Exhibit 10.2

XOMA LTD.

WARRANT TO PURCHASE COMMON SHARES

Warrant No.: [    ]

Number of Common Shares: [            ]

Date of Issuance: February [    ], 2010 (“Issuance Date”)

XOMA Ltd., a Bermuda corporation, (the “Company”), hereby certifies that, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, [            ], the registered holder hereof, or its permitted
assigns (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company, at the Exercise Price (as defined below) then in
effect, upon surrender of this Warrant to Purchase Common Shares (including any
Warrants to Purchase Common Shares issued in exchange, transfer or replacement
hereof, the “Warrant”), at any time or times on or after the six (6) month and
one (1) day anniversary of the date hereof, but not after 11:59 p.m., New York
Time, on the Expiration Date (as defined below), [            ] fully paid
nonassessable Common Shares (as defined below), as adjusted pursuant to the
terms hereof (the “Warrant Shares”). Except as otherwise defined herein,
capitalized terms in this Warrant shall have the meanings set forth in
Section 15. This Warrant is one of the Warrants to Purchase Common Shares issued
pursuant to that certain Underwriting Agreement, dated as of February 2, 2010,
by and among the Company and Lazard Capital Markets LLC.

1. EXERCISE OF WARRANT.

(a) Mechanics of Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any day on or after the six (6) month
and one (1) day anniversary of the date hereof in whole or in part, by
(i) delivery of a written notice, in the form attached hereto as Exhibit A (the
“Exercise Notice”), of the Holder’s election to exercise this Warrant and
(ii) payment to the Company of an amount equal to the applicable Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being
exercised (the “Aggregate Exercise Price”) in cash or by wire transfer of
immediately available funds. The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder. Execution and
delivery of the Exercise Notice with respect to less than all of the Warrant
Shares shall have the same effect as cancellation of the original Warrant and
issuance of a new Warrant evidencing the right to purchase the remaining number
of Warrant Shares. On or before the first (1st) Business Day following the date
on which the Company has received each of the Exercise Notice and the Aggregate
Exercise Price (the “Exercise Delivery Documents”), the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of the Exercise
Delivery Documents to the Holder and the Company’s transfer agent (the “Transfer
Agent”). On or before the third (3rd) Trading Day following the date on which
the Company has received all of the Exercise Delivery Documents (the “Share
Delivery Date”), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company (“DTC”)

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Fast Automated Securities Transfer Program, upon the request of the Holder,
credit such aggregate number of Common Shares to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account with
DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent or the Company is not participating in the DTC Fast Automated
Securities Transfer Program, issue and dispatch by overnight courier to the
address as specified in the Exercise Notice, a certificate, registered in the
Company’s share register in the name of the Holder or its designee, for the
number of Common Shares to which the Holder is entitled pursuant to such
exercise. Upon delivery of the Exercise Delivery Documents, the Holder shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date such Warrant Shares are credited to the Holder’s DTC
account or the date of delivery of the certificates evidencing such Warrant
Shares, as the case may be. If this Warrant is submitted in connection with any
exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then the Company shall as soon
as practicable and in no event later than three (3) Business Days after any
exercise and at its own expense, issue a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the number of Warrant Shares
issuable immediately prior to such exercise under this Warrant, less the number
of Warrant Shares with respect to which this Warrant is exercised. No fractional
Common Shares are to be issued upon the exercise of this Warrant, but rather the
number of Common Shares to be issued shall be rounded up to the nearest whole
number. The Company shall pay any and all taxes which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this
Warrant.

(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means $0.70,
subject to adjustment as provided herein.

(c) Company’s Failure to Timely Deliver Securities. If the Company fails to
cause the Transfer Agent to transmit to the Holder a certificate or the
certificates representing the Warrant Shares pursuant to an exercise on or
before the Warrant Share Delivery Date, and if after such date the Holder
purchases (in an open market transaction or otherwise) or the Holder’s brokerage
firm otherwise purchases, Common Shares to deliver in satisfaction of a sale by
the Holder of the Warrant Shares which the Holder anticipated receiving upon
such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder
the amount, if any, by which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the Common Shares so purchased exceeds
(y) the amount obtained by multiplying (1) the number of Warrant Shares that the
Company was required to deliver to the Holder in connection with the exercise at
issue times (2) the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder, either reinstate
the portion of the Warrant and equivalent number of Warrant Shares for which
such exercise was not honored (in which case such exercise shall be deemed
rescinded) or deliver to the Holder the number of Common Shares that would have
been issued had the Company timely complied with its exercise and delivery
obligations hereunder. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss. Nothing herein
shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a

 

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decree of specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing Common Shares upon
exercise of the Warrant as required pursuant to the terms hereof.

(d) Disputes. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the Holder the number of Warrant Shares that are not disputed.

(e) Limitations on Exercises; Beneficial Ownership. The Company shall not effect
the exercise of this Warrant, and the Holder shall not have the right to
exercise this Warrant, to the extent that after giving effect to such exercise,
such Person (together with such Person’s affiliates) would beneficially own in
excess of 9.80% (the “Maximum Percentage”) of the Common Shares outstanding
immediately after giving effect to such exercise. For purposes of the foregoing
sentence, the aggregate number of Common Shares beneficially owned by such
Person and its affiliates shall include the number of Common Shares issuable
upon exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude Common Shares which would be issuable
upon (A) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (B) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred shares or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence, for
purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). For purposes of this Warrant, in determining the number of
outstanding Common Shares, the Holder may rely on the number of outstanding
Common Shares as reflected in (1) the Company’s most recent Form 10-K, Form
10-Q, Current Report on Form 8-K or other public filing with the Securities and
Exchange Commission, as the case may be, (2) a more recent public announcement
by the Company or (3) any other notice by the Company or the Transfer Agent
setting forth the number of Common Shares outstanding. For any reason at any
time, upon the written or oral request of the Holder, the Company shall within
one (1) Business Day confirm orally and in writing to the Holder the number of
Common Shares then outstanding. In any case, the number of outstanding Common
Shares shall be determined after giving effect to the conversion or exercise of
securities of the Company by the Holder and its affiliates since the date as of
which such number of outstanding Common Shares was reported. By written notice
to the Company, the Holder may from time to time increase or decrease the
Maximum Percentage to any other percentage not in excess of 9.99% specified in
such notice; provided that (i) any such increase will not be effective until the
sixty-first (61 st) day after such notice is delivered to the Company, and
(ii) any such increase or decrease will apply only to the Holder and not to any
other holder of warrants. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms
of this Section 1(e) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended beneficial ownership limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation.

 

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(f) Insufficient Authorized Shares. If at any time while any of the Warrants
remain outstanding the Company does not have a sufficient number of authorized
and unreserved Common Shares to satisfy its obligation to reserve for issuance
upon exercise of the Warrants at least a number of Common Shares equal to 100%
(the “Required Reserve Amount”) of the number of Common Shares as shall from
time to time be necessary to effect the exercise of this Warrant (an “Authorized
Share Failure”), then the Company shall immediately take all action necessary to
increase the Company’s authorized Common Shares to an amount sufficient to allow
the Company to reserve the Required Reserve Amount for this Warrant.

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. If the Company at
any time on or after the Issuance Date subdivides (by any share split, dividend,
recapitalization or otherwise) one or more classes of its outstanding Common
Shares into a greater number of shares, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
Warrant Shares will be proportionately increased. If the Company at any time on
or after the Issuance Date combines (by combination, reverse share split or
otherwise) one or more classes of its outstanding Common Shares into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares
will be proportionately decreased. Any adjustment under this Section 2 shall
become effective at the close of business on the date the subdivision or
combination becomes effective.

3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of Common Shares, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, share or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a “Distribution”), at any time after the issuance of this
Warrant, then, in each such case:

(a) any Exercise Price in effect immediately prior to the close of business on
the record date fixed for the determination of holders of Common Shares entitled
to receive the Distribution shall be reduced, effective as of the close of
business on such record date, to a price determined by multiplying such Exercise
Price by a fraction of which (i) the numerator shall be the Closing Bid Price of
the Common Shares on the Trading Day immediately preceding such record date
minus the value of the Distribution (as determined in good faith by the
Company’s Board of Directors) applicable to one share of Common Shares, and
(ii) the denominator shall be the Closing Bid Price of the Common Shares on the
Trading Day immediately preceding such record date; and

(b) the number of Warrant Shares shall be increased to a number of shares equal
to the number of Common Shares obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Shares entitled to receive the Distribution multiplied by the reciprocal of the
fraction set forth in the immediately preceding paragraph (a); provided that in
the event that the Distribution of common shares (“Other Shares of Common
Shares”) of a company whose common shares are traded on a national securities
exchange or a national automated quotation system, then the Holder may elect

 

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to receive a warrant to purchase Other Shares of Common Shares in lieu of an
increase in the number of Warrant Shares, the terms of which shall be identical
to those of this Warrant, except that such warrant shall be exercisable into the
number of shares of Other Shares of Common Shares that would have been payable
to the Holder pursuant to the Distribution had the Holder exercised this Warrant
immediately prior to such record date and with an aggregate exercise price equal
to the product of the amount by which the exercise price of this Warrant was
decreased with respect to the Distribution pursuant to the terms of the
immediately preceding paragraph (a) and the number of Warrant Shares calculated
in accordance with the first part of this paragraph (b).

4. PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS.

(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above,
if at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase shares, warrants, securities or other property
pro rata to the record holders of any class of Common Shares (the “Purchase
Rights”), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could
have acquired if the Holder had held the number of Common Shares acquirable upon
complete exercise of this Warrant (without regard to any limitations on the
exercise of this Warrant) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Shares are to be
determined for the grant, issue or sale of such Purchase Rights.

(b) Fundamental Transactions. The Company shall not enter into or be party to a
Fundamental Transaction unless (i) the Successor Entity assumes in writing all
of the obligations of the Company under this Warrant in accordance with the
provisions of this Section (4)(b) pursuant to written agreements in form and
substance satisfactory to the Holder, including agreements to deliver to each
holder of Warrants in exchange for such Warrants a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to this Warrant, including, without limitation, an adjusted exercise
price equal to the value for the Common Shares reflected by the terms of such
Fundamental Transaction, and exercisable for a corresponding number of shares of
capital stock equivalent to the Common Shares acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and (ii) the Successor
Entity (including its Parent Entity) is a publicly traded corporation whose
common stock is quoted on or listed for trading on an Eligible Market. Upon the
occurrence of any Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein. Upon consummation of the Fundamental Transaction, the Successor
Entity shall deliver to the Holder confirmation that there shall be issued upon
exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Shares (or other securities,
cash, assets or other property) issuable upon the exercise of this Warrant prior
to

 

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such Fundamental Transaction, such shares of the publicly traded Common Shares
(or its equivalent) of the Successor Entity (including its Parent Entity) which
the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Warrant been converted immediately prior to
such Fundamental Transaction, as adjusted in accordance with the provisions of
this Warrant. In addition to and not in substitution for any other rights
hereunder, prior to the consummation of any Fundamental Transaction pursuant to
which holders of Common Shares are entitled to receive securities or other
assets with respect to or in exchange for Common Shares (a “Corporate Event”),
the Company shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this Warrant at any
time after the consummation of the Fundamental Transaction but prior to the
Expiration Date, in lieu of the shares of the Common Shares (or other
securities, cash, assets or other property) issuable upon the exercise of this
Warrant prior to such Fundamental Transaction, such shares of stock, securities,
cash, assets or any other property whatsoever (including warrants or other
purchase or subscription rights) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Warrant been
exercised immediately prior to such Fundamental Transaction. The provisions of
this Section shall apply similarly and equally to successive Fundamental
Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.

(c) Notwithstanding the foregoing, in the event of a Change of Control, at the
request of the Holder delivered before the ninetieth (90th) day after the
consummation of such Change of Control, the Company (or the Successor Entity)
shall purchase this Warrant from the Holder by paying to the Holder, within five
(5) Business Days of such request (or, if later, on the effective date of the
Change of Control), cash in an amount equal to the Black Scholes Value of the
remaining unexercised portion of this Warrant on the date of such Change of
Control.

5. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically
provided herein, the Holder, solely in such Person’s capacity as a holder of
this Warrant, shall not be entitled to vote or receive dividends or be deemed
the holder of share capital of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the Holder, solely in such
Person’s capacity as the Holder of this Warrant, any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of shares, reclassification
of shares, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the Holder of the Warrant Shares which such Person is then entitled
to receive upon the due exercise of this Warrant. In addition, nothing contained
in this Warrant shall be construed as imposing any liabilities on the Holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as a
shareholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company.

6. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company
will not, by amendment of its Certificate of Incorporation, Bylaws or through
any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or

 

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performance of any of the terms of this Warrant, and will at all times in good
faith carry out all the provisions of this Warrant and take all action as may be
required to protect the rights of the Holder. Without limiting the generality of
the foregoing, the Company (i) shall not increase the par value of any Common
Shares receivable upon the exercise of this Warrant above the Exercise Price
then in effect, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Common Shares upon the exercise of this Warrant, and
(iii) shall, so long as any of this Warrant is outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
Common Shares, solely for the purpose of effecting the exercise of this Warrant,
100% of the number of Common Shares as shall from time to time be necessary to
effect the exercise of this Warrant (without regard to any limitations on
exercise).

7. REISSUANCE OF WARRANTS.

(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith
issue and deliver upon the order of the Holder a new Warrant (in accordance with
Section 7(d)), registered as the Holder may request, representing the right to
purchase the number of Warrant Shares being transferred by the Holder and, if
less than the total number of Warrant Shares then underlying this Warrant is
being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.

(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of this Warrant,
the Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section 7(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.

(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
Warrant or Warrants (in accordance with Section 7(d)) representing in the
aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional Common
Shares shall be given.

(d) Issuance of New Warrants. Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added
to the number of Common Shares underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of Warrant

 

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Shares then underlying this Warrant), (iii) shall have an issuance date, as
indicated on the face of such new Warrant which is the same as the Issuance
Date, and (iv) shall have the same rights and conditions as this Warrant.

8. NOTICES. Whenever notice is required to be given under this Warrant, unless
otherwise provided herein, such notice shall be given in accordance with the
following instructions: (a) (i) if within the United States, by 1st-class
registered or certified mail or nationally-recognized overnight express courier,
postage prepaid, or facsimile or (ii) if delivered from outside the United
States, by International FedEx or facsimile and (b) will be deemed given (i) if
delivered by 1st-class registered or certified mail, three business days after
being so mailed, (ii) if delivered by nationally-recognized overnight express
courier, one business day after being so mailed, (iii) if delivered by
International FedEx, two business days after being so mailed, and (iv) if
delivered by facsimile, upon electronic confirmation of receipt, and will be
delivered and addressed as follows:

 

  (A) If to the Company, to:

XOMA Ltd.

2910 Seventh Street

Berkeley, CA 97410

Attention: Legal Department

Facsimile: (510) 649-7571

 

  (B) If to the Holder, at its address on the Exercise

Notice, annexed as Exhibit A hereto, or at such

other address or addresses as may have

been furnished to the Company in writing.

The Company shall provide the Holder with prompt written notice of all actions
taken pursuant to this Warrant, including in reasonable detail a description of
such action and the reason therefor.

9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the Holder.

10. GOVERNING LAW. This Warrant shall be governed by and construed and enforced
in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Warrant shall be governed by, the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted
by the Company and the Holder and shall not be construed against any person as

 

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the drafter hereof. The headings of this Warrant are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Warrant.

12. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all other
remedies available under this Warrant, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit the right of the Holder to pursue actual damages for any failure by
the Company to comply with the terms of this Warrant.

13. TRANSFER. This Warrant may be offered for sale, sold, transferred or
assigned without the consent of the Company. The Holder shall give prompt notice
to the Company of any such sale, transfer or assignment.

14. SEVERABILITY. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall
have the following meanings:

(a) “Black Scholes Value” means the value of this Warrant based on the Black and
Scholes Option Pricing Model obtained from the “OV” function on Bloomberg
determined as of the day of the closing of the applicable Fundamental
Transaction for pricing purposes and reflecting (i) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term
of this Warrant as of such date of request, (ii) an expected volatility equal to
the greater of 100% and the 100 day volatility obtained from the HVT function on
Bloomberg as of the day immediately following the public announcement of the
applicable Fundamental Transaction and (iii) the underlying price per share used
in such calculation shall be the sum of the price per share being offered in
cash, if any, plus the value of any non cash consideration, if any, being
offered in the Fundamental Transaction.

(b) “Bloomberg” means Bloomberg Financial Markets.

 

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(c) “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.

(d) “Change of Control” means any Fundamental Transaction other than (A) any
reorganization, recapitalization or reclassification of the Common Shares, in
which holders of the Company’s voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (B) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company.

(e) “Closing Bid Price” and “Closing Sale Price” means, for any security as of
any date, the last closing bid price and last closing trade price, respectively,
for such security on the Principal Market, as reported by Bloomberg, or, if the
Principal Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price, as the case may be,
then the last bid price or last trade price, respectively, of such security
prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the last closing bid price or last trade price, respectively, of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last
trade price, respectively, is reported for such security by Bloomberg, the
average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by Pink Sheets LLC (formerly
the National Quotation Bureau, Inc.). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date on any of
the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the
case may be, of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 12. All such determinations to be
appropriately adjusted for any dividend, share split, share combination or other
similar transaction during the applicable calculation period.

(f) “Common Shares” means (i) the Company’s Common Shares, par value $0.005 per
share, and (ii) any share capital into which such Common Shares shall have been
changed or any share capital resulting from a reclassification of such Common
Shares.

(g) “Convertible Securities” means any shares or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for
Common Shares.

 

10

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(h) “Eligible Market” means the Principal Market, The New York Stock Exchange,
Inc., The NASDAQ Global Market, The NASDAQ Capital Market or The NASDAQ Global
Select Market.

(i) “Expiration Date” means the date that is five (5) years following the
Issuance Date or, if such date falls on a day other than a Business Day or on
which trading does not take place on the Principal Market (a “Holiday”), the
next day that is not a Holiday.

(j) “Fundamental Transaction” means that the Company shall directly or
indirectly, in one or more related transactions, (i) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another
Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company to another Person,
or (iii) allow another Person to make a purchase, tender or exchange offer that
is accepted by the holders of more than the 50% of the outstanding Common Shares
(not including any Common Shares held by the Person or Persons making or party
to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the
outstanding Common Shares (not including any Common Shares held by the other
Person or other Persons making or party to, or associated or affiliated with the
other Persons making or party to, such share purchase agreement or other
business combination), or (v) reorganize, recapitalize or reclassify its Common
Shares, or (vi) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act), become the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of
the aggregate ordinary voting power represented by issued and outstanding Common
Shares.

(k) “Options” means any rights, warrants or options to subscribe for or purchase
Common Shares or Convertible Securities.

(l) “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the Fundamental
Transaction.

(m) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.

(n) “Principal Market” means The Nasdaq Global Market.

(o) “Successor Entity” means the Person (or, if so elected by the Holder, the
Parent Entity) formed by, resulting from or surviving any Fundamental
Transaction or the Person (or, if so elected by the Holder, the Parent Entity)
with which such Fundamental Transaction shall have been entered into.

 

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(p) “Trading Day” means any day on which the Common Shares is traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Shares, then on the principal securities exchange or
securities market on which the Common Shares is then traded; provided that
“Trading Day” shall not include any day on which the Common Shares is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Shares is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York Time).

[Signature Page Follows]

 

12

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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common
Shares to be duly executed as of the Issuance Date set out above.

 

XOMA LTD.

By:

 

 

Name:

 

Title:

 

Signature Page to Common Shares Purchase Warrant

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EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

XOMA LTD.

The undersigned holder hereby exercises the right to purchase
                     of the Common Shares (“Warrant Shares”) of XOMA Ltd., a
Bermuda corporation (the “Company”), evidenced by the attached Warrant to
Purchase Common Shares (the “Warrant”). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.

1. Payment of Exercise Price. The holder shall pay the Aggregate Exercise Price
in the sum of $             to the Company in accordance with the terms of the
Warrant.

2. Delivery of Warrant Shares. The Company shall deliver to the holder
                     Warrant Shares in accordance with the terms of the Warrant.

Date:                      ,             

 

 

Name of Registered Holder

 

By:  

 

Name:   Title:  

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ACKNOWLEDGMENT

The Company hereby acknowledges this Exercise Notice and hereby directs [Insert
Stock Transfer Agent] to issue the above indicated number of Common Shares in
accordance with the Transfer Agent Instructions dated [—], 20[—] from the
Company and acknowledged and agreed to by [Insert Stock Transfer Agent].

 

XOMA LTD. By:  

 

Name:   Title: