Exhibit 10.9

 

TANOX, INC.

 

NON-QUALIFIED STOCK OPTION AGREEMENT

 

1.             Grant of Option.

 

TANOX, INC., a Delaware corporation (the “Company”), hereby grants
to                       (the “Employee”), an option, pursuant to the Company’s
1997 Stock Plan (the “Plan”), to purchase an aggregate of
                   shares of Common Stock, $.01 par value per share, of the
Company (“Common Stock”) at a price of                     per share,
purchasable as set forth in and subject to the terms and conditions of this
option and the Plan.                          , the date of grant of this
option, is hereinafter referred to as the “Grant Date.”

 

2.             Exercise of Option and Provisions for Termination.

 

(a)           Except as otherwise provided herein, this option is exercisable
for the first time with respect to the following shares subject to the option:

 

25% on the first anniversary of the Grant Date; and an additional

 

1/48th on the 13th through 48th monthly anniversary of the Grant Date

 

To the extent not exercised, installments shall be cumulative and shall be
exercisable in whole or in part; provided that no partial exercise of the option
shall be for less than 10 whole shares.

 

This option shall become fully exercisable, irrespective of the limitations set
forth above, provided that the Employee has been in continuous employment since
the Grant Date, upon a Change in Control.  This option may not be exercised at
any time after the tenth anniversary of the Grant Date.

 

(b)           Subject to the conditions hereof, this option shall be exercisable
by the Employee contacting the Company’s designated stock option administration
representative (the “Representative”), specifying the number of shares to be
purchased and the exercise price to be paid therefor and accompanied by payment
in accordance with Section 3 hereof.

 

(c)           If the Employee ceases to be employed by the Company or one of its
subsidiaries for any reason, including retirement but other than death, this
option shall immediately terminate; provided, however, that any portion of this
option which was otherwise exercisable on the date of termination of the
Employee’s employment may be exercised within the three-month period

 

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following the date on which the Employee ceased to be so employed unless
termination was due to “cause” as determined by the Board of Directors or the
Employee is found by the Board of Directors to have disclosed trade secrets of
the Company.  In no event may this option be exercised after the tenth
anniversary of the Grant Date.  Any such exercise may be made only to the extent
of the number of shares subject to this option which are purchasable upon the
date of such termination of employment.  If the Employee dies during such
three-month period, this option shall be exercisable by the Employee’s personal
representatives, heirs or legatees to the same extent and during the same period
that the Employee could have exercised this option on the date of his or her
death.

 

(d)           If the Employee dies while an employee of the Company or any
subsidiary of the Company, this option shall be exercisable, by the Employee’s
personal representatives, heirs or legatees, to the same extent that the
Employee could have exercised this option on the date of death.  This option or
any unexercised portion hereof shall terminate unless so exercised prior to the
earlier of the expiration of one year from the date of such death or the tenth
anniversary of the Grant Date.

 

(e)           The Employee agrees not to exercise this option, and that the
Company will not be obligated to issue any shares of Common Stock pursuant to
this option agreement, if the exercise of the option or the issuance of such
shares would constitute a violation by the Employee or by the Company of any
provision of any law or regulation of any governmental authority or any stock
exchange or transaction quotation system.  Whether or not the issuance of shares
covered by the Plan have been registered pursuant to the Securities Act of 1933,
as amended, the Company may, at its election, require the Employee to give a
representation in writing in form and substance satisfactory to the Company to
the effect that the Employee is acquiring such shares for the Employee’s own
account for investment and not with a view to, or for sale in connection with,
the distribution of such shares or any part thereof.

 

If any law or regulation requires the Company to take any action with respect to
the shares specified in such notice, the time for delivery thereof, which would
otherwise be as promptly as possible, shall be postponed for the period of time
necessary to take such action.

 

(f)            A “Change in Control” shall be deemed to have occurred as on the
date that one or more of the following occurs:

 

(i)            Individuals who, on the date hereof, constitute the entire Board
of Directors of the Company (“Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company’s stockholders, was approved by a vote

 

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of at least a majority of the then Incumbent Directors shall be considered as
though such individual was an Incumbent Director, but excluding, for this
purpose any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest, as such terms are
used in Rule 14a-11 under the Securities Exchange Act of 1934, as amended
(“Exchange Act”) or other actual or threatened solicitation of proxies or
consents by or on behalf of any Person (as defined below) other than the Board;

 

(ii)           The stockholders of the Company shall approve (A) any merger,
consolidation or recapitalization of the Company (or, if the capital stock of
the Company is affected, any subsidiary of the Company), or any sale, lease, or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company (each of the foregoing being an “Acquisition Transaction”)
where (1) the stockholders of the Company immediately prior to such Acquisition
Transaction would not immediately after such Acquisition Transaction
beneficially own, directly or indirectly, shares or other ownership interests
representing in the aggregate fifty one percent (51%) or more of (a) the then
outstanding common stock or other equity interests of the corporation or other
entity surviving or resulting from such merger, consolidation or
recapitalization or acquiring such assets of the Company, as the case may be
(the “Surviving Entity”) (or of its ultimate parent corporation or other entity,
if any), and (b) the Combined Voting Power of the then outstanding Voting
Securities of the Surviving Entity (or of its ultimate parent corporation or
other entity, if any) or (2) the Incumbent Directors at the time of the initial
approval of such Acquisition Transaction would not immediately after such
Acquisition Transaction constitute a majority of the Board of Directors, or
similar managing group, of the Surviving Entity (or of its ultimate parent
corporation or other entity, if any), or (B) any plan or proposal for the
liquidation or dissolution of the Company; or

 

(iii)          Any Person other than Nancy T. Chang or Tse Wen Chang shall be or
become the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of securities of the Company representing
in the aggregate more than forty percent (40%) of either (A) the then
outstanding shares of common stock of the Company (“Common Stock”) or (B) the
Combined Voting Power of all then outstanding Voting Securities of the Company;
provided, however, that notwithstanding the foregoing, a Change in Control shall
not be deemed to have occurred for purposes of this Subsection (iii):

 

(1)           Solely as a result of an acquisition of securities by the Company
which, by reducing the number of Common Stock or other Voting Securities
outstanding, increases (a) the proportionate number of Common Stock beneficially
owned by any Person to more than forty percent (40%) of the Common Stock then
outstanding, or (b) the proportionate voting power represented by

 

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the Voting Securities beneficially owned by any Person to more than forty
percent (40%) of the Combined Voting Power of all then outstanding Voting
Securities; or

 

(2)           Solely as a result of an acquisition of securities directly from
the Company except for any conversion of a security that was not acquired
directly from the Company,

 

(3)           provided, further, that if any Person referred to in paragraph (1)
or (2) of this Subsection (iii) shall thereafter become the beneficial owner of
any additional Common Stock or other Voting Securities of the Company (other
than pursuant to a stock split, stock dividend or similar transaction), then a
Change in Control shall be deemed to have occurred for purposes of this
Subsection (iii).

 

(iv)          For purposes of this Section (f):

 

(1)  “Affiliate” shall mean, as to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person, within the
meaning of such terms as used in Rule 405 under the Securities Act of 1933, as
amended (“Securities Act”), or any successor rule.

 

(2)  “Combined Voting Power” shall mean the aggregate votes entitled to be cast
generally in the election of the Board of Directors, or similar managing group,
of a corporation or other entity by holders of then outstanding Voting
Securities of such corporation or other entity.

 

(3)  “Person” shall mean any individual, entity (including, without limitation,
any corporation, partnership, trust, joint venture, association or governmental
body) or group (as defined in Sections 14(d)(3) or 15(d)(2) of the Exchange Act
and the rules and regulations thereunder); provided, however, that Person shall
not include the Company, any of its subsidiaries, any employee benefit plan of
the Company or any of its majority-owned subsidiaries or any entity organized,
appointed or established by the Company or such subsidiaries for or pursuant to
the terms of any such plan.

 

(4)  “Voting Securities” shall mean all securities of a corporation or other
entity having the right under ordinary circumstances to vote in an election of
the Board of Directors, or similar managing group, of such corporation or other
entity.

 

3.             Payment of Exercise Price.

 

(a)           Payment of the exercise price for shares purchased upon exercise
of this option, together with all applicable taxes and fees, shall be made by

 

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delivery to the Representative of cash or other verifiable funds (wire transfer,
cashier’s check, money order) payable to the order of the Representative, or, if
the Employee elects and the Company permits, by delivery of shares of Common
Stock held by the Employee for at least six months and having a fair market
value (as determined by the Board of Directors of the Company in accordance with
the terms of the Plan) equal to or less than the aggregate exercise price of the
shares to be purchased, and any difference shall be paid by cash or check.

 

(b)           If the Employee elects to exercise options by delivery of shares
of Common Stock, the certificate(s) representing the shares shall be registered
in the name of the Employee and duly executed in blank, or accompanied by a
stock power duly executed in blank, by the Employee suitable for purposes of
transferring such shares to the Company.  The shares so tendered shall be free
of all liens, claims and encumbrances.

 

4.             Delivery of Shares.

 

The Representative shall, upon receipt of the exercise price, together with all
applicable taxes and fees, and verification of funds for the number of shares
purchased and paid for, make prompt delivery of such shares to the Employee,
provided that if any law or regulation requires Representative or the Company to
take any action with respect to such shares before the issuance thereof, then
the date of delivery of such shares shall be extended for the period necessary
to complete such action.  No shares shall be issued and delivered upon exercise
of any option unless and until, in the opinion of counsel for the Company, any
applicable registration requirements of the Securities Act, any applicable
listing requirements of any national securities exchange on which stock of the
same class is then listed, and any other requirements of law or of any
regulatory bodies having jurisdiction over such issuance and delivery, shall
have been fully complied with.

 

5.             Non-transferability of Option.

 

Except as expressly provided in the Plan or as provided in Section 2(c) and 2(d)
hereof, this option is personal and no rights granted hereunder shall be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment or similar process.  Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of such rights contrary to
the provisions hereof, or upon the levy of any attachment or similar process
upon this option or such rights, this option and such rights shall become null
and void.

 

6.             No Special Employment Rights.

 

Nothing contained in the Plan or this Agreement shall be construed or deemed by
any person under any circumstances to bind the Company or any of

 

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its subsidiaries to continue the employment of the Employee for the period
within which this option may be exercised.

 

7.             No Rights as a Stockholder.

 

The Employee shall have no rights as a stockholder with respect to any shares
which may be purchased by exercise of this option unless and until such shares
are duly issued and delivered to the Employee.  Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date is prior to the date such stock is issued.

 

8.             Withholding Taxes and Fees.

 

No shares of Common Stock purchased shall be delivered to or in respect of the
Employee unless the amount of all applicable federal, state and local
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares of Common Stock, together with all applicable fees, has
been remitted to the Representative.

 

9.             Certain Limits.

 

(a)           Notwithstanding anything in this Agreement to the contrary, but
subject to the application of clause (b) below, to the extent the Employee would
be subject to the excise tax under Section 4999 of the Code on the amounts
payable pursuant to this Agreement and such other amounts or benefits the
Employee receives from the Company, any person whose actions result in a change
of ownership covered by Section 280G(b)(2) of the Code or any person affiliated
with the Company or such person, required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code, the
amounts vested pursuant to Section 2(a) of this Agreement shall be automatically
reduced to an amount one dollar less than that which, when combined with such
other amounts, would subject the Employee to such excise tax.

 

(b)           If the Employee’s employment with the Company is terminated by the
Company without Cause (hereinafter defined) or by the Employee upon a
Constructive Termination for Good Reason (hereinafter defined), in each case
within one year following a Change in Control (a “Protected Termination”), then
the provisions of this clause (b) will apply and clause (a) shall not be
applicable.  If a Protected Termination occurs, then notwithstanding anything in
this Agreement to the contrary, if (i) any amounts due to the Employee under
this Agreement and any other plan or program of the Company constitute a
“parachute payment,” as such term is defined in Code Section 280G(b)(2), and
(ii) the amount of the parachute payment, reduced by all federal, state and
local taxes applicable thereto, including the excise tax imposed pursuant to
Code Section 4999, is less than the amount the Employee would receive if he were

 

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paid three times his “base amount,” as defined in Code Section 280G(b)(3), less
one dollar, reduced by all federal, state and local taxes applicable thereto,
then the aggregate of the amounts constituting the parachute payment shall be
reduced to an amount that will equal three times his base amount less one
dollar.

 

(c)           The determinations to be made with respect to this Section shall
be made by an accounting firm jointly selected by the Company’s Board of
Directors and the Employee and paid by the Company, and which may be the
Company’s independent auditors.

 

(d)           For purposes of this Section 9:

 

(i)            “Cause” shall mean: (A) the continued and willful refusal by
Employee to substantially perform his duties after demand for substantial
performance is delivered by the Board which demand specifically identifies the
manner in which the Board has determined that the Employee has not substantially
performed his duties, and the Employee’s performance is not cured to the Board’s
reasonable satisfaction within thirty (30) days from such demand; (B) the
engagement by Employee in willful misconduct or dishonesty that is materially
injurious to the Company, monetarily or otherwise;  (C) Employee’s felony
conviction, or (D) disclosure by the Employee of Company trade secrets or
confidential Company matters to unauthorized persons which is reasonably likely
to be materially injurious to the Company, monetarily or otherwise.

 

(ii)           “Constructive Termination for Good Reason” means:

 

(1)           the Employee’s duties or responsibilities are not comparable to
the Employee’s position, offices, duties, responsibilities or status with the
Company at the time of the Change in Control, or the Employee’s reporting
responsibilities or titles are changed and the change results in a material
reduction of the Employee’s responsibilities or position with the Company;

 

(2)           the level of benefits or compensation (individual base
compensation and short and long-term incentive opportunity) provided to the
Employee is reduced below the comparable level payable to similarly situated
officers of the Company; or

 

(3)           the Employee is actually transferred, or offered a proposed
transfer, as evidenced in a written communication from the Company to the
Employee, to another location other than the location at which he was primarily
employed immediately preceding the Change in Control, unless that new location
is a major operating unit or facility of the Company that is located within 50
miles of the Employee’s primary location as of the date immediately preceding a
transfer; provided, however, (A) the Employee, within thirty (30) days from the
date that he is given written notice by the Company of such actual or proposed
transfer, shall

 

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provide the Committee or the Board with written notice that the transfer shall
constitute a Constructive Termination for Good Reason, (B) the Company, within
twenty (20) days of receipt of the notice, fails to provide the Employee with
written notice rescinding the actual or proposed transfer and (C) if the Company
does not rescind the transfer, the Employee must terminate his employment due to
Constructive Termination for Good Reason within forty (40) days following
expiration of the twenty (20)-day period so that in any event the Employee shall
have terminated his employment with the Company within ninety (90) days after
the Employee first receives written notice from the Company of such actual or
proposed transfer.

 

10.           Miscellaneous.

 

(a)           Except as provided herein, this Agreement may not be amended or
otherwise modified unless evidenced in writing and signed by the Company and the
Employee.

 

(b)           All notices under this Agreement shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designated in writing by either of the
parties to one another.

 

(c)           This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas.

 

 

Grant Date:

TANOX, INC.

 

 

 

 

By:

 

 

 

Title:Vice President of Finance

 

Address:10301 Stella Link

 

Houston, Texas 77025

 

EMPLOYEE’S ACCEPTANCE

 

The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof.

 

EMPLOYEE

 

 

 

Signature

 

 

Address:

 

 

 

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TANOX, INC.

 

NON-QUALIFIED STOCK OPTION AGREEMENT

 

1.             Grant of Option.

 

TANOX, INC., a Delaware corporation (the ‘Company’), hereby grants to
                           (the “Employee”), an option, pursuant to the
Company’s 1997 Stock Plan (the Plan”), to purchase an aggregate
of                     shares of Common Stock, $01 par value per share, of the
Company (“Common Stock”) at a price of                     per share,
purchasable as set forth in and subject to the terms and conditions of this
option and the Plan.  The date of grant of this option is hereinafter referred
to as the “Grant Date.”

 

2.             Exercise of Option and Provisions for Termination.

 

(a) Except as otherwise provided herein, this option is exercisable for the
first time with respect to the following shares subject to the option:

 

               shares on the first anniversary of the Grant Date; an additional

 

               shares on the second anniversary of the Grant Date; an additional

 

               shares on the third anniversary of the Grant Date; an additional

 

               shares on the fourth anniversary of the Grant Date; and an
additional

 

               shares on the fifth anniversary of the Grant Date; so that, after
the expiration of the fifth anniversary of the Grant Date, the option shall be
exercisable in full.

 

To the extent not exercised, installments shall be cumulative and shall be
exercisable in whole or in part; provided that no partial exercise of the option
shall be for less than 10 whole shares.

 

This option shall become fully exercisable, irrespective of the limitations set
forth above, provided that the Employee has been in continuous employment since
the Grant Date, upon a Change in Control. This option may not be exercised after
the tenth anniversary of the Grant Date.

 

(b) Subject to the conditions hereof, this option shall be exercisable by the
Employee contacting the Company’s designated stock option administration

 

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representative (the “Representative”), specifying the number of shares to be
purchased and the exercise price to be paid therefor and accompanied by payment
in accordance with Section 3 hereof.

 

(c) If the Employee ceases to be employed by the Company or one of its
subsidiaries for any reason, including retirement but other than death, this
option shall immediately terminate; provided, however, that any portion of this
option which was otherwise exercisable on the date of termination of the
Employee’s employment may be exercised within the three-month period following
the date on which the Employee ceased to be so employed unless termination was
due to “cause” as determined by the Board of Directors or the Employee is found
by the Board of Directors to have disclosed trade secrets of the Company.  In no
event may this option be exercised after the tenth anniversary of the Grant
Date.  Any such exercise may be made only to the extent of the number of shares
subject to this option which are purchasable upon the date of such termination
of employment.  If the Employee dies during such three-month period, this option
shall be exercisable by the Employee’s personal representatives, heirs or
legatees to the same extent and during the same period that the Employee could
have exercised this option on the date of his or her death.

 

(d) If the Employee dies while an employee of the Company or any subsidiary of
the Company, this option shall be exercisable, by the Employee’s personal
representatives, heirs or legatees, to the same extent that the Employee could
have exercised this option on the date of death.  This option or any unexercised
portion hereof shall terminate unless so exercised prior to the earlier of the
expiration of one year from the date of such death or the tenth anniversary of
the Grant Date.

 

(e) The Employee agrees not to exercise this option, and that the Company will
not be obligated to issue any shares of Common Stock pursuant to this option
agreement, if the exercise of the option or the issuance of such shares would
constitute a violation by the Employee or by the Company of any provision of any
law or regulation of any governmental authority or any stock exchange or
transaction quotation system.  Whether or not the issuance of shares covered by
the Plan have been registered pursuant to the Securities Act of 1933, as
amended, the Company may, at its election, require the Employee to give a
representation in writing in form and substance satisfactory to the Company to
the effect that the Employee is acquiring such shares for the Employee’s own
account for investment and not with a view to, or for sale in connection with,
the distribution of such shares or any part thereof.

 

If any law or regulation requires the Company to take any action with respect to
the shares specified in such notice, the time for delivery thereof, which would
otherwise be as promptly as possible, shall be postponed for the period of time
necessary to take such action.

 

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(f)  A “Change in Control” shall be deemed to have occurred on the date that one
or more of the following occurs:

 

(i)    Individuals who, on the date hereof, constitute the entire Board of
Directors of the Company (“Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of the then Incumbent Directors shall be considered as
though such individual was an Incumbent Director, but excluding, for this
purpose any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest, as such terms are
used in Rule 14a-11 under the Securities Exchange Act of 1934, as amended
(“Exchange Act’) or other actual or threatened solicitation of proxies or
consents by or on behalf of any Person (as defined below) other than the Board;

 

(ii)   The stockholders of the Company shall approve (A) any merger,
consolidation or recapitalization of the Company (or, if the capital stock of
the Company is affected, any subsidiary of the Company), or any sale, lease, or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company (each of the foregoing being an Acquisition Transaction”)
where (1) the stockholders of the Company immediately prior to such Acquisition
Transaction would not immediately after such Acquisition Transaction
beneficially own, directly or indirectly, shares or other ownership interests
representing in the aggregate fifty one percent (51%) or more of (a) the then
outstanding common stock or other equity interests of the corporation or other
entity surviving or resulting from such merger, consolidation or
recapitalization or acquiring such assets of the Company, as the case may be
(the “Surviving Entity”) (or of its ultimate parent corporation or other entity,
if any), and (b) the Combined Voting Power of the then outstanding Voting
Securities of the Surviving Entity (or of its ultimate parent corporation or
other entity, if any) or (2) the Incumbent Directors at the time of the initial
approval of such Acquisition Transaction would not immediately after such
Acquisition Transaction constitute a majority of the Board of Directors, or
similar managing group, of the Surviving Entity (or of its ultimate parent
corporation or other entity, if any), or (B) any plan or proposal for the
liquidation or dissolution of the Company; or

 

(iii) Any Person other than Nancy T. Chang or Tse Wen Chang shall be or become
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of securities of the Company representing in the
aggregate more than forty percent (40%) of either (A) the then outstanding
shares of common stock of the Company (Common Stock”) or (B) the Combined Voting
Power of all then outstanding Voting Securities of the Company; provided,
however, that notwithstanding the foregoing, a Change in Control shall not be
deemed to have occurred for purposes of this Subsection (iii):

 

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(1)        Solely as a result of an acquisition of securities by the Company
which, by reducing the number of Common Stock or other Voting Securities
outstanding, increases (a) the proportionate number of Common Stock beneficially
owned by any Person to more than forty percent (40%) of the Common Stock then
outstanding, or (b) the proportionate voting power represented by the Voting
Securities beneficially owned by any Person to more than forty percent (40%) of
the Combined Voting Power of all then outstanding Voting Securities; or

 

(2)        Solely as a result of an acquisition of securities directly from the
Company except for any conversion of a security that was not acquired directly
from the Company,

 

(3)        provided, further, that if any Person referred to in paragraph (1) or
(2) of this Subsection (iii) shall thereafter become the beneficial owner of any
additional Common Stock or other Voting Securities of the Company (other than
pursuant to a stock split, stock dividend or similar transaction), then a Change
in Control shall be deemed to have occurred for purposes of this Subsection
(iii).

 

(iv) For purposes of this Section (f):

 

(1)        “Affiliate” shall mean, as to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person, within the
meaning of such terms as used in Rule 405 under the Securities Act of 1933, as
amended (“Securities Act”), or any successor rule.

 

(2)        “Combined Voting Power” shall mean the aggregate votes entitled to be
cast generally in the election of the Board of Directors, or similar managing
group, of a corporation or other entity by holders of then outstanding Voting
Securities of such corporation or other entity.

 

(3)        ‘Person” shall mean any individual, entity (including, without
limitation, any corporation, partnership, trust, joint venture, association or
governmental body) or group (as defined in Sections 14(d)(3) or l5(d)(2) of the
Exchange Act and the rules and regulations thereunder); provided, however, that
Person shall not include the Company, any of its subsidiaries, any employee
benefit plan of the Company or any of its majority-owned subsidiaries or any
entity organized, appointed or established by the Company or such subsidiaries
for or pursuant to the terms of any such plan.

 

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(4)        “Voting Securities” shall mean all securities of a corporation or
other entity having the right under ordinary circumstances to vote in an
election of the Board of Directors, or similar managing group, of such
corporation or other entity.

 

3.             Payment of Exercise Price.

 

(a) Payment of the exercise price for shares purchased upon exercise of this
option, together with all applicable taxes and fees, shall be made by delivery
to the Representative of cash or other verifiable funds (wire transfer,
cashier’s check, money order) payable to the order of the Representative, or, if
the Employee elects and the Company permits, by delivery of shares of Common
Stock held by the Employee for at least six months and having a fair market
value (as determined by the Board of Directors of the Company in accordance with
the terms of the Plan) equal to or less than the aggregate exercise price of the
shares to be purchased, and any difference shall be paid by cash or check.

 

(b) If the Employee elects to exercise options by delivery of shares of Common
Stock, the certificate(s) representing the shares shall be registered in the
name of the Employee and duly executed in blank, or accompanied by a stock power
duly executed in blank, by the Employee suitable for purposes of transferring
such shares to the Company. The shares so tendered shall be free of all liens,
claims and encumbrances.

 

4.             Delivery of Shares.

 

The Representative shall, upon receipt of the exercise price, together with all
applicable taxes and fees, and verification of funds for the number of shares
purchased and paid for, make prompt delivery of such shares to the Employee,
provided that if any law or regulation requires the Representative or the
Company to take any action with respect to such shares before the issuance
thereof, then the date of delivery of such shares shall be extended for the
period necessary to complete such action. No shares shall be issued and
delivered upon exercise of any option unless and until, in the opinion of
counsel for the Company, any applicable registration requirements of the
Securities Act, any applicable listing requirements of any national securities
exchange on which stock of the same class is then listed, and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery, shall have been fully complied with.

 

5.             Non-transferability of Option.

 

Except as expressly provided in the Plan or as provided in Section 2(c) and 2(d)
hereof, this option is personal and no rights granted hereunder shall be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment

 

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

 

or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of this option or of such rights contrary to the provisions
hereof, or upon the levy of any attachment or similar process upon this option
or such rights, this option and such rights shall become null and void.

 

6.             No Special Employment Rights.

 

Nothing contained in the Plan or this Agreement shall be construed or deemed by
any person under any circumstances to bind the Company or any of its
subsidiaries to continue the employment of the Employee for the period within
which this option may be exercised.

 

7.             No Rights as a Stockholder.

 

The Employee shall have no rights as a stockholder with respect to any shares
which may be purchased by exercise of this option unless and until such shares
are duly issued and delivered to the Employee. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date is prior to the date such stock is issued.

 

8.             Withholding Taxes and Fees.

 

No shares of Common Stock purchased shall be delivered to or in respect of the
Employee unless the amount of all applicable federal, state and local
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares of Common Stock, together with all applicable fees, has
been remitted to the Representative.

 

9.             Certain Limits.

 

(a) Notwithstanding anything in this Agreement to the contrary, but subject to
the application of clause (b) below, to the extent the Employee would be subject
to the excise tax under Section 4999 of the Code on the amounts payable pursuant
to this Agreement and such other amounts or benefits the Employee receives from
the Company, any person whose actions result in a change of ownership covered by
Section 280G(b)(2) of the Code or any person affiliated with the Company or such
person, required to be included in the calculation of parachute payments for
purposes of Sections 280G and 4999 of the Code, the amounts vested pursuant to
Section 2(a) of this Agreement shall be automatically reduced to an amount one
dollar less than that which, when combined with such other amounts, would
subject the Employee to such excise tax.

 

(b) If the Employee’s employment with the Company is terminated by the Company
without Cause (hereinafter defined) or by the Employee upon a Constructive
Termination for Good Reason (hereinafter defined), in each case

 

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

 

within one year following a Change in Control (a “Protected Termination”), then
the provisions of this clause (b) will apply and clause (a) shall not be
applicable. If a Protected Termination occurs, then notwithstanding anything in
this Agreement to the contrary, if (i) any amounts due to the Employee under
this Agreement and any other plan or program of the Company constitute a
“parachute payment,’ as such term is defined in Code Section 280G(b)(2), and
(ii) the amount of the parachute payment, reduced by all federal, state and
local taxes applicable thereto, including the excise tax imposed pursuant to
Code Section 4999, is less than the amount the Employee would receive if he were
paid three times his “base amount,” as defined in Code Section 280G(b)(3), less
one dollar, reduced by all federal, state and local taxes applicable thereto,
then the aggregate of the amounts constituting the parachute payment shall be
reduced to an amount that will equal three times his base amount less one
dollar.

 

(c) The determinations to be made with respect to this Section shall be made by
an accounting firm jointly selected by the Company’s Board of Directors and the
Employee and paid by the Company, and which may be the Company’s independent
auditors.

 

(d)           For purposes of this Section 9:

 

(i)    Termination for “Cause’ shall have occurred if, on or after the date of
the Change in Control, the Company terminates Employee’s employment because (i)
as a result of an investigation, the Employee shall (A) be found to have engaged
in, (B) admit in writing facts amounting to, or (C) be held civilly liable for,
fraud, embezzlement or dishonesty, (ii) the Employee discloses Company trade
secrets or confidential Company matters to unauthorized persons and such
disclosures are reasonably likely to be materially injurious to the Company,
monetarily or otherwise, (iii) the Employee, after reasonable notice and
opportunity to correct his conduct, willfully refuses or continually neglects to
substantially perform his duties and assigned work, or (iv) the Employee
materially breaches any provision of any employment agreement with the Company.

 

(ii) “Constructive Termination for Good Reason” means:

 

(1)        the Company has taken action that results in a material diminution in
the Employees position (other than titles and reporting requirements),
authority, duties or responsibilities with the Company in effect immediately
before the date of closing of the Change in Control;

 

(2)        the level of benefits or compensation (individual base compensation
and short and long-term incentive opportunity) provided to the Employee is
reduced below the comparable level payable to similarly situated employees of
the Company; or

 

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

 

(3)        the Employee is actually transferred, or offered a proposed transfer,
as evidenced in a written communication from the Company to the Employee, to
another location other than the location at which he was primarily employed
immediately preceding the Change in Control, unless that new location is a major
operating unit or facility of the Company that is located within 50 miles of the
Employee’s primary location as of the date immediately preceding a transfer;
provided, however, (A) the Employee, within thirty (30) days from the date that
he is given written notice by the Company of such actual or proposed transfer,
shall provide the Committee or the Board with written notice that the transfer
shall constitute a Constructive Termination for Good Reason, (B) the Company,
within twenty (20) days of receipt of the notice, fails to provide the Employee
with written notice rescinding the actual or proposed transfer and (C) if the
Company does not rescind the transfer, the Employee must terminate his
employment due to Constructive Termination for Good Reason within forty (40)
days following expiration of the twenty (20)-day period so that in any event the
Employee shall have terminated his employment with the Company within ninety
(90) days after the Employee first receives written notice from the Company of
such actual or proposed transfer.

 

10.           Miscellaneous.

 

(a)           Except as provided herein, this Agreement may not be amended or
otherwise modified unless evidenced in writing and signed by the Company and the
Employee

 

(b)           All notices under this Agreement shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designated in writing by either of the
parties to one another.

 

(c)           This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas.

 

 

Grant Date:

TANOX, INC.

 

 

By:

 

Title:VP of Finance

 

Address:

10301 Stella Link

 

 

Houston, Texas 77025

 

EMPLOYEE’S ACCEPTANCE

 

The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof.

 

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

 

EMPLOYEE

 

 

 

Signature

 

 

 

 

Address:

 

 

 

 

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TANOX, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

 

1.             Grant of Option.

 

TANOX, INC., a Delaware corporation (the ‘Company’), hereby grants
to                       (the “Employee”), an option, pursuant to the Company’s
1997 Stock Plan (the “Plan”), to purchase an aggregate of                shares
of Common Stock, $01 par value per share, of the Company (‘Common Stock”) at a
price of                per share, purchasable as set forth in and subject to
the terms and conditions of this option and the Plan. The date of grant of this
option is hereinafter referred to as the “Grant Date.”

 

2.             Exercise of Option and Provisions for Termination.

 

(a)           Except as otherwise provided herein, this option is exercisable
for the first time with respect to the following shares subject to the option:

 

shares on the first anniversary of the Grant Date; an additional

 

shares on the second anniversary of the Grant Date; an additional

 

shares on the third anniversary of the Grant Date; an additional

 

shares on the fourth anniversary of the Grant Date; and an additional

 

shares on the fifth anniversary of the Grant Date; so that, after the expiration
of the fifth anniversary of the Grant Date, the option shall be exercisable in
full.

 

To the extent not exercised, installments shall be cumulative and shall be
exercisable in whole or in part; provided that no partial exercise of the option
shall be for less than 10 whole shares.

 

This option shall become fully exercisable, irrespective of the limitations set
forth above, provided that the Employee has been in continuous employment since
the Grant Date, upon a Change in Control. This option may not be exercised after
the tenth anniversary of the Grant Date.

 

(b) Subject to the conditions hereof, this option shall be exercisable by the
Employee contacting the Company’s designated stock option administration
representative (the “Representative”), specifying the number of shares to be
purchased and the exercise price to be paid therefor and accompanied by payment
in accordance with Section 3 hereof.

 

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(c) If the Employee ceases to be employed by the Company or one of its
subsidiaries for any reason, including retirement but other than death, this
option shall immediately terminate; provided, however, that any portion of this
option which was otherwise exercisable on the date of termination of the
Employees employment may be exercised within the three-month period following
the date on which the Employee ceased to be so employed unless termination was
due to cause’ as determined by the Board of Directors or the Employee is found
by the Board of Directors to have disclosed trade secrets of the Company. In no
event may this option be exercised after the tenth anniversary of the Grant
Date. Any such exercise may be made only to the extent of the number of shares
subject to this option which are purchasable upon the date of such termination
of employment. If the Employee dies during such three-month period, this option
shall be exercisable by the Employee’s personal representatives, heirs or
legatees to the same extent and during the same period that the Employee could
have exercised this option on the date of his or her death.

 

(d) If the Employee dies while an employee of the Company or any subsidiary of
the Company, this option shall be exercisable, by the Employee’s personal
representatives, heirs or legatees, to the same extent that the Employee could
have exercised this option on the date of death. This option or any unexercised
portion hereof shall terminate unless so exercised prior to the earlier of the
expiration of one year from the date of such death or the tenth anniversary of
the Grant Date.

 

(e) The Employee agrees not to exercise this option, and that the Company will
not be obligated to issue any shares of Common Stock pursuant to this option
agreement, if the exercise of the option or the issuance of such shares would
constitute a violation by the Employee or by the Company of any provision of any
law or regulation of any governmental authority or any stock exchange or
transaction quotation system. Whether or not the issuance of shares covered by
the Plan have been registered pursuant to the Securities Act of 1933, as
amended, the Company may, at its election, require the Employee to give a
representation in writing in form and substance satisfactory to the Company to
the effect that the Employee is acquiring such shares for the Employee’s own
account for investment and not with a view to, or for sale in connection with,
the distribution of such shares or any part thereof.

 

If any law or regulation requires the Company to take any action with respect to
the shares specified in such notice, the time for delivery thereof, which would
otherwise be as promptly as possible, shall be postponed for the period of time
necessary to take such action.

 

(f) A “Change in Control” shall be deemed to have occurred on the date that one
or more of the following occurs:

 

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

 

(i)            Individuals who, on the date hereof, constitute the entire Board
of Directors of the Company (“Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of the then Incumbent Directors shall be considered as
though such individual was an Incumbent Director, but excluding, for this
purpose any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest, as such terms are
used in Rule 14a-1 1 under the Securities Exchange Act of 1934, as amended
(“Exchange Act”) or other actual or threatened solicitation of proxies or
consents by or on behalf of any Person (as defined below) other than the Board;

 

(ii)           The stockholders of the Company shall approve (A) any merger,
consolidation or recapitalization of the Company (or, if the capital stock of
the Company is affected, any subsidiary of the Company), or any sale, lease, or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company (each of the foregoing being an “Acquisition Transaction”)
where (I) the stockholders of the Company immediately prior to such Acquisition
Transaction would not immediately after such Acquisition Transaction
beneficially own, directly or indirectly, shares or other ownership interests
representing in the aggregate fifty one percent (51%) or more of (a) the then
outstanding common stock or other equity interests of the corporation or other
entity surviving or resulting from such merger, consolidation or
recapitalization or acquiring such assets of the Company, as the case may be
(the Surviving Entity (or of its ultimate parent corporation or other entity, if
any), and (b) the Combined Voting Power of the then outstanding Voting
Securities of the Surviving Entity (or of its ultimate parent corporation or
other entity, if any) or (2) the Incumbent Directors at the time of the initial
approval of such Acquisition Transaction would not immediately after such
Acquisition Transaction constitute a majority of the Board of Directors, or
similar managing group, of the Surviving Entity (or of its ultimate parent
corporation or other entity, if any), or (B) any plan or proposal for the
liquidation or dissolution of the Company; or

 

(iii) Any Person other than Nancy T. Chang or Tse Wen Chang shall be or become
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of securities of the Company representing in the
aggregate more than forty percent (40%) of either (A) the then outstanding
shares of common stock of the Company (“Common Stock”) or (B) the Combined
Voting Power of all then outstanding Voting Securities of the Company; provided,
however, that notwithstanding the foregoing, a Change in Control shall not be
deemed to have occurred for purposes of this Subsection (iii):

 

(1)           Solely as a result of an acquisition of securities by the Company
which, by reducing the number of Common Stock or other Voting Securities
outstanding,

 

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

 

increases (a) the proportionate number of Common Stock beneficially owned by any
Person to more than forty percent (40%) of the Common Stock then outstanding, or
(b) the proportionate voting power represented by the Voting Securities
beneficially owned by any Person to more than forty percent (40%) of the
Combined Voting Power of all then outstanding Voting Securities; or

 

(2)           Solely as a result of an acquisition of securities directly from
the Company except for any conversion of a security that was not acquired
directly from the Company,

 

(3)           provided, further, that if any Person referred to in paragraph (I)
or (2) of this Subsection (iii) shall thereafter become the beneficial owner of
any additional Common Stock or other Voting Securities of the Company (other
than pursuant to a stock split, stock dividend or similar transaction), then a
Change in Control shall be deemed to have occurred for purposes of this
Subsection (iii).

 

(iv) For purposes of this Section (f):

 

(1)           “Affiliate” shall mean, as to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person, within the
meaning of such terms as used in Rule 405 under the Securities Act of 1933, as
amended (“Securities Act”), or any successor rule.

 

(2)           “Combined Voting Power” shall mean the aggregate votes entitled to
be cast generally in the election of the Board of Directors, or similar managing
group, of a corporation or other entity by holders of then outstanding Voting
Securities of such corporation or other entity.

 

(3)           “Person” shall mean any individual, entity (including, without
limitation, any corporation, partnership, trust, joint venture, association or
governmental body) or group (as defined in Sections 14(d)(3) or 15(d)(2) of the
Exchange Act and the rules and regulations thereunder); provided, however, that
Person shall not include the Company, any of its subsidiaries, any employee
benefit plan of the Company or any of its majority-owned subsidiaries or any
entity organized, appointed or established by the Company or such subsidiaries
for or pursuant to the terms of any such plan.

 

(4)           “Voting Securities” shall mean all securities of a corporation or
other entity having the right under ordinary circumstances to vote in an
election of the Board of Directors, or similar managing group, of such
corporation or other entity.

 

3.             Payment of Exercise Price.

 

(a) Payment of the exercise price for shares purchased upon exercise of this
option, together with all applicable taxes and fees, shall be made by delivery
to

 

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

 

the Representative of cash or other verifiable funds (wire transfer, cashiers
check, money order) payable to the order of the Representative, or, if the
Employee elects and the Company permits, by delivery of shares of Common Stock
held by the Employee for at least six months and having a fair market value (as
determined by the Board of Directors of the Company in accordance with the terms
of the Plan) equal to or less than the aggregate exercise price of the shares to
be purchased, and any difference shall be paid by cash or check.

 

(b) If the Employee elects to exercise options by delivery of shares of Common
Stock, the certificate(s) representing the shares shall be registered in the
name of the Employee and duly executed in blank, or accompanied by a stock power
duly executed in blank, by the Employee suitable for purposes of transferring
such shares to the Company. The shares so tendered shall be free of all liens,
claims and encumbrances.

 

4.             Delivery of Shares.

 

The Representative shall, upon receipt of the exercise price, together with all
applicable taxes and fees, and verification of funds for the number of shares
purchased and paid for, make prompt delivery of such shares to the Employee,
provided that if any law or regulation requires the Representative or the
Company to take any action with respect to such shares before the issuance
thereof, then the date of delivery of such shares shall be extended for the
period necessary to complete such action. No shares shall be issued and
delivered upon exercise of any option unless and until, in the opinion of
counsel for the Company, any applicable registration requirements of the
Securities Act, any applicable listing requirements of any national securities
exchange on which stock of the same class is then listed, and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery, shall have been fully complied with.

 

5.             Non-transferability of Option.

 

Except as expressly provided in the Plan or as provided in Section 2(c) and 2(d)
hereof, this option is personal and no rights granted hereunder shall be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of such rights contrary to
the provisions hereof, or upon the levy of any attachment or similar process
upon this option or such rights, this option and such rights shall become null
and void.

 

6.             No Special Employment Rights.

 

Nothing contained in the Plan or this Agreement shall be construed or deemed by
any person under any circumstances to bind the Company or any of its

 

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

 

subsidiaries to continue the employment of the Employee for the period within
which this option may be exercised.

 

7.             No Rights as a Stockholder.

 

The Employee shall have no rights as a stockholder with respect to any shares
which may be purchased by exercise of this option unless and until such shares
are duly issued and delivered to the Employee. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date is prior to the date such stock is issued.

 

8.             Withholding Taxes and Fees.

 

No shares of Common Stock purchased shall be delivered to or in respect of the
Employee unless the amount of all applicable federal, state and local
withholding tax requirements imposed upon the Company with respect to the
issuance of such shares of Common Stock, together with all applicable fees, has
been remitted to the Representative.

 

9.             Certain Limits.

 

(a) Notwithstanding anything in this Agreement to the contrary, but subject to
the application of clause (b) below, to the extent the Employee would be subject
to the excise tax under Section 4999 of the Code on the amounts payable pursuant
to this Agreement and such other amounts or benefits the Employee receives from
the Company, any person whose actions result in a change of ownership covered by
Section 280G(b)(2) of the Code or any person affiliated with the Company or such
person, required to be included in the calculation of parachute payments for
purposes of Sections 2800 and 4999 of the Code, the amounts vested pursuant to
Section 2(a) of this Agreement shall be automatically reduced to an amount one
dollar less than that which, when combined with such other amounts, would
subject the Employee to such excise tax.

 

(b) If the Employee’s employment with the Company is terminated by the Company
without Cause (hereinafter defined) or by the Employee upon a Constructive
Termination for Good Reason (hereinafter defined), in each case within one year
following a Change in Control (a “Protected Termination”), then the provisions
of this clause (b) will apply and clause (a) shall not be applicable. If a
Protected Termination occurs, then notwithstanding anything in this Agreement to
the contrary, if (i) any amounts due to the Employee under this Agreement and
any other plan or program of the Company constitute a ‘parachute payment,’ as
such term is defined in Code Section 280G(b)(2), and (ii) the amount of the
parachute payment, reduced by all federal, state and local taxes applicable
thereto, including the excise tax imposed pursuant to Code Section 4999, is less
than the amount the Employee would receive if he were paid three times his “base
amount,” as defined in Code Section 280G(b)(3), less

 

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

 

one dollar, reduced by all federal, state and local taxes applicable thereto,
then the aggregate of the amounts constituting the parachute payment shall be
reduced to an amount that will equal three times his base amount less one
dollar.

 

(c) For purposes of this Section 9:

 

(i)            “Cause” shall mean: (A) the continued and willful refusal by
Employee to substantially perform his duties after demand for substantial
performance is delivered by the Board which demand specifically identifies the
manner in which the Board has determined that the Employee has not substantially
performed his duties, and the Employee’s performance is not cured to the Board’s
reasonable satisfaction within thirty (30) days from such demand; (B) the
engagement by Employee in willful misconduct or dishonesty that is materially
injurious to the Company, monetarily or otherwise; (C) Employee’s felony
conviction, or (D) disclosure by the Employee of Company trade secrets or
confidential Company matters to unauthorized persons which is reasonably likely
to be materially injurious to the Company, monetarily or otherwise.

 

(ii)           “Constructive Termination for Good Reason” means:

 

(1)           the Employee’s duties or responsibilities are not comparable to
the Employees position, offices, duties, responsibilities or status with the
Company at the time of the Change in Control, or the Employees reporting
responsibilities or titles are changed and the change results in a material
reduction of the Employee’s responsibilities or position with the Company;

 

(2)           the level of benefits or compensation (individual base
compensation and short and long-term incentive opportunity) provided to the
Employee is reduced below the comparable level payable to similarly situated
employees of the Company; or

 

(3)           the Employee is actually transferred, or offered a proposed
transfer, as evidenced in a written communication from the Company to the
Employee, to another location other than the location at which he was primarily
employed immediately preceding the Change in Control, unless that new location
is a major operating unit or facility of the Company that is located within 50
miles of the Employee’s primary location as of the date immediately preceding a
transfer; provided, however, (A) the Employee, within thirty (30) days from the
date that he is given written notice by the Company of such actual or proposed
transfer, shall provide the Committee or the Board with written notice that the
transfer shall constitute a Constructive Termination for Good Reason, (B) the
Company, within twenty (20) days of receipt of the notice, fails to provide the
Employee with written notice rescinding the actual or proposed transfer and (C)
if the Company does not rescind the transfer, the Employee must terminate his
employment due to Constructive Termination for Good Reason within forty (40)
days following expiration of the twenty (20)-day period so that in any event the
Employee shall

 

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

 

have terminated his employment with the Company within ninety (90) days after
the Employee first receives written notice from the Company of such actual or
proposed transfer.

 

10.           Miscellaneous.

 

(a)           Except as provided herein, this Agreement may not be amended or
otherwise modified unless evidenced in writing and signed by the Company and the
Employee.

 

(b)           All notices under this Agreement shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designated in writing by either of the
parties to one another.

 

(d)           This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas.

 

Grant Date:

TANOX, INC.

 

 

 

 

 

.1

 

 

By:

 

 

 

Title:

 

 

 

Address:

 

 

 

EMPLOYEE’S ACCEPTANCE

 

The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof.

 

EMPLOYEE

 

 

 

 

Signature

 

 

 

Address:

 

 

 

 

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TANOX, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

 

1.             Grant of Option.

 

TANOX, INC., a Delaware corporation (the “Company”), hereby grants
to                 (the “Employee), an option, pursuant to the Company’s 1997
Stock Plan (the ‘Plan”), to purchase an aggregate of                  shares of
Common Stock, $01 par value per share, of the Company (“Common Stock”) at a
price of                 per share, purchasable as set forth in and subject to
the terms and conditions of this option and the Plan. The date of grant of this
option is hereinafter referred to as the “date of grant.”

 

2.             Exercise of Option and Provisions for Termination.

 

(a)           Except as otherwise provided herein, this option is exercisable
for the first time with respect to the following shares subject to the option:

 

shares on the first anniversary of the date of grant; an additional

 

shares on the second anniversary of the date of grant; an additional

 

shares on the third anniversary of the date of grant; an additional

 

shares on the fourth anniversary of the date of grant; so that, after the
expiration of the fourth anniversary of the date of grant, the option shall be
exercisable in full.

 

To the extent not exercised installments shall be cumulative and shall be
exercisable in whole or in part; provided that no partial exercise of the option
shall be for less than 10 whole shares.

 

This option shall become fully exercisable, irrespective of the limitations set
forth above, provided that the Employee has been in continuous employment since
the date of grant, upon a Change in Control. This option may not be exercised at
any time after the tenth anniversary of the date of grant.

 

(b)           Subject to the conditions hereof this option shall be exercisable
by the Employee giving written notice of exercise to the Company, specifying the
number of shares to be purchased and the purchase price to be paid therefor and
accompanied by payment in accordance with Section 3 hereof. Such exercise shall
be effective upon receipt by the Treasurer of the Company of the written notice
together with the required payment.

 

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

 

(c)           If the Employee ceases to be employed by the Company or one of its
subsidiaries for any reason, including retirement but other than death, this
option shall immediately terminate; provided, however, that any portion of this
option which was otherwise exercisable on the date of termination of the
Employee’s employment may be exercised within the three-month period following
the date on which the Employee ceased to be so employed unless termination was
due to “cause” as determined by the Board of Directors or the Employee is found
by the Board of Directors to have disclosed trade secrets of the Company. In no
event may this option be exercised after the tenth anniversary date. Any such
exercise may be made only to the extent of the number of shares subject to this
option which are purchasable upon the date of such termination of employment. If
the Employee dies during such three-month period, this option shall be
exercisable by the Employee’s personal representatives, heirs or legatees to the
same extent and during the same period that the Employee could have exercised
this option on the date of his or her death.

 

(d)           If the Employee dies while an employee of the Company or any
subsidiary of the Company, this option shall be exercisable, by the Employees
personal representatives, heirs or legatees, to the same extent that the
Employee could have exercised this option on the date of his or her death. This
option or any unexercised portion hereof shall terminate unless so exercised
prior to the earlier of the expiration of one year from the date of such death
or the tenth anniversary date.

 

(e)           The Employee agrees that he will not exercise this option, and
that the Company will not be obligated to issue any shares of Common Stock
pursuant to this option agreement, if the exercise of the option or the issuance
of such shares would constitute a violation by the Employee or by the Company of
any provision of any law or regulation of any governmental authority or any
stock exchange or transaction quotation system. Whether or not the issuance of
shares covered by the Plan have been registered pursuant to the Securities Act
of 1933, as amended, the Company may, at its election, require the Employee to
give a representation in writing in form and substance satisfactory to the
Company to the effect that he is acquiring such shares for his own account for
investment and not with a view tot or for sale in connection with, the
distribution of such shares or any part thereof.

 

If any law or regulation requires the Company to take any action with respect to
the shares specified in such notice, the time for delivery thereof, which would
otherwise be as promptly as possible, shall be postponed for the period of time
necessary to take such action.

 

(f)            A “Change in Control” shall be deemed to have occurred as of the
date that one or more of the following occurs:

 

(i)            Individuals who, as of the date hereof, constitute the entire
Board of

 

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Directors of the Company (“Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of the then Incumbent Directors shall be considered as
though such individual was an Incumbent Director, but excluding, for this
purpose any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest, as such terms are
used in Rule 14a-1 1 under the Securities Exchange Act of 1934, as amended
(“Exchange Act”) or other actual or threatened solicitation of proxies or
consents by or on behalf of any Person (as defined below) other than the Board;

 

(ii)           The stockholders of the Company shall approve (A) any merger,
consolidation or recapitalization of the Company (or, if the capital stock of
the Company is affected, any subsidiary of the Company), or any sale, lease, or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company (each of the foregoing being an “Acquisition Transaction”)
where (1) the stockholders of the Company immediately prior to such Acquisition
Transaction would not immediately after such Acquisition Transaction
beneficially own, directly or indirectly, shares or other ownership interests
representing in the aggregate fifty one percent (51%) or more of (a) the then
outstanding common stock or other equity interests of the corporation or other
entity surviving or resulting from such merger, consolidation or
recapitalization or acquiring such assets of the Company, as the case may be
(the “Surviving Entity”) (or of its ultimate parent corporation or other entity,
if any), and (b) the Combined Voting Power of the then outstanding Voting
Securities of the Surviving Entity (or of its ultimate parent corporation or
other entity, if any) or (2) the Incumbent Directors at the time of the initial
approval of such Acquisition Transaction would not immediately after such
Acquisition Transaction constitute a majority of the Board of Directors, or
similar managing group of the Surviving Entity (or of its ultimate parent
corporation or other entity, if any), or (B) any plan or proposal for the
liquidation or dissolution of the Company; or

 

(iii) Any Person other than Nancy T. Chang or Tse Wen Chang shall be or become
the beneficial owner (as defined in Rules 1 3d-3 and 1 3d-S under the Exchange
Act), directly or indirectly, of securities of the Company representing in the
aggregate more than forty percent (40%) of either (A) the then outstanding
shares of common stock of the Company (‘Common Stock”) or (B) the Combined
Voting Power of all then outstanding Voting Securities of the Company; provided,
however, that notwithstanding the foregoing, a Change in Control shall not be
deemed to have occurred for purposes of this Subsection (iii):

 

(1)           Solely as a result of an acquisition of securities by the Company
which, by reducing the number of Common Stock or other Voting Securities
outstanding, increases (a) the proportionate number of Common Stock beneficially
owned by

 

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

 

any Person to more than forty percent (40%) of the Common Stock then
outstanding, or (b) the proportionate voting power represented by the Voting
Securities beneficially owned by any Person to more than forty percent (40%) of
the Combined Voting Power of all then outstanding Voting Securities; or

 

(2)           Solely as a result of an acquisition of securities directly from
the Company except for any conversion of a security that was not acquired
directly from the Company,

 

(3)           provided, further, that if any Person referred to in paragraph (1)
or (2) of this Subsection (iii) shall thereafter become the beneficial owner of
any additional Common Stock or other Voting Securities of the Company (other
than pursuant to a stock split, stock dividend or similar transaction), then a
Change in Control shall be deemed to have occurred for purposes of this
Subsection (iii).

 

(iv) For purposes of this Section (f):

 

(1)           “Affiliate” shall mean, as to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person, within the
meaning of such terms as used in Rule 405 under the Securities Act of 1933, as
amended (“Securities Act”), or any successor rule.

 

(2)           “Combined Voting Power” shall mean the aggregate votes entitled to
be cast generally in the election of the Board of Directors, or similar managing
group, of a corporation or other entity by holders of then outstanding Voting
Securities of such corporation or other entity.

 

(3)           “Person” shall mean any individual, entity (including, without
limitation, any corporation, partnership, trust, joint venture, association or
governmental body) or group (as defined in Sections 14(d)(3) or 1 5(d)(2) of the
Exchange Act and the rules and regulations thereunder); provided, however, that
Person shall not include the Company, any of its subsidiaries, any employee
benefit plan of the Company or any of its majority-owned subsidiaries or any
entity organized, appointed or established by the Company or such subsidiaries
for or pursuant to the terms of any such plan.

 

(4)           “Voting Securities” shall mean all securities of a corporation or
other entity having the right under ordinary circumstances to vote in an
election of the Board of Directors, or similar managing group, of such
corporation or other entity.

 

3.             Payment of Purchase Price.

 

(a)           Payment of the purchase price for shares purchased upon exercise
of this option shall be made by delivery to the Company of cash or other
verifiable funds (wire transfer, cashiers check, money order) payable to the
order of the

 

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

 

Company in an amount equal to the purchase price of such shares, or, if the
Employee elects and the Company permits, by delivery of shares of Common Stock
held by the Employee for at least six months and having a fair market value (as
determined by the Board of Directors of the Company in accordance with the terms
of the Plan) equal to or less than the aggregate purchase price of the shares to
be purchased, and any difference shall be paid by cash or check.

 

(b)           If the Employee elects to exercise options by delivery of shares
of Common Stock, the certificate(s) representing the shares shall be registered
in the name of the Employee and duly executed in blank, or accompanied by a
stock power duly executed in blank, by the Employee suitable for purposes of
transferring such shares to the Company. The shares so tendered shall be free of
all liens, claims and encumbrances.

 

4.             Delivery of Shares.

 

The Company shall, upon receipt of the purchase price, and verification of funds
for the number of shares purchased and paid for, make prompt delivery of such
shares to the Employee provided that if any law or regulation requires the
Company to take any action with respect to such shares before the issuance
thereof, then the date of delivery of such shares shall be extended for the
period necessary to complete such action. No shares shall be issued and
delivered upon exercise of any option unless and until, in the opinion of
counsel for the Company, any applicable registration requirements of the
Securities Act, any applicable listing requirements of any national securities
exchange on which stock of the same class is then listed, and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery, shall have been fully complied with.

 

5.             Non-transferability of Option.

 

Except as expressly provided in the Plan or as provided in Section 2(c) and 2(d)
hereof, this option is personal and no rights granted hereunder shall be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of such rights contrary to
the provisions hereof, or upon the levy of any attachment or similar process
upon this option or such rights, this option and such rights shall become null
and void.

 

6.             No Special Employment Rights.

 

Nothing contained in the Plan or this Agreement shall be construed or deemed by
any person under any circumstances to bind the Company or any of its
subsidiaries to continue the employment of the Employee for the period within
which this option may be exercised.

 

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

 

7.             No Rights as a Stockholder.

 

The Employee shall have no rights as a stockholder with respect to any shares
which may be purchased by exercise of this option unless and until a certificate
or certificates representing such shares are duly issued and delivered to the
Employee. Except as otherwise expressly provided in the Plan, no adjustment
shall be made for dividends or other rights for which the record date is prior
to the date such stock certificate is issued.

 

8.             Withholding Taxes.

 

No certificates representing shares of Common Stock purchased hereunder shall be
delivered to or in respect of the Employee unless the amount of all federal,
state and local withholding tax requirements imposed upon the Company with
respect to the issuance of such shares of Common Stock has been remitted to the
Company or unless provisions to pay such withholding requirements have been made
to the satisfaction of the Committee.

 

9.             Certain Limits.

 

(a)           Notwithstanding anything in this Agreement to the contrary, but
subject to the application of clause (b) below, to the extent the Employee would
be subject to the excise tax under Section 4999 of the Code on the amounts
payable pursuant to this Agreement and such other amounts or benefits the
Employee receives from the Company, any person whose actions result in a change
of ownership covered by Section 280G(b)(2) of the Code or any person affiliated
with the Company or such person, required to be included in the calculation of
parachute payments for purposes of Sections 280G and 4999 of the Code, the
amounts vested pursuant to Section 2(a) of this Agreement shall be automatically
reduced to an amount one dollar less than that which, when combined with such
other amounts, would subject the Employee to such excise tax.

 

(b)           If the Employee’s employment with the Company is terminated by the
Company without Cause (hereinafter defined) or by the Employee upon a
Constructive Termination for Good Reason (hereinafter defined), in each case
within one year following a Change in Control (a ‘Protected Termination’), then
the provisions of this clause (b) will apply and clause (a) shall not be
applicable. If a Protected Termination occurs, then notwithstanding anything in
this Agreement to the contrary, if (i) any amounts due to the Employee under
this Agreement and any other plan or program of the Company constitute a
“parachute payment,” as such term is defined in Code Section 280G(b)(2), and
(ii) the amount of the parachute payment, reduced by all federal, state and
local taxes applicable thereto, including the excise tax imposed pursuant to
Code Section 4999, is less than the amount the Employee would receive if he were
paid three times his ‘base amount,” as defined in Code Section 280G(b)(3), less

 

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

 

one dollar, reduced by all federal, state and local taxes applicable thereto,
then the aggregate of the amounts constituting the parachute payment shall be
reduced to an amount that will equal three times his base amount less one
dollar.

 

(c)           For purposes of this Section 9:

 

(i)            “Cause” shall mean: (A) the continued and willful refusal by
Employee to substantially perform his duties after demand for substantial
performance is delivered by the Board which demand specifically identifies the
manner in which the Board has determined that the Employee has not substantially
performed his duties, and the Employee’s performance is not cured to the Board’s
reasonable satisfaction within thirty (30) days from such demand; (B.) the
engagement by Employee in willful misconduct or dishonesty that is materially
injurious to the Company, monetarily or otherwise; (C) Employee’s felony
conviction, or (D) disclosure by the Employee of Company trade secrets or
confidential Company matters to unauthorized persons which is reasonably likely
to be materially injurious to the Company, monetarily or otherwise.

 

(ii)           ‘Constructive Termination for Good Reason” means:

 

(1)           the Employee’s duties or responsibilities are not comparable to
the Employee’s position, offices, duties, responsibilities or status with the
Company at the time of the Change in Control, or the Employee’s reporting
responsibilities or titles are changed and the change results in a material
reduction of the Employee’s responsibilities or position with the Company;

 

(2)           the level of benefits or compensation (individual base
compensation and short and long-term incentive opportunity) provided to the
Employee is reduced below the comparable level payable to similarly situated
officers of the Company; or

 

(3)           the Employee is actually transferred, or offered a proposed
transfer, as evidenced in a written communication from the Company to the
Employee, to another location other than the location at which he was primarily
employed immediately preceding the Change in Control, unless that new location
is a major operating unit or facility of the Company that is located within 50
miles of the Employee’s primary location as of the date immediately preceding a
transfer; provided, however, (A) the Employee, within thirty (30) days from the
date that he is given written notice by the Company of such actual or proposed
transfer, shall provide the Committee or the Board with written notice that the
transfer shall constitute a Constructive Termination for Good Reason, (B) the
Company, within twenty (20) days of receipt of the notice, fails to provide the
Employee with written notice rescinding the actual or proposed transfer and (C)
if the Company does not rescind the transfer, the Employee must terminate his
employment due to Constructive Termination ,for Good Reason within forty (40)
days following expiration of the twenty (20)-day period so that in any event the
Employee shall

 

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

 

have terminated his employment with the Company within ninety (90) days after
the Employee first receives written notice from the Company of such actual or
proposed transfer.

 

10.           Miscellaneous.

 

(a)           Except as provided herein, this Agreement may not be amended or
otherwise modified unless evidenced in writing and signed by the Company and the
Employee.

 

(b)           All notices under this Agreement shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designated in writing by either of the
parties to one another.

 

(c)           This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas.

 

Date of Grant:

TANOX, INC.

 

 

By:

 

 

 

Title:

 

 

 

Address:

 

 

 

EMPLOYEE’S ACCEPTANCE

 

The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof.

 

EMPLOYEE

 

 

 

 

Signature

 

 

 

Address:

 

 

 

 

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TANOX, INC.

INCENTIVE STOCK OPTION AGREEMENT

 

1.             Grant of Option.

 

TANOX, INC., a Delaware corporation (the “Company’), hereby
grants                         (the “Employee”), an option, pursuant to the
Company’s 1997 Stock Plan (the ‘Plan”), to purchase an aggregate
of                  shares of Common Stock, $01 par value per share, of the
Company (“Common Stock”) at a price of                  per share, purchasable
as set forth in and subject to the terms and conditions of this option and the
Plan. This option is intended to qualify as an incentive stock option (Incentive
Stock Option”) within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the Code”). The date of grant of this option is hereinafter
referred to as the ‘date of grant.”

 

2.             Exercise of Option and Provisions for Termination.

 

(a)           Except as otherwise provided herein, this option is exercisable
for the first time with respect to the following shares subject to the option:

 

shares on the first anniversary of the date of grant; an additional

 

shares on the second anniversary of the date of grant; an additional

 

shares on the third anniversary of the date of grant; an additional

 

shares on the fourth anniversary of the date of grant; and an additional

 

shares on the fifth anniversary of the date of grant; so that, after the
expiration of the fifth anniversary of the date of grant, the option shall be
exercisable in full.

 

To the extent not exercised, installments shall be cumulative and shall be
exercisable in whole or in part; provided that no partial exercise of the option
shall be for less than 10 whole shares.

 

This option shall become fully exercisable, irrespective of the limitations set
forth above, provided that the Employee has been in continuous employment since
the date of grant, upon a Change in Control. This option may not be exercised at
any time after the tenth anniversary of the date of grant.

 

(b) Subject to the conditions hereof, this option shall be exercisable by the
Employee giving written notice of exercise to the Company, specifying the number
of shares to be purchased and the purchase price to be paid therefor

 

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

 

and accompanied by payment in accordance with Section 3 hereof. Such exercise
shall be effective upon receipt by the Treasurer of the Company of the written
notice together with the required payment.

 

(c) If the Employee ceases to be employed by the Company or one of its
subsidiaries for any reason, including retirement but other than death, this
option shall immediately terminate; provided, however, that any portion of this
option which was otherwise exercisable on the date of termination of the
Employee’s employment may be exercised within the three-month period following
the date on which the Employee ceased to be so employed unless termination was
due to cause” as determined by the Board of Directors or the Employee is found
by the Board of Directors to have disclosed trade secrets of the Company. In no
event may this option be exercised after the tenth anniversary date. Any such
exercise may be made only to the extent of the number of shares subject to this
option which are purchasable upon the date of such termination of employment. If
the Employee dies during such three-month period, this option shall be
exercisable by the Employees personal representatives, heirs or legatees to the
same extent and during the same period that the Employee could have exercised
this option on the date of his or her death.

 

(d) If the Employee dies while an employee of the Company or any subsidiary of
the Company, this option shall be exercisable, by the Employee’s personal
representatives, heirs or legatees, to the same extent that the Employee could
have exercised this option on the date of his or her death. This option or any
unexercised portion hereof shall terminate unless so exercised prior to the
earlier of the expiration of one year from the date of such death or the tenth
anniversary date.

 

(e) The Employee agrees that he will not exercise this option, and that the
Company will not be obligated to issue any shares of Common Stock pursuant to
this option agreement, if the exercise of the option or the issuance of such
shares would constitute a violation by the Employee or by the Company of any
provision of any law or regulation of any governmental authority or any stock
exchange or transaction quotation system. Whether or not the issuance of shares
covered by the Plan have been registers pursuant to the Securities Act of 1933,
as amended, the Company may, at its election, require the Employee to give a
representation in writing in form and substance satisfactory to the Company to
the effect that he is acquiring such shares for his own account for investment
and not with a view to, or for sale in connection with, the distribution of such
shares or any part thereof.

 

If any law or regulation requires the Company to take any action with respect to
the shares specified in such notice, the time for delivery thereof, which would
otherwise be as promptly as possible, shall be postponed for the period of time
necessary to take such action.

 

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

 

(f) A “Change in Control” shall be deemed to have occurred as of the date that
one or more of the following occurs:

 

(i)            Individuals who, as of the date hereof, constitute the entire
Board of Directors of the Company (Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of the then Incumbent Directors shall be considered as
though such individual was an Incumbent Director, but excluding, for this
purpose any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest, as such terms are
used in Rule 14a-1l under the Securities Exchange Act of 1934, as amended
(Exchange Act”) or other actual or threatened solicitation of proxies or
consents by or on behalf of any Person (as defined below) other than the Board;

 

(ii) The stockholders of the Company shall approve (A) any merger, consolidation
or recapitalization of the Company (or, if the capital stock of the Company is
affected, any subsidiary of the Company), or any sale, lease, or other transfer
(in one transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of the Company
(each of the foregoing being an Acquisition Transaction”) where (1) the
stockholders of the Company immediately prior to such Acquisition Transaction
would not immediately after such Acquisition Transaction beneficially own,
directly or indirectly, shares or other ownership interests representing in the
aggregate fifty one percent (51%) or more of (a) the then outstanding common
stock or other equity interests of the corporation or other entity surviving or
resulting from such merger, consolidation or recapitalization or acquiring such
assets of the Company, as the case may be (the ‘Surviving Entity”) (or of its
ultimate parent corporation or other entity, if any), and (b) the Combined
Voting Power of the then outstanding Voting Securities of the Surviving Entity
(or of its ultimate parent corporation or other entity, if any) or (2) the
Incumbent Directors at the time of the initial approval of such Acquisition
Transaction would not immediately after such Acquisition Transaction constitute
a majority of the Board of Directors, or similar managing group of the Surviving
Entity (or of its ultimate parent corporation or other entity, if any), or (B)
any plan or proposal for the liquidation or dissolution of the Company; or

 

(iii) Any Person other than Nancy T. Chang or Tse Wen Chang shall be or become
the beneficial owner (as defined in Rules 1 3d-3 and 1 3d-5 under the Exchange
Act), directly or indirectly, of securities of the Company representing in the
aggregate more than forty percent (40%) of either (A) the then outstanding
shares of common stock of the Company (“Common Stock”) or (B) the Combined
Voting Power of all then outstanding Voting Securities of the Company; provided,
however, that notwithstanding the foregoing, a Change in Control shall not be
deemed to have occurred for purposes of this Subsection (iii):

 

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

 

(1)           Solely as a result of an acquisition of securities by the Company
which, by reducing the number of Common Stock or other Voting Securities
outstanding, increases (a) the proportionate number of Common Stock beneficially
owned by any Person to more than forty percent (40%) of the Common Stock then
outstanding, or (b) the proportionate voting power represented by the Voting
Securities beneficially owned by any Person to more than forty percent (40%) of
the Combined Voting Power of all then outstanding Voting Securities; or

 

(2)           Solely as a result of an acquisition of securities directly from
the Company except for any conversion of a security that was not acquired
directly from the Company,

 

(3)           provided, further, that if any Person referred to in paragraph (I)
or (2) of this Subsection (iii) shall thereafter become the beneficial owner of
any additional Common Stock or other Voting Securities of the Company (other
than pursuant to a stock split, stock dividend or similar transaction), then a
Change in Control shall be deemed to have occurred for purposes of this
Subsection (iii).

 

(iv) For purposes of this Section (f):

 

(1)           “Affiliate” shall mean, as to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person, within the
meaning of such terms as used in Rule 405 under the Securities Act of 1933, as
amended (‘Securities Act’), or any successor rule.

 

(2)           “Combined Voting Power” shall mean the aggregate votes entitled to
be cast generally in the election of the Board of Directors, or similar managing
group, of a corporation or other entity by holders of then outstanding Voting
Securities of such corporation or other entity.

 

(3)           Person” shall mean any individual, entity (including, without
limitation, any corporation, partnership, trust, joint venture, association or
governmental body) or group (as defined in Sections 14(d)(3) or 15(d)(2) of the
Exchange Act and the rules and regulations thereunder); provided, however, that
Person shall not include the Company, any of its subsidiaries, any employee
benefit plan of the Company or any of its majority-owned subsidiaries or any
entity organized, appointed or established by the Company or such subsidiaries
for or pursuant to the terms of any such plan.

 

(4)           “Voting Securities” shall mean all securities of a corporation or
other entity having the right under ordinary circumstances to vote in an
election of the Board of Directors, or similar managing group, of such
corporation or other entity.

 

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

 

3.             Payment of Purchase Price.

 

(a) Payment of the purchase price for shares purchased upon exercise of this
option shall be made by delivery to the Company of cash or other verifiable
funds (wire transfer, cashier’s check, money order) payable to the order of the
Company in an amount equal to the purchase price of such shares, or, if the
Employee elects and the Company permits, by delivery of shares of Common Stock
held by the Employee for at least six months and having a fair market value (as
determined by the Board of Directors of the Company in accordance with the terms
of the Plan) equal to or less than the aggregate purchase price of the shares to
be purchased, and any difference shall be paid by cash or check.

 

(b) If the Employee elects to exercise options by delivery of shares of Common
Stock, the certificate(s) representing the shares shall be registered in the
name of the Employee and duly executed in blank, or accompanied by a stock power
duly executed in blank, by the Employee suitable for purposes of transferring
such shares to the Company. The shares so tendered shall be free of all liens,
claims and encumbrances.

 

4.             Delivery of Shares.

 

The Company shall, upon receipt of the purchase price, and verification of funds
for the number of shares purchased and paid for, make prompt delivery of such
shares to the Employee, provided that if any law or regulation requires the
Company to take any action with respect to such shares before the issuance
thereof, then the date of delivery of such shares shall be extended for the
period necessary to complete such action. No shares shall be issued and
delivered upon exercise of any option unless and until, in the opinion of
counsel for the Company, any applicable registration requirements of the
Securities Act, any applicable listing requirements of any national securities
exchange on which stock of the same class is then listed, and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery, shall have been fully complied with.

 

5.             Non-transferability of Option.

 

Except as expressly provided in the Plan or as provided in Section 2(c) and 2(d)
hereof, this option is personal and no rights granted hereunder shall be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of such rights contrary to
the provisions hereof, or upon the levy of any attachment or similar process
upon this option or such rights, this option and such rights shall become null
and void.

 

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

 

6.             No Special Employment Rights.

 

Nothing contained in the Plan or this Agreement shall be construed or deemed by
any person under any circumstances to bind the Company or any of its
subsidiaries to continue the employment of the Employee for the period within
which this option may be exercised.

 

7.             No Rights as a Stockholder.

 

The Employee shall have no rights as a stockholder with respect to any shares
which may be purchased by exercise of this option unless and until a certificate
or certificates representing such shares are duly issued and delivered to the
Employee. Except as otherwise expressly provided in the Plan, no adjustment
shall be made for dividends or other rights for which the record date is prior
to the date such stock certificate is issued.

 

8.             Withholding Taxes.

 

No certificates representing shares of Common Stock purchased hereunder shall be
delivered to or in respect of the Employee unless the amount of all federal,
state and local withholding tax requirements imposed upon the Company with
respect to the issuance of such shares of Common Stock has been remitted to the
Company or unless provisions to pay such withholding requirements have been made
to the satisfaction of the Committee.

 

9.             Qualification under Section 422.

 

It is understood and intended that the option granted hereunder shall qualify as
an “incentive stock option” as defined in Section 422 of the Code. Accordingly,
the Employee understands that in order to obtain the benefits of an incentive
stock option under Section 421 of the Code, no sale or other disposition may be
made of any shares acquired upon exercise & the option within the one-year
period beginning on the day after the day of the transfer of such shares to him
or her, nor within the two-year period beginning on the day after the grant of
the option. If the Employee intends to dispose or does dispose (whether by sale,
exchange, gift, transfer or otherwise) of any such shares within said periods,
he or she will notify the Company within 30 days after such disposition.

 

10.           Certain Limits.

 

(a) Notwithstanding anything in this Agreement to the contrary, but subject to
the application of clause (b) below, to the extent the Employee would be subject
to the excise tax under Section 4999 of the Code on the amounts payable pursuant
to this Agreement and such other amounts or benefits the Employee receives from
the Company, any person whose actions result in a change of ownership covered by
Section 280G(b)(2) of the Code or any person affiliated with the Company or such
person, required to be included in the calculation of parachute payments for
purposes of Sections 280G and 4999 of the Code, the amounts

 

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

 

vested pursuant to Section 2(a) of this Agreement shall be automatically reduced
to an amount one dollar less than that which, when combined with such other
amounts, would subject the Employee to such excise tax.

 

(b) If the Employee’s employment with the Company is terminated by the Company
without Cause (hereinafter defined) or by the Employee upon a Constructive
Termination for Good Reason (hereinafter defined), in each case within one year
following a Change in Control (a “Protected Termination”), then the provisions
of this clause (b) will apply and clause (a) shall not be applicable. If a
Protected Termination occurs, then notwithstanding anything in this Agreement to
the contrary, if (I) any amounts due to the Employee under this Agreement and
any other plan or program of the Company constitute a “parachute payment,” as
such term is defined in Code Section 280G(b)(2), and (ii) the amount of the
parachute payment, reduced by all federal, state and local taxes applicable
thereto, including the excise tax imposed pursuant to Code Section 4999, is less
than the amount the Employee would receive if he were paid three times his “base
amount,” as defined in Code Section 280G(b)(3), less one dollar, reduced by all
federal, state and local taxes applicable thereto, then the aggregate of the
amounts constituting the parachute payment shall be reduced to an amount that
will equal three times his base amount less one dollar.

 

(c) The determinations to be made with respect to this Section shall be made by
an accounting firm jointly selected by the Company’s Board of Directors and the
Employee and paid by the Company, and which may be the Company’s independent
auditors.

 

(d) For purposes of this Section 10:

 

(i)            Termination for ‘Cause” shall have occurred if, on or after the
date of the Change in Control, the Company terminates Employee’s employment
because (i) as a result of an investigation, the Employee shall (A) be found to
have engaged in, (B) admit in writing facts amounting to, or (C) be held civilly
liable for, fraud, embezzlement or dishonesty, (ii) the Employee discloses
Company trade secrets or confidential Company matters to unauthorized persons
and such disclosures are reasonably likely to be materially injurious to the
Company, monetarily or otherwise, (Hi) the Employee, after reasonable notice and
opportunity to correct his conduct, willfully refuses or continually neglects to
substantially perform his duties and assigned work, or (iv) the Employee
materially breaches any provision of any employment agreement with the Company.

 

(ii)           “Constructive Termination for Good Reason” means:

 

(1)           the Company has taken action that results in a material diminution
in the Employee’s position (other than titles and reporting requirements),
authority, duties or responsibilities with the Company in effect immediately
before the date of the closing of the Change in Control;

 

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

 

(2)           the level of benefits or compensation (individual base
compensation and short and long-term incentive opportunity) provided to the
Employee is reduced below the comparable level payable to similarly situated
employees of the Company; or

 

(3)           the Employee is actually transferred, or offered a proposed
transfer, as evidenced in a written communication from the Company to the
Employee, to another location other than the location at which he was primarily
employed immediately preceding the Change in Control, unless that new location
is a major operating unit or facility Of the Company that is located within 50
miles of the Employee’s primary location as of the date immediately preceding a
transfer; provided, however, (A) the Employee, within thirty (30) days from the
date that he is given written notice by the Company of such actual or proposed
transfer, shall provide the Committee or the Board with written notice that the
transfer shall constitute a Constructive Termination for Good Reason, (B) the
Company, within twenty (20) days of receipt of the notice, fails to provide the
Employee with written notice rescinding the actual or proposed transfer and (C)
if the Company does not rescind the transfer, the Employee must terminate his
employment due to Constructive Termination for Good Reason within forty (40)
days following expiration of the twenty (20)-day period so that in any event the
Employee shall have terminated his employment with the Company within ninety
(90) days after the Employee first receives written notice from the Company of
such actual or proposed transfer.

 

11.           Miscellaneous.

 

(a) Except as provided herein, this Agreement may not be amended or otherwise
modified unless evidenced in writing and signed by the Company and the Employee.

 

(b) All notices under this Agreement shall be mailed or delivered by hand to the
parties at their respective addresses set forth beneath their names below or at
such other address as may be designated in writing by either of the parties to
one another.

 

(c)  This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas.

 

 

Date of Grant:

 

TANOX, INC.

 

 

By:

 

 

 

Title:

 

 

 

Address:

 

 

 

EMPLOYEE’S ACCEPTANCE

 

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

 

The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof.

 

EMPLOYEE

 

 

 

 

Signature

 

 

 

Address:

 

 

 

 

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TANOX, INC.

INCENTIVE STOCK OPTION AGREEMENT

 

1.             Grant of Option.

 

TANOX, INC., a Delaware corporation (the Company”), hereby grants to
            (the “Employee”), an option, pursuant to the Company’s 1997 Stock
Plan (the ‘Plan’), to purchase an aggregate of         shares of Common Stock,
$01 par value per share, of the Company (“Common Stock”) at a price
of        per share, purchasable as set forth in and subject to the terms and
conditions of this option and the Plan. This option is intended to qualify as an
incentive stock option (‘Incentive Stock Option”) within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the “Code”). The date of
grant of this option is hereinafter referred to as the “date of grant.”

 

2.             Exercise of Option and Provisions for Termination.

 

(a)           Except as otherwise provided herein, this option is exercisable
for the first time with respect to the following shares subject to the option:

 

shares on the first anniversary of the date of grant; an additional

 

shares on the second anniversary of the date of grant; an additional

 

shares on the third anniversary of the date of grant; an additional

 

shares on the fourth anniversary of the date of grant; and an additional

 

shares on the fifth anniversary of the date of grant; so that, after the
expiration of the fifth anniversary of the date of grant, the option shall be
exercisable in full.

 

To the extent not exercised, installments shall be cumulative and shall be
exercisable in whole or in part; provided that no partial exercise of the option
shall be for less than 10 whole shares.

 

This option shall become fully exercisable, irrespective of the limitations set
forth above, provided that the Employee has been in continuous employment since
the date of grant, upon a Change in Control. This option may not be exercised at
any time after the tenth anniversary of the date of grant.

 

(b) Subject to the conditions hereof, this option shall be exercisable by the
Employee giving written notice of exercise to the Company, specifying the number
of shares to be purchased and the purchase price to be paid therefor and
accompanied by payment in accordance with Section 3 hereof. Such

 

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

 

exercise shall be effective upon receipt by the Treasurer of the Company of the
written notice together with the required payment.

 

(c) If the Employee ceases to be employed by the Company or one of its
subsidiaries for any reason, including retirement but other than death, this
option shall immediately terminate; provided, however, that any portion of this
option which was otherwise exercisable on the date of termination of the
Employee’s employment may be exercised within the three-month period following
the date on which the Employee ceased to be so employed unless termination was
due to “cause” as determined by the Board of Directors or the Employee is found
by the Board of Directors to have disclosed trade secrets of the Company. In no
event may this option be exercised after the tenth anniversary date. Any such
exercise may be made only to the extent of the number of shares subject to this
option which are purchasable upon the date of such termination of employment. If
the Employee dies during such three-month period, this option shall be
exercisable by the Employee’s personal representatives, heirs or legatees to the
same extent and during the same period that the Employee could have exercised
this option on the date of his or her death.

 

(d) If the Employee dies while an employee of the Company or any subsidiary of
the Company, this option shall be exercisable, by the Employee’s personal
representatives, heirs or legatees, to the same extent that the Employee could
have exercised this option on the date of his or her death. This option or any
unexercised portion hereof shall terminate unless so exercised prior to the
earlier of the expiration of one year from the date of such death or the tenth
anniversary date.

 

(e) The Employee agrees that he will not exercise this option, and that the
Company will not be obligated to issue any shares of Common Stock pursuant to
this option agreement, if the exercise of the option or the issuance of such
shares would constitute a violation by the Employee or by the Company of any
provision of any law or regulation of any governmental authority or any stock
exchange or transaction quotation system. Whether or not the issuance of shares
covered by the Plan have been registered pursuant to the Securities Act of 1933,
as amended, the Company may, at its election, require the Employee to give a
representation in writing in form and substance satisfactory to the Company to
the effect that he is acquiring such shares for his own account for investment
and not with a view to, or for sale in connection with, the distribution of such
shares or any part thereof.

 

If any law or regulation requires the Company to take any action with respect to
the shares specified in such notice, the time for delivery thereof, which would
otherwise be as promptly as possible, shall be postponed for the period of time
necessary to take such action.

 

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

 

(f) A “Change in Control’ shall be deemed to have occurred as of the date that
one or more of the following occurs:

 

(i) Individuals who, as of the date hereof, constitute the entire Board of
Directors of the Company (‘Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of the then Incumbent Directors shall be considered as
though such individual was an Incumbent Director, but excluding, for this
purpose any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest, as such terms are
used in Rule 14a-11 under the Securities Exchange Act of 1934, as amended
(“Exchange Act”) or other actual or threatened solicitation of proxies or
consents by or on behalf of any Person (as defined below) other than the Board;

 

(ii) The stockholders of the Company shall approve (A) any merger, consolidation
or recapitalization of the Company (or, if the capital stock of the Company is
affected, any subsidiary of the Company), or any sale, lease, or other transfer
(in one transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of the Company
(each of the foregoing being an “Acquisition Transaction”) where (1) the
stockholders of the Company immediately prior to such Acquisition Transaction
would not immediately after such Acquisition Transaction beneficially own,
directly or indirectly, shares or other ownership interests representing in the
aggregate fifty one percent (51%) or more of (a) the then outstanding common
stock or other equity interests of the corporation or other entity surviving or
resulting from such merger, consolidation or recapitalization or acquiring such
assets of the Company, as the case may be (the ‘Surviving Entity”) (or of its
ultimate parent corporation or other entity, if any), and (b) the Combined
Voting Power of the then outstanding Voting Securities of the Surviving Entity
(or of its ultimate parent corporation or other entity, if any) or (2) the
Incumbent Directors at the time of the initial approval of such Acquisition
Transaction would not immediately after such Acquisition Transaction constitute
a majority of the Board of Directors, or similar managing group, of the
Surviving Entity (or of its ultimate parent corporation or other entity, if
any), or (B) any plan or proposal for the liquidation or dissolution of the
Company; or

 

(iii.) Any Person other than Nancy T. Chang or Tse Wen Chang shall be or become
the beneficial owner (as defined in Rules 1 3d-3 and 1 3d-5 under the Exchange
Act), directly or indirectly, of securities of the Company representing in the
aggregate more than forty percent (40%) of either (A) the then outstanding
shares of common stock of the Company (“Common Stock”) or (B) the Combined
Voting Power of all then outstanding Voting Securities of the Company; provided,
however, that notwithstanding the foregoing, a Change in Control shall not be
deemed to have occurred for purposes of this Subsection (iii):

 

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

 

(1)           Solely as a result of an acquisition of securities by the Company
which, by reducing the number of Common Stock or other Voting Securities
outstanding, increases (a) the proportionate number of Common Stock beneficially
owned by any Person to more than forty percent (40%) of the Common Stock then
outstanding, or (b) the proportionate voting power represented by the Voting
Securities beneficially owned by any Person to more than forty percent (40%) of
the Combined Voting Power of all then outstanding Voting Securities; or

 

(2)           Solely as a result of an acquisition of securities directly from
the Company except for any conversion of a security that was not acquired
directly from the Company,

 

(3)           provided, further, that if any Person referred to in paragraph (1)
or (2) of this Subsection (iii) shall thereafter become the beneficial owner of
any additional Common Stock or other Voting Securities of the Company (other
than pursuant to a stock split, stock dividend or similar transaction), then a
Change in Control shall be deemed to have occurred for purposes of this
Subsection (iii).

 

(iv) For purposes of this Section (f):

 

(1)           “Affiliate” shall mean, as to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified Person, within the
meaning of such terms as used in Rule 405 under the Securities Act of 1933, as
amended (“Securities Act”), or any successor rule.

 

(2)           “Combined Voting Power” shall mean the aggregate votes entitled to
be cast generally in the election of the Board of Directors, or similar managing
group, of a corporation or other entity by holders of then outstanding Voting
Securities of such corporation or other entity.

 

(3)           “Person” shall mean any individual, entity (including, without
limitation, any corporation, partnership, trust, joint venture, association or
governmental body) or group (as defined in Sections 14(d)(3) or 15(d)(2) of the
Exchange Act and the rules and regulations thereunder); provided, however, that
Person shall not include the Company, any of its subsidiaries, any employee
benefit plan of the Company or any of its majority-owned subsidiaries or any
entity organized, appointed or established by the Company or such subsidiaries
for or pursuant to the terms of any such plan.

 

(4)           “Voting Securities” shall mean all securities of a corporation or
other entity having the right under ordinary circumstances to vote in an
election of the Board of Directors, or similar managing group, of such
corporation or other entity.

 

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

 

3.             Payment of Purchase Price.

 

(a) Payment of the purchase price for shares purchased upon exercise of this
option shall be made by delivery to the Company of cash or other verifiable
funds (wire transfer, cashier’s check, money order) payable to the order of the
Company in an amount equal to the purchase price of such shares, or, if the
Employee elects and the Company permits, by delivery of shares of Common Stock
held by the Employee for at least six months and having a fair market value (as
determined by the Board of Directors of the Company in accordance with the terms
of the Plan) equal to or less than the aggregate purchase price of the shares to
be purchased, and any difference shall be paid by cash or check.

 

(b) If the Employee elects to exercise options by delivery of shares of Common
Stock, the certificate(s) representing the shares shall be registered in the
name of the Employee and duly executed in blank, or accompanied by a stock power
duly executed in blank, by the Employee suitable for purposes of transferring
such shares to the Company. The shares so tendered shall be free of all liens,
claims and encumbrances.

 

4.             Delivery of Shares.

 

The Company shall, upon receipt of the purchase price, and verification of funds
for the number of shares purchased and paid for, make prompt delivery of such
shares to the Employee, provided that if any law or regulation requires the
Company to take any action with respect to such shares before the issuance
thereof, then the date of delivery of such shares shall be extended for the
period necessary to complete such action. No shares shall be issued and
delivered upon exercise of any option unless and until, in the opinion of
counsel for the Company, any applicable registration requirements of the
Securities Act, any applicable listing requirements of any national securities
exchange on which stock of the same class is then listed, and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery, shall have been fully complied with.

 

5.             Non-transferability of Option.

 

Except as expressly provided in the Plan or as provided in Section 2(c) and 2(d)
hereof, this option is personal and no rights granted hereunder shall be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of such rights contrary to
the provisions hereof, or upon the levy of any attachment or similar process
upon this option or such rights, this option and such rights shall become null
and void.

 

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

 

6.             No Special Employment Rights.

 

Nothing contained in the Plan or this Agreement shall be construed or deemed by
any person under any circumstances to bind the Company or any of its
subsidiaries to continue the employment of the Employee for the period within
which this option may be exercised.

 

7.             No Rights as a Stockholder.

 

The Employee shall have no rights as a stockholder with respect to any shares
which may be purchased by exercise of this option unless and until a certificate
or certificates representing such shares are duly issued and delivered to the
Employee. Except as otherwise expressly provided in the Plan, no adjustment
shall be made for dividends or other rights for which the record date is prior
to the date such stock certificate is issued.

 

8.             Withholding Taxes.

 

No certificates representing shares of Common Stock purchased hereunder shall be
delivered to or in respect of the Employee unless the amount of all federal,
state and local withholding tax requirements imposed upon the Company with
respect to the issuance of such shares of Common Stock has been remitted to the
Company or unless provisions to pay such withholding requirements have been made
to the satisfaction of the Committee.

 

9.             Qualification under Section 422.

 

It is understood and intended that the option granted hereunder shall qualify as
an “incentive stock option” as defined in Section 422 of the Code. Accordingly,
the Employee understands that in order to obtain the benefits of an incentive
stock option under Section 421 of the Code, no sale or other disposition may be
made of any shares acquired upon exercise of the option within the one-year
period beginning on the day after the day of the transfer of such shares to him
or her, nor within the two-year period beginning on the day after the grant of
the option. If the Employee intends to dispose or does dispose (whether by sale,
exchange, gift, transfer or otherwise) of any such shares within said periods,
he’ or she will notify the Company within 30 days after such disposition.

 

10.           Certain Limits.

 

(a) Notwithstanding anything in this Agreement to the contrary, but subject to
the application of clause (b) below, to the extent the Employee would be subject
to the excise tax under Section 4999 of the Code on the amounts payable pursuant
to this Agreement and such other amounts or benefits the Employee receives from
the Company, any person whose actions result in a change of ownership covered by
Section 280G(b)(2) of the Code or any person affiliated with the Company or such
person, required to be included in the calculation of parachute payments for
purposes of Sections 280G and 4999 of the Code, the amounts

 

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

 

vested pursuant to Section 2(a) of this Agreement shall be automatically reduced
to an amount one dollar less than that which, when combined with such other
amounts, would subject the Employee to such excise tax.

 

(b) If the Employee’s employment with the Company is terminated by the Company
without Cause (hereinafter defined) or by the Employee upon a Constructive
Termination for Good Reason (hereinafter defined), in each case within one year
following a Change in Control (a “Protected Termination”), then the provisions
of this clause (b) will apply and clause (a) shall not be applicable. If a
Protected Termination occurs, then notwithstanding anything in this Agreement to
the contrary, if (i) any amounts due to the Employee under this Agreement and
any other plan or program of the Company constitute a “parachute payment,” as
such term is defined in Code Section 280G(b)(2), and (ii) the amount of the
parachute payment, reduced by all federal, state and local taxes applicable
thereto, including the excise tax imposed pursuant to Code Section 4999, is less
than the amount the Employee would receive if he were paid three times his “base
amount,” as defined in Code Section 280G(b)(3), less one dollar, reduced by all
federal, state and local taxes applicable thereto, then the aggregate of the
amounts constituting the parachute payment shall be reduced to an amount that
will equal three times his base amount less one dollar.

 

(c) For purposes of this Section 10:

 

(i)            ‘Cause” shall mean: (A) the continued and willful refusal by
Employee to substantially perform his duties after demand for substantial
performance is delivered by the Board which demand specifically identifies the
manner in which the Board has determined that the Employee has not substantially
performed his duties, and the Employee’s performance is not cured to the Board’s
reasonable satisfaction within thirty (30) days from such demand; (B) the
engagement by Employee in willful misconduct or dishonesty that is materially
injurious to the Company, monetarily or otherwise; (C) Employee’s felony
conviction, or (D) disclosure by the Employee of Company trade secrets or
confidential Company matters to unauthorized persons which is reasonably likely
to be materially injurious to the Company, monetarily or otherwise.

 

(ii)           ‘Constructive Termination for Good Reason” means:

 

(1)           the Employee’s duties or responsibilities are not comparable to
the Employee’s position, offices, duties, responsibilities or status with the
Company at the time of the Change in Control, or the Employee’s reporting
responsibilities or titles are changed and the change results in a material
reduction of the Employee’s responsibilities or position with the Company;

 

(2)           the level of benefits or compensation (individual base
compensation and short and long-term incentive opportunity) provided to the
Employee is reduced

 

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

 

below the comparable level payable to similarly situated officers of the
Company; or

 

(3)           the Employee is actually transferred, or offered a proposed
transfer, as evidenced in a written communication from the Company to the
Employee, to another location other than the location at which he was primarily
employed immediately preceding the Change in Control, unless that new location
is a major operating unit or facility of the Company that is located within 50
miles of the Employee’s primary location as of the date immediately preceding a
transfer; provided, however, (A) the Employee, within thirty (30) days from the
date that he is given written notice by the Company of such actual or proposed
transfer, shall provide the Committee or the Board with written notice that the
transfer shall constitute a Constructive Termination for Good Reason, (B) the
Company, within twenty (20) days of receipt of the notice, fails to provide the
Employee with written notice rescinding the actual or proposed transfer and (C)
if the Company does not rescind the transfer, the Employee must terminate his
employment due to Constructive Termination for Good Reason within forty (40)
days following expiration of the twenty (20)-day period so that in any event the
Employee shall have terminated his employment with the Company within ninety
(90) days after the Employee first receives written notice from the Company of
such actual or proposed transfer.

 

11.           Miscellaneous.

 

(a)           Except as provided herein, this Agreement may not be amended or
otherwise modified unless evidenced in writing and signed by the Company and the
Employee.

 

(b)           All notices under this Agreement shall be mailed or delivered by
hand to the parties at their respective addresses set forth beneath their names
below or at such other address as may be designated in writing by either of the
parties to one another.

 

(c)           This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas.

 

 

Date of Grant:

 

TANOX, INC.

 

 

 

 

 

 

By:

 

 

 

Title:

 

 

 

Address:

 

 

 

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

 

EMPLOYEE’S ACCEPTANCE

 

The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof.

 

EMPLOYEE

 

 

 

 

Signature

 

 

 

Address:

 

 

 

 

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STOCK OPTION AGREEMENT

 

Agreement made effective as of the       day of           , between TANOX
BIOSYSTEMS, INC., a Texas corporation (the Company), and                        
(Employee).

 

To carry out the purposes of the Tanox Biosystems, Inc. 1987 Stock Option Plan
(the Plan), a copy of which is attached hereto as Exhibit A, by affording
Employee the opportunity to purchase shares of the $01 par value common stock of
the Company (the Stock”), and in consideration of the mutual agreements and
other matters set forth herein and in the Plan, the Company and Employee hereby
agree as follows:

 

1.             Grant of Option. The Company hereby irrevocably grants to
Employee the right and option (Option) to purchase all or any part of an
aggregate of                shares of Stock, on the terms and conditions set
forth herein and in the Plan, which is incorporated herein by reference as a
part of this Option. This Option is not intended to constitute an incentive
stock option, within the meaning of section 422A (b) of the Internal Revenue
Code of 1986, as amended (the “Code”).

 

2.             Purchase Price. The purchase price of Stock purchased pursuant to
the exercise of this Option shall be       per share.

 

3.             Exercise of Option. Subject to the earlier expiration or
termination of this Option as herein provided, this Option shall be cumulative
and may be exercised, by written notice to the Company, only at such time or
times and for such percentage of the aggregate number of shares offered by this
Option, determined by the number of full years from the date of grant hereof to
the date of such exercise, in accordance with the following schedule:

 

Number
of Full
Years

 

Percentage
of Shares
Purchasable

 

Cumulative
Percentage
Purchasable

 

2 years

 

40

%

40

%

3 years

 

20

%

60

%

4 years

 

20

%

80

%

5 years

 

20

%

100

%

 

Notwithstanding the provisions of vesting above, this option may be exercised in
full if, prior to full vesting, the Company is acquired, whether by merger, sale
of substantially all of its assets or sale of stock, if following such
transaction (including a series of related transactions) at least 50% of the
outstanding voting securities of the Company or its successor shall not be owned
directly or indirectly by stockholders that beneficially owned voting securities
of the

 

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

 

Company immediately prior to such transaction in substantially the same
proportion as their ownership immediately prior to such transaction.

 

At or prior to the time this Option becomes exercisable, the Company shall
provide to Employee, if applicable, the buy-sell and other agreements referred
to below, together with certain information regarding the Company and the Stock
useful to Employee in making an investment decision, if such information is not
otherwise available to Employee.

 

This Option is not transferable by Employee (otherwise than by will or the laws
of descent and distribution as provided below), and may be exercised only by
Employee during Employee’s lifetime and while Employee remains an employee of
the Company, subject to any rights or restrictions contained in any buy-sell or
other agreement to which Employee is subject, except that:

 

(a)           If Employee’s employment with the Company terminates for cause or
voluntarily by Employee without the written consent of the Company, this Option
shall immediately terminate and shall no longer be exercisable;

 

(b)           If Employee’s employment with the Company terminates for any
reason other than death or as provided in (a) above, this Option may be
exercised by Employee at any time during the period of sixty (60) days following
such termination or, upon death of Employee within such period, by Employee’s
estate (or the person who acquires this Option by bequest or inheritance or by
reason of the death of Employee) during a period of one hundred eighty (180)
days following Employee’s death, but in each case only as to the number of
shares Employee was entitled to purchase hereunder as of the date Employee’s
employment so terminates; provided, however, that this Option and any Stock
acquired pursuant hereto shall be subject to any restrictions on transfer or any
rights and options of the Company and its shareholders contained in any buy-sell
or other agreement to which Employee is subject; or

 

(c)           If Employee dies while in the employ of the Company, Employee’s
estate, or the person who acquires this Option by bequest or inheritance or by
reason of the death of Employee, may exercise this Option in full at any time
during the period of one hundred eighty (180) days following the date of
employee’s death (subject to the limitation set forth in Paragraph IV of the
Plan as to the maximum amount of Stock as to which this Option may first become
exercisable in any calendar year).

 

This Option shall not be exercisable in any event after the expiration of One
Hundred Twenty-One (121) months from the date of grant hereof. The purchase
price of shares as to which this Option is exercised shall be paid in full at
the time of exercise (a) in cash (including check, bank draft or money order
payable to the order of the Company), (b) by delivering to the Company shares of
Stock having a fair market value equal to the purchase price, or (c) a
combination of cash and

 

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Stock. For purposes of this Agreement, fair market value of the Stock shall be
determined in accordance with the provisions of the Plan and any Stock delivered
to the Company hereunder shall be required to meet the holding period
requirements set forth in the Plan. No fraction of a share of Stock shall be
issued by the Company upon exercise of a option or accepted by the Company in
payment of the exercise price thereof; rather, Employee shall provide a cash
payment for such cash amount as is necessary to effect the issuance and
acceptance of only whole shares of Stock.

 

Unless and until a certificate or certificates representing such shares shall
have been issued by the Company to Employee, Employee (or the person permitted
to exercise this Option in the event of Employee’s death) shall not be or have
any of the rights or privileges of a shareholder of the Company with respect to
shares acquirable upon an exercise of this Option.

 

4. Withholding of Tax. To the extent that the exercise of this Option or the
disposition of shares of Stock acquired by exercise of this Option results in
compensation income to Employee for federal or state income tax purposes,
Employee shall pay to the Company at the time of such exercise or disposition
such amount of money as the Company may require to meet its obligation under
applicable tax laws or regulations and, if Employee fails to do so, the Company
is authorized to withhold from any cash remuneration then or thereafter payable
to Employee any tax required to be withheld by reason of such resulting
compensation income.

 

5. Status of Stock. The Company may register for issue under the Securities Act
of 1933, as amended (the “Act”) the shares of Stock acquirable upon exercise of
this Option, and may keep such registration effective throughout the period this
Option is exercisable. In the absence of such effective registration or an
available exemption from registration, under the Act, exercise of this Option
and delivery of shares of Stock acquirable upon such exercise will be delayed
until registration of such shares is effective or an exemption from registration
under the Act is available. The Company intends to use its reasonable efforts to
ensure that no such delay will occur. If the stock is not registered and an
exemption from registration under the Act is available upon an exercise of this
Option, Employee (or the person permitted to exercise this Option in the event
of Employee’s death or incapacity), if requested by the Company to do so, will
be required to execute and deliver to the Company in writing an agreement
containing such representations and other provisions as the Company may require
to evidence Employee’s qualification to acquire the Stock and otherwise assure
compliance with applicable securities laws.

 

No sales or disposition of shares of Stock acquired upon exercise of this Option
shall be made in the absence of a registration statement being on file with
respect to such shares under the Act unless an opinion of counsel satisfactory
to

 

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the Company that such sale or disposition will not constitute a violation of the
Act or any other applicable securities laws is first obtained.

 

If the shares of Stock acquirable upon exercise of this Option are not
registered for issue under the Act, the Company, in its sole discretion, may
require that Employee execute a buy-sell or other agreement, in form and
substance satisfactory to the Company, which provides certain restrictions on
Employee’s right to transfer the shares of Stock and provides the Company and
certain of the other shareholders with rights to purchase the Employee’s Option
or shares of Stock acquired by Employee upon the happening of certain events,
including, without limitation, death, divorce, death of spouse, termination of
employment, or voluntary or involuntary transfer of Stock. Such agreement may
have such other provisions as the Company determines to be necessary to
reasonably restrict transfer of the shares of Stock or rights thereto to other
persons.

 

The certificates representing shares of Stock acquired under this Option may
bear such legend as the Committee deems appropriate, referring to the provisions
of this Paragraph 5.

 

6. Employment Relationship. Employee shall be considered to be in the employment
of the Company as long as Employee remains an employee of either the Company, a
parent or subsidiary corporation (as defined in section 425 of the Code) of the
Company, if any, or a corporation or a parent or subsidiary of such corporation
assuming or substituting a new option for this Option. Any question as to
whether and when there has been a termination of such employment, and the cause
of such termination, shall be determined by the Board of Directors of the
employing corporation, and its determination shall be final.

 

7. Binding Effect. This Agreement shall be binding upon and inure to the benefit
of any successors to the Company and all persons lawfully claiming under
Employee.

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by one
of its duly authorized officers, and Employee has executed this Agreement, all
as of the day and year first above written.

 

 

TANOX BIOSYSTEMS, INC.

 

 

 

By:

 

 

 

Title:President

 

 

 

 

 

 

Employee

 

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