FORM OF LETTER TO RECORD HOLDERS
Subscription Rights to Purchase Shares of Common Stock
November 19, 2018
Dear XOMA Stockholder:
This letter is being distributed by XOMA Corporation (the Company) to all holders of record of shares of its common stock, par
value $0.0075 per share (the Common Stock), as of 5:00 p.m., New York City time, on November 16, 2018 (the Record Date), in connection with the distribution of
non-transferable subscription rights (the Rights) to such holders to subscribe for and purchase up to an aggregate of 1,538,462 shares of Common Stock in a rights offering (the Rights
Offering) for a cash purchase price of $13.00 per share of Common Stock (the Subscription Price). Any holder of greater than 9.9% of the outstanding number of shares of the Common Stock may elect to instead purchase non-voting Series Y Preferred Stock at a purchase price of $13,000 per share, and any such holder so electing would have a right to purchase one one-thousandth of a share of
Series Y Preferred Stock for each share of Common Stock it had a right to purchase in the Rights Offering. The Company is offering up to an aggregate of 1,538,462 shares of Common Stock and up to 1,538 shares of Series Y Preferred Stock in the
Rights Offering (the Shares). Holders as of the Record Date of the Companys Series X Preferred Stock also will have a right to participate in the Rights Offering on an as-converted basis. The
Rights and the Shares are described in the prospectus supplement (and the accompanying prospectus), dated November 19, 2018 (the Prospectus), covering the offer and sale of the Shares issuable upon the exercise of the Rights.
As described in the Prospectus, you will receive 0.1148 Rights for each share of Common Stock owned of record by you, or issuable upon
conversion of the shares of Series X Preferred Stock, of which you are a record holder as of 5:00 p.m., New York City time, on the Record Date. The Rights are evidenced by a non-transferable certificate (the
Rights Certificate) registered in your name and will cease to have any value as of 5:00 p.m., New York City time, on December 14, 2018, unless the Rights Offering is extended by the Company as described below
(the Expiration Time). The total number of Rights issued to you will be rounded down to the nearest whole number and each whole Right will allow you to subscribe for one share of Common Stock at the Subscription Price (or an equivalent
number of shares of Series Y Preferred Stock on the terms described in the Prospectus) (the Subscription Right).
described in the Prospectus, the Company has entered into an Investment Agreement with BVF Partners L.P. and its affiliates (BVF), pursuant to which BVF has agreed to purchase from the Company any and all Shares not subscribed for in the
Rights Offering, in the form of non-voting Series Y Preferred Stock, as further described in the Prospectus. BVF also will have the same right as other stockholders to subscribe for and purchase Shares under
its Subscription Right. The Investment Agreement with BVF is described in more detail in the Prospectus. Mr. Matthew Perry, a member of the Companys board of directors, is a representative of BVF. Mr. Perry recused himself from the
deliberations by the board of directors regarding the approval of the Investment Agreement and the Rights Offering.
The Rights will
expire and be of no value if not exercised prior to the Expiration Time.
You will be required to submit payment in full for all of
the Shares you wish to purchase pursuant to the exercise of the Subscription Right prior to the Expiration Time.
As soon as practicable
after the Expiration Time and after any and all prorations and adjustments contemplated by the terms of the Rights Offering, as described in the Prospectus, have been effected, any excess subscription payment received by American Stock
Transfer & Trust Company, LLC (the Subscription Agent) from you will be returned to you, without interest or penalty.