request of the Lender, execute
and deliver any documents that are necessary to give full force and effect to an
assignment permitted hereunder, including a new Note in exchange for the Note
held by the Lender.

SECTION 14.02. Participations. The Lender may at any time grant to one or more
financial institutions, institutional investors and/or commercial paper conduits
(each a “Participant”) participating interests in its Loan. In the event of any
such grant by the Lender of a participating interest to a Participant, whether
or not upon notice to the Borrower, such Lender shall remain responsible for the
performance of its obligations hereunder, and the Borrower shall continue to
deal solely and directly with the Lender in connection with the Lender’s rights
and obligations under this Agreement. Any agreement pursuant to which the Lender
may grant such a participating interest shall provide that the Lender shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including the right to approve any amendment, modification or
waiver of any provision of this Agreement. The Borrower agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Article V and Article XII with respect to its
participating interest, as though it were a Lender.

SECTION 14.03. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and
permitted assigns.

SECTION 14.04. Notices. All notices, consents, approvals, reports, designations,
requests, waivers, elections and other communications (collectively, “Notices”)
authorized or required to be given pursuant to this Agreement shall be given in
writing and either personally delivered to the Party to whom it is given or
delivered by an established delivery service by which receipts are given or
mailed by registered or certified mail, postage prepaid, or sent by facsimile or
electronic mail with a copy sent on the following Banking Day by one of the
other methods of giving notice described herein, addressed to the Party at its
address listed below:

(a) If to the Borrower:

XOMA (US) LLC

2910 Seventh Street

Berkeley, California 94710

Attn: Legal Department

 

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with a copy, which shall not constitute notice, to:

XOMA (US) LLC

2910 Seventh Street

Berkeley, California 94710

Attn: Finance Department

and a copy, which shall not constitute notice, to:

Cahill Gordon & Reindel LLP

80 Pine Street

New York, New York 10005

Attn: Geoffrey Liebmann

(b) If to the Lender:

Goldman Sachs Specialty Lending Holdings, Inc.

85 Broad Street

New York, New York 10004

Attention: James David

with a copy to:

Goldman Sachs Specialty Lending Holdings, Inc.

600 E. Las Colinas Boulevard

Suite 400

Irving, Texas 75039

Attention: Kyle Volluz

(c) If to XOMA:

XOMA Ltd.

2910 Seventh Street

Berkeley, California 94710

Attn: Legal Department

with a copy, which shall not constitute notice, to:

XOMA Ltd.

2910 Seventh Street

Berkeley, California 94710

Attn: Finance Department

and a copy, which shall not constitute notice, to:

Cahill Gordon & Reindel LLP

 

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80 Pine Street

New York, New York 10005

Attn: Geoffrey Liebmann

Any Party may change its address for the receipt of Notices at any time by
giving Notice thereof to the other Parties. Except as otherwise provided herein,
any Notice authorized or required to be given by this Agreement shall be
effective when received.

SECTION 14.05. Entire Agreement. This Agreement and the other Transaction
Documents contain the entire agreement between the Parties relating to the
subject matter hereof and supersede all oral statements and prior writings with
respect thereto.

SECTION 14.06. Modification. No change or modification of this Agreement shall
be of any force unless such change or modification is in writing and has been
signed by the Lender and the Borrower.

SECTION 14.07. No Delay; Waivers; etc. No delay on the part of the Lender in
exercising any power or right hereunder shall operate as a waiver thereof nor
shall any single or partial exercise of any power or right hereunder preclude
other or further exercise thereof or the exercise of any other power or right.
The Lender shall not be deemed to have waived any rights hereunder unless such
waiver shall be in writing and signed by the Lender.

SECTION 14.08. Severability. If any provision of this Agreement shall be held to
be invalid, illegal or unenforceable, then, to the fullest extent permitted by
law, the validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.

SECTION 14.09. Determinations. Each determination or calculation by the Lender
hereunder shall, in the absence of manifest error, be conclusive and binding on
the Parties.

SECTION 14.10. Replacement of Note. Upon the loss, theft, destruction, or
mutilation of the Note and (a) in the case of loss, theft or destruction, upon
receipt by the Borrower of indemnity or security reasonably satisfactory to it
(except that if the holder of the Note is the Lender or any other financial
institution of recognized responsibility, the holder’s own agreement of
indemnity shall be deemed to be satisfactory) or (b) in the case of mutilation,
upon surrender to the Borrower of the mutilated Note, the Borrower shall execute
and deliver in lieu thereof a new Note, dated the Closing Date, in the same
principal amount.

SECTION 14.11. Governing Law. THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO ANY CONFLICT OF LAWS PRINCIPLES THAT WOULD REQUIRE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION).

SECTION 14.12. Jurisdiction. Each of the Borrower and XOMA irrevocably submits
to the jurisdiction of the courts of the State of New York and of the United
States sitting in the State of New York, and of the courts of its own corporate
domicile with respect to actions

 

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or proceedings brought against it as a defendant, for purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby (a “Proceeding”). Each of the Borrower and XOMA irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of venue of any Proceeding and any claim that
any Proceeding has been brought in an inconvenient forum. Any process or summons
for purposes of any Proceeding may be served on the Borrower or XOMA by mailing
a copy thereof by registered mail, or a form of mail substantially equivalent
thereto, addressed to it at its address as provided for Notices hereunder.

SECTION 14.13. Waiver of Jury Trial. EACH OF THE BORROWER AND XOMA HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

SECTION 14.14. Waiver of Immunity. To the extent that the Borrower or XOMA has
or hereafter may be entitled to claim or may acquire, for itself or any of its
assets, any immunity from suit, jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, or otherwise) with respect to itself or any of
its property, each of the Borrower and XOMA hereby irrevocably waives such
immunity in respect of its obligations hereunder and under the Note to the
fullest extent permitted by law.

SECTION 14.15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

SECTION 14.16. Limitation on Rights of Others. Except for the Indemnitees
referred to in Section 13.03, no Person other than a Party shall have any legal
or equitable right, remedy or claim under or in respect of this Agreement.

SECTION 14.17. No Partnership. Nothing in this Agreement or any other
Transaction Document shall be read to create any agency, partnership or joint
venture of the Lender (or any of its Affiliates) and the Borrower (or any of its
Affiliates).

SECTION 14.18. Survival. The obligations of the Borrower contained in Sections
4.05, 4.06, Article V and Article XIII and of XOMA contained in Article XII
shall survive the repayment of the Loan and the cancellation of the Note and the
termination of the other obligations of the Borrower hereunder.

SECTION 14.19. Patriot Act Notification. The Lender hereby notifies the Borrower
that, consistent with the USA Patriot Act, Public Law No. 107-56 (the “Patriot
Act”), regulations promulgated thereunder and under other applicable Law, the
Lender’s procedures and customer due diligence standards require it to obtain,
verify and record information that identifies the Borrower, including among
other things name, address, information regarding persons with authority or
control over the Borrower, and other information regarding the Borrower, its
operations and transactions with the Lender. The Borrower agrees to provide such
information and take such actions as are reasonably requested by the Lender in
order to assist the Lender in maintaining compliance with its procedures, the
Patriot Act and any other applicable Laws.

 

41

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

IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the day
and year first above written.

 

GOLDMAN SACHS SPECIALTY   LENDING HOLDINGS, INC.,   as Lender By:   /s/ ALAN
WAXMAN   Name: Alan S. Waxman   Title: Vice President XOMA (US) LLC, as Borrower
By:   /s/ CHRISTOPHER J. MARGOLIN   Name: Christopher J. Margolin  

Title: Vice President, General Counsel

and Secretary

XOMA LTD., as Guarantor By:   /s/ CHRISTOPHER J. MARGOLIN   Name: Christopher J.
Margolin  

Title: Vice President, General Counsel

and Secretary

 

42

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

EXHIBIT A

Form of Promissory Note

 

US$35,000,000    New York, New York November 9, 2006

FOR VALUE RECEIVED, XOMA (US) LLC, a Delaware limited liability company (the
“Borrower”), hereby promises to pay to the order of Goldman Sachs Specialty
Lending Holdings, Inc. or its registered assigns (the “Lender”), in lawful money
of the United States of America, in same day funds on the Maturity Date the
principal sum of thirty-five million dollars (US$35,000,000).

The Borrower also promises to pay interest on the unpaid principal amount hereof
in like money, from the date hereof until such unpaid principal is paid in full,
at the rates, at the times and in the manner provided in the Loan Agreement
referred to below.

This Note is the Note referred to in the Loan Agreement, dated as of November 9,
2006, between the Borrower and the Lender (as amended from time to time, the
“Loan Agreement”) and is entitled to the benefits thereof and of the other Loan
Documents. This Note is secured as provided in the Loan Documents. This Note is
subject to optional prepayment, in whole or in part, prior to the Maturity Date
as provided in the Loan Agreement.

If an Event of Default shall occur and be continuing, the principal of and
accrued interest on this Note may become or be declared to be due and payable in
the manner and with the effect provided in the Loan Agreement.

The Borrower hereby waives presentment, demand, protest or notice of any kind in
connection with this Note.

Capitalized terms used but not defined herein shall have the meanings given to
them in the Loan Agreement.

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

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAWS PRINCIPLES
THAT WOULD REQUIRE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION).

 

XOMA (US) LLC By:   /s/ J. DAVID BOYLE II   Name: J. David Boyle II  

Title: Vice President, Finance and

Chief Financial Officer

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

EXHIBIT B

Form of Notice of Borrowing

[*]

EXHIBIT C

[Form of Security Agreement]

EXHIBIT D-1

Form of Certificate of Borrower

[*]

EXHIBIT D-2

Form of Certificate of XOMA

[*]

EXHIBIT D-3

Form of Certificate of XOMA Bermuda

[*]

EXHIBIT E

Existing Liens and Related Indebtedness

[*]

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

EXHIBIT F

Revenue Milestones

[*]

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

EXHIBIT G

Form of Assignment and Acceptance

[*]

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

EXHIBIT H-1

[*]

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

EXHIBIT H-2

[*]

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

EXHIBIT J

XOMA BCE/HE Intellectual Property

XOMA Patent Rights – Bacterial Expression

A. Title: Modular Assembly of Antibody Genes, Antibodies Prepared Thereby and
Use

Based on PCT/US88/02514, which corresponds to U.S. Application No. 07/077,528,
which is a continuation-in-part PCT/US86/02269 (abandoned), which is a
continuation-in-part of U.S. Application No. 06/793,980 (abandoned).

 

COUNTRY

   APPLICATION NO.    PATENT NO.

Australia

   23244/88    632,462

Canada

   572,398    1,341,235

Denmark

   192/90    174824

Denmark

   200301155    PR 175654 B1

Denmark

   200301156    PR 175581 B1

Europe

   EP 88907510.7    EP 0371998

Austria

   EP 88907510.7    EP 0371998

Belgium

   EP 88907510.7    EP 0371998

France

   EP 88907510.7    EP 0371998

Germany

   EP 88907510.7    P 3888186.1

Italy

   EP 88907510.7    EP 0371998

Luxembourg

   EP 88907510.7    EP 0371998

Netherlands

   EP 88907510.7    EP 0371998

Sweden

   EP 88907510.7    EP 0371998

Switzerland / Liechtenstein

   EP 88907510.7    EP 0371998

United Kingdom

   EP 88907510.7    EP 0371998

Europe

   EP 93100041.8    EP 0550400

Austria

   EP 93100041.8    EP 0550400

Belgium

   EP 93100041.8    EP 0550400

France

   EP 93100041.8    EP 0550400

Germany

   EP 93100041.8    P 3855421.6

Italy

   EP 93100041.8    EP 0550400

Luxembourg

   EP 93100041.8    EP 0550400

Netherlands

   EP 93100041.8    EP 0550400

Sweden

   EP 93100041.8    EP 0550400

Switzerland/ Liechtenstein

   EP 93100041.8    EP 0550400

United Kingdom

   EP 93100041.8    EP 0550400

Europe

   EP 95119798.7    EP 0731167

Austria

   EP 95119798.7    EP 0731167

Belgium

   EP 95119798.7    EP 0731167

France

   EP 95119798.7    EP 0731167

Germany

   EP 95119798.7    P 3856440.12

Italy

   EP 95119798.7    EP 0731167

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

Luxembourg

   EP 95119798.7    EP 0731167

Netherlands

   EP 95119798.7    EP 0731167

Sweden

   EP 95119798.7    EP 0731167

Switzerland/Liechtenstein

   EP 95119798.7    EP 0731167

United Kingdom

   EP 95119798.7    EP 0731167

Japan

   506481/88    2991720

Based on U.S. Application No. 07/501,092 filed March 29, 1990, which is a
continuation-in-part of U.S. Application No. 07/077,528 (Modular Assembly of
Antibody Genes, Antibodies Prepared Thereby and Use; Robinson, Liu, Horwitz,
Wall, Better) and of U.S. Application No. 07/142,039 (Novel Plasmid Vector with
Pectate Lyase Signal Sequence; Lei, Wilcox).

 

COUNTRY

   APPLICATION NO.    PATENT NO.

United States

   08/235,225    5,618,920

United States

   08/299,085    5,595,898

United States

   08/472,691    6,204,023

United States

   08/467,140    5,698,435

United States

   08/450,731    5,693,493

United States

   08/466,203    5,698,417

United States

   11/582,563    Pending

B. Title: Novel Plasmid Vector with Pectate Lyase Signal Sequence (PelB)

 

Inventors: Lei, Wilcox

Based on U.S. Application No. 07/142,039 filed January 11, 1988 and
PCT/US89/00077.

 

COUNTRY

   APPLICATION NO.    PATENT NO.

Australia

   29377/89    627443

Canada

   587,885    1,338,807

Europe

   EP 89901763.6    EP 0396612

Austria

   EP 89901763.6    EP 0396612

Belgium

   EP 89901763.6    EP 0396612

France

   EP 89901763.6    EP 0396612

Germany

   EP 89901763.6    689 26 882 T2

Italy

   EP 89901763.6    EP 0396612

Luxembourg

   EP 89901763.6    EP 0396612

Netherlands

   EP 89901763.6    EP 0396612

Sweden

   EP 89901763.6    EP 0396612

Switzerland/Liechtenstein

   EP 89901763.6    EP 0396612

United Kingdom

   EP 89901763.6    EP 0396612

Japan

   501661/89    2980626

United States

   08/472,696    5,846,818

United States

   08/357,234    5,576,195

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

XOMA Patent Rights – Human Engineering™

 

A. Title: Methods and Materials for Preparation of Modified Antibody Variable
Domains and Therapeutic Uses Thereof

Inventors: Studnicka, Little, Fishwild, Kohn

Based on PCT/US92/10906 [WO 93/11794 filed 12/14/92], which is a
continuation-in-part of U.S. Serial No. 07/808,464 filed December 13, 1991
(abandoned).

 

COUNTRY

   SERIAL NO.    PATENT NO.

United States

   08/107,669    5,766,886

United States

   10/340,189    Published 2003/0229207

United States

   11/133,775    Published 2005/0239141

United States

   08/082,842    5,869,619

United States

   08/472,788    5,770,196

United States

Canada

   08/477,531
2,103,887    5,821,123
2,103,887

Canada

   2,507,749 DIV    Pending

Europe

   EP 93901238.1    EP 0571613

Belgium

   EP 93901238.1    EP 0571613

France

   EP 93901238.1    EP 0571613

Germany

   EP 93901238.1    DE 69233204T

Ireland

   EP 93901238.1    EP 0571613

Italy

   EP 93901238.1    EP 0571613

Netherlands

   EP 93901238.1    EP 0571613

Spain

   EP 93901238.1    ES 2202310T

Switzerland/Liechtenstein

   EP 93901238.1    EP 0571613

United Kingdom

   EP 93901238.1    EP 0571613

Japan

   5-511171    Published 6-506362

Japan

   2005-6625    Published 2005-160485