Xoma Royalty Corp

This management proposal seeks shareholder approval to amend and restate the Company’s existing 2010 Long Term Incentive and Stock Award Plan to increase the share reserve by 425,000 shares and extend the plan term to March 16, 2036. Management frames the request as necessary to preserve the Company’s ability to attract, retain and motivate employees, consultants, and directors through equity compensation, noting current overhang and burn-rate metrics and asserting the requested increase equates to approximately 2.5% additional dilution (inclusive of preferred conversion). The amendment contains governance-friendly features: a prohibition on option/SAR repricing without shareholder approval, no liberal share recycling, a $750,000 annual limit on non-employee director compensation, a fungible share ratio (1.08 for full value awards), limits on option/SAR terms and exercise prices and a clawback policy. The Board’s rationale emphasizes competition for biotech talent, the timing given current burn rates, and that exhaustion of the reserve would impair compensation competitiveness. It also provides detailed disclosure of outstanding awards, historical burn rates, overhang projections, and the plan’s terms (eligibility, award types, administration, change-in-control treatment, tax consequences). The Board recommends a FOR vote, arguing the increase is modest relative to the shares outstanding and historically managed carefully. The proposal is routine in equity-plan refreshes but carries dilutionary impact; analysts should weigh the plan’s governance safeguards and disclosed burn-rate trajectory against potential shareholder dilution and the company’s need to continue incentivizing management and staff as it executes its royalty-aggregation strategy.

Management seeks approval of a 2026 Employee Stock Purchase Plan authorizing 500,000 shares (≈4% of outstanding shares) to enable eligible employees to purchase Common Stock at 85% of the lesser of the offering or exercise date fair market value during overlapping 24-month offer periods. The Board argues the ESPP is a standard retention and alignment tool that allows employees to acquire equity at a discount, with limits (5,000-share per offering cap, 12% payroll deduction cap, $25,000 annual purchase limit) and procedural features (overlapping offer periods, bottom-up pro rata allocation if oversubscribed). Management expects the ESPP to support recruitment and retention while providing broad-based equity ownership; recommends shareholders vote FOR on governance and compensation alignment grounds. The plan is subject to Section 423 tax-qualified rules and contains standard change-in-control and adjustment provisions. Analysts should assess the modest dilutive impact against the benefits of employee ownership and retention, particularly given the company’s small employee base (≈14 eligible employees) noted in the filing.

Management requests a non-binding advisory approval of the named executive officers’ compensation. The Compensation Committee frames the program as performance-driven and aligned with shareholder interests via incentive programs and PSUs linked to stock price and corporate objectives. While advisory, the vote provides feedback to the Compensation Committee and will be considered in future pay decisions. The company notes use of consultants and peer benchmarking and discusses pay-for-performance elements, including discretionary awards, PSUs with VWAP hurdles, and recent bonus outcomes tied to corporate objectives. Analysts should weigh the mix of pay design, realized pay, and disclosed pay-versus-performance metrics when evaluating the recommendation.