**Exhibit 10.9**

 

TANOX, INC.

 

NON-QUALIFIED STOCK OPTION AGREEMENT

 

1.             Grantof Option. 

 

TANOX, INC., aDelaware 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                    sharesof Common Stock, $.01 par value per share, of the Company (“Common Stock”) at aprice of                     pershare, purchasable as set forth in and subject to the terms and conditions ofthis option and thePlan.                          ,the date of grant of this option, is hereinafter referred to as the “GrantDate.”

 

2.             Exerciseof Option and Provisions for Termination.

 

(a)           Exceptas otherwise provided herein, this option is exercisable for the first timewith respect to the following shares subject to the option:

 

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

 

1/48th on the13th through 48th monthly anniversary of the Grant Date

 

To the extentnot exercised, installments shall be cumulative and shall be exercisable inwhole or in part; provided that no partial exercise of the option shall be forless than 10 whole shares.

 

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

 

(b)           Subjectto the conditions hereof, this option shall be exercisable by the Employeecontacting the Company’s designated stock option administration representative(the “Representative”), specifying the number of shares to be purchased and theexercise price to be paid therefor and accompanied by payment in accordancewith Section 3 hereof.

 

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

 

----

 

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

 

(d)           Ifthe Employee dies while an employee of the Company or any subsidiary of theCompany, this option shall be exercisable, by the Employee’s personalrepresentatives, heirs or legatees, to the same extent that the Employee couldhave exercised this option on the date of death.  This option or any unexercised portion hereofshall terminate unless so exercised prior to the earlier of the expiration ofone year from the date of such death or the tenth anniversary of the GrantDate.

 

(e)           TheEmployee agrees not to exercise this option, and that the Company will not beobligated to issue any shares of Common Stock pursuant to this optionagreement, if the exercise of the option or the issuance of such shares wouldconstitute a violation by the Employee or by the Company of any provision ofany law or regulation of any governmental authority or any stock exchange ortransaction quotation system.  Whether ornot the issuance of shares covered by the Plan have been registered pursuant tothe Securities Act of 1933, as amended, the Company may, at its election, requirethe Employee to give a representation in writing in form and substancesatisfactory to the Company to the effect that the Employee is acquiring suchshares for the Employee’s own account for investment and not with a view to, orfor sale in connection with, the distribution of such shares or any partthereof.

 

If any law orregulation requires the Company to take any action with respect to the sharesspecified in such notice, the time for delivery thereof, which would otherwisebe as promptly as possible, shall be postponed for the period of time necessaryto take such action.

 

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

 

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

 

----

 

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

 

(ii)           Thestockholders of the Company shall approve (A) any merger, consolidation orrecapitalization of the Company (or, if the capital stock of the Company isaffected, any subsidiary of the Company), or any sale, lease, or other transfer(in one transaction or a series of transactions contemplated or arranged by anyparty as a single plan) of all or substantially all of the assets of theCompany (each of the foregoing being an “Acquisition Transaction”) where (1) thestockholders of the Company immediately prior to such Acquisition Transactionwould not immediately after such Acquisition Transaction beneficially own,directly or indirectly, shares or other ownership interests representing in theaggregate fifty one percent (51%) or more of (a) the then outstanding commonstock or other equity interests of the corporation or other entity surviving orresulting from such merger, consolidation or recapitalization or acquiring suchassets of the Company, as the case may be (the “Surviving Entity”) (or of itsultimate parent corporation or other entity, if any), and (b) the CombinedVoting Power of the then outstanding Voting Securities of the Surviving Entity(or of its ultimate parent corporation or other entity, if any) or (2) theIncumbent Directors at the time of the initial approval of such AcquisitionTransaction would not immediately after such Acquisition Transaction constitutea majority of the Board of Directors, or similar managing group, of theSurviving Entity (or of its ultimate parent corporation or other entity, ifany), or (B) any plan or proposal for the liquidation or dissolution of theCompany; or

 

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

 

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

 

----

 

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

 

(2)           Solelyas a result of an acquisition of securities directly from the Company exceptfor any conversion of a security that was not acquired directly from theCompany,

 

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

 

(iv)          Forpurposes of this Section (f):

 

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

 

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

 

(3)  “Person” shall mean any individual, entity(including, without limitation, any corporation, partnership, trust, jointventure, association or governmental body) or group (as defined in Sections14(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 itssubsidiaries, any employee benefit plan of the Company or any of itsmajority-owned subsidiaries or any entity organized, appointed or establishedby the Company or such subsidiaries for or pursuant to the terms of any suchplan.

 

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

 

3.             Paymentof Exercise Price.

 

(a)           Paymentof 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 Representativeof 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 theCompany permits, by delivery of shares of Common Stock held by the Employee forat least six months and having a fair market value (as determined by the Boardof Directors of the Company in accordance with the terms of the Plan) equal toor less than the aggregate exercise price of the shares to be purchased, andany difference shall be paid by cash or check.

 

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

 

4.             Deliveryof Shares.

 

TheRepresentative shall, upon receipt of the exercise price, together with allapplicable taxes and fees, and verification of funds for the number of sharespurchased and paid for, make prompt delivery of such shares to the Employee,provided that if any law or regulation requires Representative or the Companyto 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 periodnecessary to complete such action.  Noshares shall be issued and delivered upon exercise of any option unless anduntil, in the opinion of counsel for the Company, any applicable registrationrequirements of the Securities Act, any applicable listing requirements of anynational securities exchange on which stock of the same class is then listed,and any other requirements of law or of any regulatory bodies havingjurisdiction over such issuance and delivery, shall have been fully compliedwith.

 

5.             Non-transferabilityof Option.

 

Except asexpressly 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 orotherwise) nor shall any such rights be subject to execution, attachment orsimilar process.  Upon any attempt totransfer, assign, pledge, hypothecate or otherwise dispose of this option or ofsuch rights contrary to the provisions hereof, or upon the levy of anyattachment or similar process upon this option or such rights, this option andsuch rights shall become null and void.

 

6.             NoSpecial Employment Rights.

 

Nothingcontained in the Plan or this Agreement shall be construed or deemed by anyperson under any circumstances to bind the Company or any of

 

----

 

its subsidiaries to continue theemployment of the Employee for the period within which this option may beexercised.

 

7.             NoRights as a Stockholder.

 

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

 

8.             WithholdingTaxes and Fees.

 

No shares ofCommon Stock purchased shall be delivered to or in respect of the Employeeunless the amount of all applicable federal, state and local withholding taxrequirements imposed upon the Company with respect to the issuance of suchshares of Common Stock, together with all applicable fees, has been remitted tothe Representative.

 

9.             CertainLimits.

 

(a)           Notwithstandinganything in this Agreement to the contrary, but subject to the application ofclause (b) below, to the extent the Employee would be subject to the excise taxunder Section 4999 of the Code on the amounts payable pursuant to thisAgreement and such other amounts or benefits the Employee receives from theCompany, any person whose actions result in a change of ownership covered bySection 280G(b)(2) of the Code or any person affiliated with the Company orsuch person, required to be included in the calculation of parachute paymentsfor purposes of Sections 280G and 4999 of the Code, the amounts vested pursuantto Section 2(a) of this Agreement shall be automatically reduced to an amountone dollar less than that which, when combined with such other amounts, wouldsubject the Employee to such excise tax.

 

(b)           Ifthe Employee’s employment with the Company is terminated by the Company withoutCause (hereinafter defined) or by the Employee upon a Constructive Terminationfor Good Reason (hereinafter defined), in each case within one year following aChange in Control (a “Protected Termination”), then the provisions of thisclause (b) will apply and clause (a) shall not be applicable.  If a Protected Termination occurs, thennotwithstanding anything in this Agreement to the contrary, if (i) any amountsdue to the Employee under this Agreement and any other plan or program of theCompany constitute a “parachute payment,” as such term is defined in CodeSection 280G(b)(2), and (ii) the amount of the parachute payment, reduced byall federal, state and local taxes applicable thereto, including the excise taximposed pursuant to Code Section 4999, is less than the amount the Employeewould receive if he were

 

----

 

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

 

(c)           Thedeterminations to be made with respect to this Section shall be made by anaccounting firm jointly selected by the Company’s Board of Directors and theEmployee and paid by the Company, and which may be the Company’s independentauditors.

 

(d)           Forpurposes of this Section 9:

 

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

 

(ii)           “ConstructiveTermination for Good Reason” means:

 

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

 

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

 

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

 

----

 

provide the Committee or theBoard with written notice that the transfer shall constitute a ConstructiveTermination for Good Reason, (B) the Company, within twenty (20) days ofreceipt of the notice, fails to provide the Employee with written noticerescinding the actual or proposed transfer and (C) if the Company does notrescind the transfer, the Employee must terminate his employment due toConstructive Termination for Good Reason within forty (40) days followingexpiration of the twenty (20)-day period so that in any event the Employeeshall have terminated his employment with the Company within ninety (90) daysafter the Employee first receives written notice from the Company of suchactual or proposed transfer.

 

10.           Miscellaneous.

 

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

 

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

 

(c)           This Agreement shall begoverned 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’SACCEPTANCE

 

Theundersigned hereby accepts the foregoing option and agrees to the terms andconditions thereof.

 
| EMPLOYEE  |   |
|-----------|--------|
|      |   |
| Signature |   |
|      |
| Address:  |   |   |
|           |        |  |  |

 

----

 

TANOX, INC.

 

NON-QUALIFIED STOCK OPTION AGREEMENT

 

1.             Grantof Option.

 

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

 

2.             Exerciseof Option and Provisions for Termination.

 

(a) Except asotherwise provided herein, this option is exercisable for the first time withrespect to the following shares subject to the option:

 

               shareson the first anniversary of the Grant Date; an additional

 

               shareson the second anniversary of the Grant Date; an additional

 

               shareson the third anniversary of the Grant Date; an additional

 

               shareson the fourth anniversary of the Grant Date; and an additional

 

               shareson the fifth anniversary of the Grant Date; so that, after the expiration ofthe fifth anniversary of the Grant Date, the option shall be exercisable infull.

 

To the extentnot exercised, installments shall be cumulative and shall be exercisable inwhole or in part; provided that no partial exercise of the option shall be forless than 10 whole shares.

 

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

 

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

 

----

 

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

 

(c) If theEmployee ceases to be employed by the Company or one of its subsidiaries forany reason, including retirement but other than death, this option shallimmediately terminate; provided,however, that any portion ofthis option which was otherwise exercisable on the date of termination of theEmployee’s employment may be exercised within the three-month period followingthe date on which the Employee ceased to be so employed unless termination wasdue to “cause” as determined by the Board of Directors or the Employee is foundby the Board of Directors to have disclosed trade secrets of the Company.  In no event may this option be exercisedafter the tenth anniversary of the Grant Date. Any such exercise may be made only to the extent of the number of sharessubject to this option which are purchasable upon the date of such terminationof employment.  If the Employee diesduring such three-month period, this option shall be exercisable by theEmployee’s personal representatives, heirs or legatees to the same extent andduring the same period that the Employee could have exercised this option onthe date of his or her death.

 

(d) If theEmployee dies while an employee of the Company or any subsidiary of theCompany, this option shall be exercisable, by the Employee’s personalrepresentatives, heirs or legatees, to the same extent that the Employee couldhave exercised this option on the date of death.  This option or any unexercised portion hereofshall terminate unless so exercised prior to the earlier of the expiration ofone year from the date of such death or the tenth anniversary of the GrantDate.

 

(e) The Employeeagrees not to exercise this option, and that the Company will not be obligatedto issue any shares of Common Stock pursuant to this option agreement, if theexercise of the option or the issuance of such shares would constitute aviolation by the Employee or by the Company of any provision of any law orregulation of any governmental authority or any stock exchange or transactionquotation system.  Whether or not theissuance of shares covered by the Plan have been registered pursuant to theSecurities Act of 1933, as amended, the Company may, at its election, requirethe Employee to give a representation in writing in form and substancesatisfactory to the Company to the effect that the Employee is acquiring suchshares for the Employee’s own account for investment and not with a view to, orfor sale in connection with, the distribution of such shares or any partthereof.

 

If any law orregulation requires the Company to take any action with respect to the sharesspecified in such notice, the time for delivery thereof, which would otherwisebe as promptly as possible, shall be postponed for the period of time necessaryto take such action.

 

----

 

(f)  A “Change in Control” shallbe deemed to have occurred on the date that one or more of the followingoccurs:

 

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

 

(ii)   Thestockholders of the Company shall approve (A) any merger, consolidation orrecapitalization of the Company (or, if the capital stock of the Company isaffected, any subsidiary of the Company), or any sale, lease, or other transfer(in one transaction or a series of transactions contemplated or arranged by anyparty as a single plan) of all or substantially all of the assets of theCompany (each of the foregoing being an Acquisition Transaction”) where (1) thestockholders of the Company immediately prior to such Acquisition Transactionwould not immediately after such Acquisition Transaction beneficially own, directlyor indirectly, shares or other ownership interests representing in theaggregate fifty one percent (51%) or more of (a) the then outstanding commonstock or other equity interests of the corporation or other entity surviving orresulting from such merger, consolidation or recapitalization or acquiring suchassets of the Company, as the case may be (the “Surviving Entity”) (or of itsultimate parent corporation or other entity, if any), and (b) the CombinedVoting Power of the then outstanding Voting Securities of the Surviving Entity(or of its ultimate parent corporation or other entity, if any) or (2) theIncumbent Directors at the time of the initial approval of such AcquisitionTransaction would not immediately after such Acquisition Transaction constitutea majority of the Board of Directors, or similar managing group, of theSurviving Entity (or of its ultimate parent corporation or other entity, ifany), or (B) any plan or proposal for the liquidation or dissolution of theCompany; or

 

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

 

----

 

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

 

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

 

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

 

(iv) Forpurposes of this Section (f):

 

(1)        “Affiliate” shall mean, asto a specified Person, another Person that directly, or indirectly through oneor more intermediaries, controls or is controlled by, or is under commoncontrol with, the specified Person, within the meaning of such terms as used inRule 405 under the Securities Act of 1933, as amended (“Securities Act”), orany successor rule.

 

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

 

(3)        ‘Person” shall mean anyindividual, 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 rulesand regulations thereunder); provided, however, that Person shall not includethe Company, any of its subsidiaries, any employee benefit plan of the Companyor any of its majority-owned subsidiaries or any entity organized, appointed orestablished by the Company or such subsidiaries for or pursuant to the terms ofany such plan.

 

----

 

(4)        “Voting Securities” shallmean all securities of a corporation or other entity having the right underordinary circumstances to vote in an election of the Board of Directors, orsimilar managing group, of such corporation or other entity.

 

3.             Paymentof Exercise Price.

 

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

 

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

 

4.             Deliveryof Shares.

 

TheRepresentative shall, upon receipt of the exercise price, together with allapplicable taxes and fees, and verification of funds for the number of sharespurchased and paid for, make prompt delivery of such shares to the Employee,provided that if any law or regulation requires the Representative or theCompany to take any action with respect to such shares before the issuancethereof, then the date of delivery of such shares shall be extended for theperiod necessary to complete such action. No shares shall be issued anddelivered upon exercise of any option unless and until, in the opinion ofcounsel for the Company, any applicable registration requirements of theSecurities Act, any applicable listing requirements of any national securitiesexchange on which stock of the same class is then listed, and any otherrequirements of law or of any regulatory bodies having jurisdiction over suchissuance and delivery, shall have been fully complied with.

 

5.             Non-transferabilityof Option.

 

Except asexpressly 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 orotherwise) nor shall any such rights be subject to execution, attachment

 

----

 

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

 

6.             NoSpecial Employment Rights.

 

Nothingcontained in the Plan or this Agreement shall be construed or deemed by anyperson under any circumstances to bind the Company or any of its subsidiariesto continue the employment of the Employee for the period within which thisoption may be exercised.

 

7.             NoRights as a Stockholder.

 

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

 

8.             WithholdingTaxes and Fees.

 

No shares ofCommon Stock purchased shall be delivered to or in respect of the Employeeunless the amount of all applicable federal, state and local withholding taxrequirements imposed upon the Company with respect to the issuance of suchshares of Common Stock, together with all applicable fees, has been remitted tothe Representative.

 

9.             CertainLimits.

 

(a)Notwithstanding anything in this Agreement to the contrary, but subject to theapplication of clause (b) below, to the extent the Employee would be subject tothe excise tax under Section 4999 of the Code on the amounts payable pursuantto this Agreement and such other amounts or benefits the Employee receives fromthe Company, any person whose actions result in a change of ownership coveredby Section 280G(b)(2) of the Code or any person affiliated with the Company orsuch person, required to be included in the calculation of parachute paymentsfor purposes of Sections 280G and 4999 of the Code, the amounts vested pursuantto Section 2(a) of this Agreement shall be automatically reduced to an amountone dollar less than that which, when combined with such other amounts, wouldsubject the Employee to such excise tax.

 

(b) If theEmployee’s employment with the Company is terminated by the Company withoutCause (hereinafter defined) or by the Employee upon a Constructive Terminationfor Good Reason (hereinafter defined), in each case

 

----

 

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

 

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

 

(d)           Forpurposes of this Section 9:

 

(i)    Terminationfor “Cause’ shall have occurred if, on or after the date of the Change inControl, the Company terminates Employee’s employment because (i) as a resultof 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 secretsor confidential Company matters to unauthorized persons and such disclosuresare reasonably likely to be materially injurious to the Company, monetarily orotherwise, (iii) the Employee, after reasonable notice and opportunity tocorrect his conduct, willfully refuses or continually neglects to substantiallyperform his duties and assigned work, or (iv) the Employee materially breachesany provision of any employment agreement with the Company.

 

(ii) “ConstructiveTermination for Good Reason” means:

 

(1)        the Company has takenaction that results in a material diminution in the Employees position (otherthan titles and reporting requirements), authority, duties or responsibilitieswith the Company in effect immediately before the date of closing of the Changein Control;

 

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

 

----

 

(3)        the Employee is actuallytransferred, or offered a proposed transfer, as evidenced in a writtencommunication from the Company to the Employee, to another location other thanthe location at which he was primarily employed immediately preceding theChange in Control, unless that new location is a major operating unit orfacility of the Company that is located within 50 miles of the Employee’sprimary location as of the date immediately preceding a transfer; provided,however, (A) the Employee, within thirty (30) days from the date that he isgiven written notice by the Company of such actual or proposed transfer, shallprovide the Committee or the Board with written notice that the transfer shallconstitute a Constructive Termination for Good Reason, (B) the Company, withintwenty (20) days of receipt of the notice, fails to provide the Employee withwritten notice rescinding the actual or proposed transfer and (C) if theCompany does not rescind the transfer, the Employee must terminate hisemployment due to Constructive Termination for Good Reason within forty (40)days following expiration of the twenty (20)-day period so that in any eventthe Employee shall have terminated his employment with the Company withinninety (90) days after the Employee first receives written notice from theCompany of such actual or proposed transfer.

 

10.           Miscellaneous.

 

(a)           Exceptas provided herein, this Agreement may not be amended or otherwise modifiedunless evidenced in writing and signed by the Company and the Employee

 

(b)           Allnotices under this Agreement shall be mailed or delivered by hand to the partiesat their respective addresses set forth beneath their names below or at suchother address as may be designated in writing by either of the parties to oneanother.

 

(c)           ThisAgreement shall be governed by and construed in accordance with the laws of theState of Texas.

 

 
| Grant Date: | TANOX, INC.         |
|-------------|---------------------|
|        |                | By: |
|        | Title:VP of Finance |
|        | Address:            | 10301 Stella Link |
|        |                | Houston,  Texas 77025 |
|             |                     |  |  |

 

EMPLOYEE’SACCEPTANCE

 

Theundersigned hereby accepts the foregoing option and agrees to the terms andconditions thereof.

 

----

 
| EMPLOYEE  |   |
|-----------|--------|
|      |   |
| Signature |   |
|      |   |   |
| Address:  |   |   |   |
|           |        |  |  |  |

 

----

 

TANOX, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

 

1.             Grantof Option.

 

TANOX, INC., aDelaware 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                sharesof Common Stock, $01 par value per share, of the Company (‘Common Stock”) at aprice of                pershare, purchasable as set forth in and subject to the terms and conditions ofthis option and the Plan. The date of grant of this option is hereinafterreferred to as the “Grant Date.”

 

2.             Exerciseof Option and Provisions for Termination.

 

(a)           Exceptas otherwise provided herein, this option is exercisable for the first timewith respect to the following shares subject to the option:

 

shares on thefirst anniversary of the Grant Date; an additional

 

shares on thesecond anniversary of the Grant Date; an additional

 

shares on thethird anniversary of the Grant Date; an additional

 

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

 

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

 

To the extentnot exercised, installments shall be cumulative and shall be exercisable inwhole or in part; provided that no partial exercise of the option shall be forless than 10 whole shares.

 

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

 

(b) Subjectto the conditions hereof, this option shall be exercisable by the Employeecontacting the Company’s designated stock option administration representative(the “Representative”), specifying the number of shares to be purchased and theexercise price to be paid therefor and accompanied by payment in accordancewith Section 3 hereof.

 

----

 

(c) Ifthe Employee ceases to be employed by the Company or one of its subsidiariesfor any reason, including retirement but other than death, this option shallimmediately terminate; provided, however, that any portion of this option whichwas otherwise exercisable on the date of termination of the Employeesemployment may be exercised within the three-month period following the date onwhich 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 Boardof Directors to have disclosed trade secrets of the Company. In no event maythis option be exercised after the tenth anniversary of the Grant Date. Anysuch exercise may be made only to the extent of the number of shares subject tothis option which are purchasable upon the date of such termination ofemployment. If the Employee dies during such three-month period, this optionshall be exercisable by the Employee’s personal representatives, heirs orlegatees to the same extent and during the same period that the Employee couldhave exercised this option on the date of his or her death.

 

(d) Ifthe Employee dies while an employee of the Company or any subsidiary of theCompany, this option shall be exercisable, by the Employee’s personalrepresentatives, heirs or legatees, to the same extent that the Employee couldhave exercised this option on the date of death. This option or any unexercisedportion hereof shall terminate unless so exercised prior to the earlier of theexpiration of one year from the date of such death or the tenth anniversary ofthe Grant Date.

 

(e) TheEmployee agrees not to exercise this option, and that the Company will not beobligated to issue any shares of Common Stock pursuant to this optionagreement, if the exercise of the option or the issuance of such shares wouldconstitute a violation by the Employee or by the Company of any provision ofany law or regulation of any governmental authority or any stock exchange ortransaction quotation system. Whether or not the issuance of shares covered bythe Plan have been registered pursuant to the Securities Act of 1933, asamended, the Company may, at its election, require the Employee to give a representationin writing in form and substance satisfactory to the Company to the effect thatthe Employee is acquiring such shares for the Employee’s own account forinvestment and not with a view to, or for sale in connection with, thedistribution of such shares or any part thereof.

 

If any law orregulation requires the Company to take any action with respect to the sharesspecified in such notice, the time for delivery thereof, which would otherwisebe as promptly as possible, shall be postponed for the period of time necessaryto take such action.

 

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

 

----

 

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

 

(ii)           Thestockholders of the Company shall approve (A) any merger, consolidation orrecapitalization of the Company (or, if the capital stock of the Company isaffected, any subsidiary of the Company), or any sale, lease, or other transfer(in one transaction or a series of transactions contemplated or arranged by anyparty as a single plan) of all or substantially all of the assets of theCompany (each of the foregoing being an “Acquisition Transaction”) where (I)the stockholders of the Company immediately prior to such AcquisitionTransaction would not immediately after such Acquisition Transactionbeneficially own, directly or indirectly, shares or other ownership interestsrepresenting in the aggregate fifty one percent (51%) or more of (a) the thenoutstanding common stock or other equity interests of the corporation or otherentity surviving or resulting from such merger, consolidation orrecapitalization 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 VotingSecurities of the Surviving Entity (or of its ultimate parent corporation orother entity, if any) or (2) the Incumbent Directors at the time of the initialapproval of such Acquisition Transaction would not immediately after suchAcquisition Transaction constitute a majority of the Board of Directors, orsimilar managing group, of the Surviving Entity (or of its ultimate parentcorporation or other entity, if any), or (B) any plan or proposal for theliquidation or dissolution of the Company; or

 

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

 

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

 

----

 

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

 

(2)           Solelyas a result of an acquisition of securities directly from the Company exceptfor any conversion of a security that was not acquired directly from theCompany,

 

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

 

(iv) Forpurposes of this Section (f):

 

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

 

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

 

(3)           “Person”shall mean any individual, entity (including, without limitation, anycorporation, partnership, trust, joint venture, association or governmentalbody) or group (as defined in Sections 14(d)(3) or 15(d)(2) of the Exchange Actand the rules and regulations thereunder); provided, however, that Person shallnot include the Company, any of its subsidiaries, any employee benefit plan ofthe Company or any of its majority-owned subsidiaries or any entity organized,appointed or established by the Company or such subsidiaries for or pursuant tothe terms of any such plan.

 

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

 

3.             Paymentof Exercise Price.

 

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

 

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

 

4.             Deliveryof Shares.

 

TheRepresentative shall, upon receipt of the exercise price, together with allapplicable taxes and fees, and verification of funds for the number of sharespurchased and paid for, make prompt delivery of such shares to the Employee,provided that if any law or regulation requires the Representative or theCompany to take any action with respect to such shares before the issuancethereof, then the date of delivery of such shares shall be extended for theperiod necessary to complete such action. No shares shall be issued anddelivered upon exercise of any option unless and until, in the opinion ofcounsel for the Company, any applicable registration requirements of theSecurities Act, any applicable listing requirements of any national securitiesexchange on which stock of the same class is then listed, and any otherrequirements of law or of any regulatory bodies having jurisdiction over suchissuance and delivery, shall have been fully complied with.

 

5.             Non-transferabilityof Option.

 

Except asexpressly 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 orotherwise) nor shall any such rights be subject to execution, attachment orsimilar process. Upon any attempt to transfer, assign, pledge, hypothecate orotherwise dispose of this option or of such rights contrary to the provisionshereof, or upon the levy of any attachment or similar process upon this optionor such rights, this option and such rights shall become null and void.

 

6.             NoSpecial Employment Rights.

 

Nothingcontained in the Plan or this Agreement shall be construed or deemed by anyperson under any circumstances to bind the Company or any of its

 

----

 

subsidiariesto continue the employment of the Employee for the period within which thisoption may be exercised.

 

7.             NoRights as a Stockholder.

 

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

 

8.             WithholdingTaxes and Fees.

 

No shares ofCommon Stock purchased shall be delivered to or in respect of the Employeeunless the amount of all applicable federal, state and local withholding taxrequirements imposed upon the Company with respect to the issuance of suchshares of Common Stock, together with all applicable fees, has been remitted tothe Representative.

 

9.             CertainLimits.

 

(a) Notwithstandinganything in this Agreement to the contrary, but subject to the application ofclause (b) below, to the extent the Employee would be subject to the excise taxunder Section 4999 of the Code on the amounts payable pursuant to thisAgreement and such other amounts or benefits the Employee receives from theCompany, any person whose actions result in a change of ownership covered bySection 280G(b)(2) of the Code or any person affiliated with the Company orsuch person, required to be included in the calculation of parachute paymentsfor purposes of Sections 2800 and 4999 of the Code, the amounts vested pursuantto Section 2(a) of this Agreement shall be automatically reduced to an amountone dollar less than that which, when combined with such other amounts, wouldsubject the Employee to such excise tax.

 

(b) Ifthe Employee’s employment with the Company is terminated by the Company withoutCause (hereinafter defined) or by the Employee upon a Constructive Terminationfor Good Reason (hereinafter defined), in each case within one year following aChange in Control (a “Protected Termination”), then the provisions of thisclause (b) will apply and clause (a) shall not be applicable. If a ProtectedTermination occurs, then notwithstanding anything in this Agreement to thecontrary, if (i) any amounts due to the Employee under this Agreement and anyother plan or program of the Company constitute a ‘parachute payment,’ as suchterm is defined in Code Section 280G(b)(2), and (ii) the amount of theparachute payment, reduced by all federal, state and local taxes applicablethereto, including the excise tax imposed pursuant to Code Section 4999, isless 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 theaggregate of the amounts constituting the parachute payment shall be reduced toan amount that will equal three times his base amount less one dollar.

 

(c) Forpurposes of this Section 9:

 

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

 

(ii)           “ConstructiveTermination for Good Reason” means:

 

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

 

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

 

(3)           theEmployee is actually transferred, or offered a proposed transfer, as evidencedin a written communication from the Company to the Employee, to anotherlocation other than the location at which he was primarily employed immediatelypreceding the Change in Control, unless that new location is a major operatingunit or facility of the Company that is located within 50 miles of the Employee’sprimary location as of the date immediately preceding a transfer; provided,however, (A) the Employee, within thirty (30) days from the date that he isgiven written notice by the Company of such actual or proposed transfer, shallprovide the Committee or the Board with written notice that the transfer shallconstitute a Constructive Termination for Good Reason, (B) the Company, withintwenty (20) days of receipt of the notice, fails to provide the Employee withwritten notice rescinding the actual or proposed transfer and (C) if theCompany does not rescind the transfer, the Employee must terminate hisemployment due to Constructive Termination for Good Reason within forty (40)days following expiration of the twenty (20)-day period so that in any eventthe Employee shall

 

----

 

haveterminated his employment with the Company within ninety (90) days after theEmployee first receives written notice from the Company of such actual orproposed transfer.

 

10.           Miscellaneous.

 

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

 

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

 

(d)           ThisAgreement shall be governed by and construed in accordance with the laws of theState of Texas.

 
| Grant Date: | TANOX, INC. |
|-------------|-------------|
|        |        |   |
|        |        |
| .1          |        |
|        | By:         |   |   |
|        | Title:      |   |   |
|        | Address:    |   |   |
|             |             |  |  |  |  |  |

 

EMPLOYEE’SACCEPTANCE

 

Theundersigned hereby accepts the foregoing option and agrees to the terms andconditions thereof.

 
| EMPLOYEE  |   |
|-----------|--------|
|      |   |   |
| Signature |   |
|      |   |
| Address:  |   |   |   |
|           |        |  |  |  |

 

----

 

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                 pershare, purchasable as set forth in and subject to the terms and conditions ofthis option and the Plan. The date of grant of this option is hereinafterreferred to as the “date of grant.”

 

2.             Exercise of Optionand Provisions for Termination.

 

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

 

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

 

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

 

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

 

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

 

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

 

This option shall become fully exercisable, irrespective of thelimitations set forth above, provided that the Employee has been in continuousemployment since the date of grant, upon a Change in Control. This option maynot be exercised at any time after the tenth anniversary of the date of grant.

 

(b)           Subject to theconditions hereof this option shall be exercisable by the Employee givingwritten notice of exercise to the Company, specifying the number of shares tobe purchased and the purchase price to be paid therefor and accompanied bypayment in accordance with Section 3 hereof. Such exercise shall be effectiveupon receipt by the Treasurer of the Company of the written notice togetherwith the required payment.

 

----

 

(c)           If the Employee ceasesto be employed by the Company or one of its subsidiaries for any reason,including retirement but other than death, this option shall immediatelyterminate; provided,however, that any portion of this optionwhich was otherwise exercisable on the date of termination of the Employee’semployment may be exercised within the three-month period following the date onwhich 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 Boardof Directors to have disclosed trade secrets of the Company. In no event maythis option be exercised after the tenth anniversary date. Any such exercisemay be made only to the extent of the number of shares subject to this optionwhich are purchasable upon the date of such termination of employment. If theEmployee dies during such three-month period, this option shall be exercisableby the Employee’s personal representatives, heirs or legatees to the sameextent and during the same period that the Employee could have exercised thisoption on the date of his or her death.

 

(d)           If the Employee dieswhile an employee of the Company or any subsidiary of the Company, this optionshall be exercisable, by the Employees personal representatives, heirs orlegatees, to the same extent that the Employee could have exercised this optionon the date of his or her death. This option or any unexercised portion hereofshall terminate unless so exercised prior to the earlier of the expiration ofone year from the date of such death or the tenth anniversary date.

 

(e)           The Employee agreesthat he will not exercise this option, and that the Company will not beobligated to issue any shares of Common Stock pursuant to this optionagreement, if the exercise of the option or the issuance of such shares wouldconstitute a violation by the Employee or by the Company of any provision ofany law or regulation of any governmental authority or any stock exchange ortransaction quotation system. Whether or not the issuance of shares covered bythe Plan have been registered pursuant to the Securities Act of 1933, asamended, the Company may, at its election, require the Employee to give a representationin writing in form and substance satisfactory to the Company to the effect thathe is acquiring such shares for his own account for investment and not with aview tot or for sale in connection with, the distribution of such shares or anypart thereof.

 

If any law or regulation requires the Company to take any action withrespect to the shares specified in such notice, the time for delivery thereof,which would otherwise be as promptly as possible, shall be postponed for theperiod 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 thefollowing occurs:

 

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

 

----

 

Directors of the Company (“Incumbent Directors”) cease for any reasonto constitute at least a majority of the Board; provided, however, that anyindividual becoming a director subsequent to the date hereof whose election, ornomination for election by the Company’s stockholders, was approved by a voteof at least a majority of the then Incumbent Directors shall be considered asthough such individual was an Incumbent Director, but excluding, for thispurpose any such individual whose initial assumption of office occurs as aresult of either an actual or threatened election contest, as such terms areused in Rule 14a-1 1 under the Securities Exchange Act of 1934, as amended (“ExchangeAct”) or other actual or threatened solicitation of proxies or consents by oron behalf of any Person (as defined below) other than the Board;

 

(ii)           The stockholders of theCompany shall approve (A) any merger, consolidation or recapitalization of theCompany (or, if the capital stock of the Company is affected, any subsidiary ofthe Company), or any sale, lease, or other transfer (in one transaction or aseries 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 foregoingbeing an “Acquisition Transaction”) where (1) the stockholders of the Companyimmediately prior to such Acquisition Transaction would not immediately aftersuch Acquisition Transaction beneficially own, directly or indirectly, sharesor other ownership interests representing in the aggregate fifty one percent(51%) or more of (a) the then outstanding common stock or other equityinterests of the corporation or other entity surviving or resulting from suchmerger, consolidation or recapitalization or acquiring such assets of theCompany, as the case may be (the “Surviving Entity”) (or of its ultimate parentcorporation or other entity, if any), and (b) the Combined Voting Power of thethen outstanding Voting Securities of the Surviving Entity (or of its ultimateparent corporation or other entity, if any) or (2) the Incumbent Directors atthe time of the initial approval of such Acquisition Transaction would notimmediately after such Acquisition Transaction constitute a majority of theBoard of Directors, or similar managing group of the Surviving Entity (or of itsultimate parent corporation or other entity, if any), or (B) any plan orproposal for the liquidation or dissolution of the Company; or

 

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

 

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

 

----

 

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

 

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

 

(3)           provided, further, thatif any Person referred to in paragraph (1) or (2) of this Subsection (iii)shall thereafter become the beneficial owner of any additional Common Stock orother Voting Securities of the Company (other than pursuant to a stock split,stock dividend or similar transaction), then a Change in Control shall be deemedto 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 ofsuch terms as used in Rule 405 under the Securities Act of 1933, as amended (“SecuritiesAct”), or any successor rule.

 

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

 

(3)           “Person” shall mean anyindividual, 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 rulesand regulations thereunder); provided, however, that Person shall not includethe Company, any of its subsidiaries, any employee benefit plan of the Companyor any of its majority-owned subsidiaries or any entity organized, appointed orestablished by the Company or such subsidiaries for or pursuant to the terms ofany such plan.

 

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

 

3.             Payment ofPurchase Price.

 

(a)           Payment of the purchaseprice for shares purchased upon exercise of this option shall be made bydelivery 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, ifthe Employee elects and the Company permits, by delivery of shares of CommonStock held by the Employee for at least six months and having a fair marketvalue (as determined by the Board of Directors of the Company in accordancewith the terms of the Plan) equal to or less than the aggregate purchase priceof the shares to be purchased, and any difference shall be paid by cash orcheck.

 

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

 

4.             Delivery of Shares.

 

The Company shall, upon receipt of the purchase price, and verificationof funds for the number of shares purchased and paid for, make prompt deliveryof such shares to the Employee provided that if any law or regulation requiresthe Company to take any action with respect to such shares before the issuancethereof, then the date of delivery of such shares shall be extended for theperiod necessary to complete such action. No shares shall be issued anddelivered upon exercise of any option unless and until, in the opinion ofcounsel for the Company, any applicable registration requirements of theSecurities Act, any applicable listing requirements of any national securitiesexchange on which stock of the same class is then listed, and any otherrequirements of law or of any regulatory bodies having jurisdiction over such issuanceand delivery, shall have been fully complied with.

 

5.             Non-transferabilityof 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 shallbe transferred, assigned, pledged or hypothecated in any way (whether byoperation of law or otherwise) nor shall any such rights be subject toexecution, attachment or similar process. Upon any attempt to transfer, assign,pledge, hypothecate or otherwise dispose of this option or of such rightscontrary to the provisions hereof, or upon the levy of any attachment orsimilar process upon this option or such rights, this option and such rightsshall become null and void.

 

6.             No SpecialEmployment Rights.

 

Nothing contained in the Plan or this Agreement shall be construed ordeemed by any person under any circumstances to bind the Company or any of itssubsidiaries to continue the employment of the Employee for the period withinwhich this option may be exercised.

 

----

 

7.             No Rights as aStockholder.

 

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

 

8.             Withholding Taxes.

 

No certificates representing shares of Common Stock purchased hereundershall be delivered to or in respect of the Employee unless the amount of allfederal, state and local withholding tax requirements imposed upon the Companywith respect to the issuance of such shares of Common Stock has been remittedto the Company or unless provisions to pay such withholding requirements havebeen made to the satisfaction of the Committee.

 

9.             Certain Limits.

 

(a)           Notwithstandinganything in this Agreement to the contrary, but subject to the application ofclause (b) below, to the extent the Employee would be subject to the excise taxunder Section 4999 of the Code on the amounts payable pursuant to thisAgreement and such other amounts or benefits the Employee receives from theCompany, any person whose actions result in a change of ownership covered bySection 280G(b)(2) of the Code or any person affiliated with the Company orsuch person, required to be included in the calculation of parachute paymentsfor purposes of Sections 280G and 4999 of the Code, the amounts vested pursuantto Section 2(a) of this Agreement shall be automatically reduced to an amountone dollar less than that which, when combined with such other amounts, wouldsubject the Employee to such excise tax.

 

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

 

----

 

one dollar, reduced by all federal, stateand local taxes applicable thereto, then the aggregate of the amountsconstituting the parachute payment shall be reduced to an amount that willequal three times his base amount less one dollar.

 

(c)           For purposes of thisSection 9:

 

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

 

(ii)           ‘ConstructiveTermination for Good Reason” means:

 

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

 

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

 

(3)           the Employee isactually transferred, or offered a proposed transfer, as evidenced in a writtencommunication from the Company to the Employee, to another location other thanthe location at which he was primarily employed immediately preceding theChange in Control, unless that new location is a major operating unit orfacility of the Company that is located within 50 miles of the Employee’sprimary location as of the date immediately preceding a transfer; provided,however, (A) the Employee, within thirty (30) days from the date that he isgiven written notice by the Company of such actual or proposed transfer, shallprovide the Committee or the Board with written notice that the transfer shallconstitute a Constructive Termination for Good Reason, (B) the Company, withintwenty (20) days of receipt of the notice, fails to provide the Employee withwritten notice rescinding the actual or proposed transfer and (C) if theCompany does not rescind the transfer, the Employee must terminate hisemployment due to Constructive Termination ,for Good Reason within forty (40)days following expiration of the twenty (20)-day period so that in any eventthe Employee shall 

 

----

 

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

 

10.           Miscellaneous.

 

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

 

(b)           All notices under thisAgreement shall be mailed or delivered by hand to the parties at theirrespective addresses set forth beneath their names below or at such otheraddress as may be designated in writing by either of the parties to oneanother.

 

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

 
| Date of Grant: | TANOX, INC. |
|----------------|-------------|
|           |        | By: |   |   |
|           | Title:      |   |   |
|           | Address:    |   |   |
|                |             |  |  |  |  |  |

 

EMPLOYEE’SACCEPTANCE

 

Theundersigned hereby accepts the foregoing option and agrees to the terms andconditions thereof.

 
| EMPLOYEE  |   |
|-----------|--------|
|      |   |   |
| Signature |   |
|      |   |
| Address:  |   |   |   |
|           |        |  |  |  |

 

----

 

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                  sharesof Common Stock, $01 par value per share, of the Company (“Common Stock”) at apriceof                  pershare, purchasable as set forth in and subject to the terms and conditions ofthis option and the Plan. This option is intended to qualify as an incentivestock option (Incentive Stock Option”) within the meaning of Section 422 of theInternal Revenue Code of 1986, as amended (the Code”). The date of grant ofthis option is hereinafter referred to as the ‘date of grant.”

 

2.             Exercise of Optionand Provisions for Termination.

 

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

 

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

 

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

 

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

 

shares on the fourth anniversary of thedate of grant;**and an additional

 

shares on the fifth anniversary of the date of grant; so that, after theexpiration of the fifth anniversary of the date of grant, the option shall beexercisable in full.

 

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

 

This option shall become fully exercisable, irrespective of thelimitations set forth above, provided that the Employee has been in continuousemployment since the date of grant, upon a Change in Control. This option maynot be exercised at any time after the tenth anniversary of the date of grant.

 

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

 

----

 

and accompanied by payment in accordancewith Section 3 hereof. Such exercise shall be effective upon receipt by theTreasurer of the Company of the written notice together with the requiredpayment.

 

(c) If the Employee ceases to be employed by the Company or one of itssubsidiaries for any reason, including retirement but other than death, thisoption shall immediately terminate; provided,however, that anyportion of this option which was otherwise exercisable on the date oftermination of the Employee’s employment may be exercised within thethree-month period following the date on which the Employee ceased to be soemployed unless termination was due to cause” as determined by the Board ofDirectors or the Employee is found by the Board of Directors to have disclosedtrade secrets of the Company. In no event may this option be exercised afterthe tenth anniversary date. Any such exercise may be made only to the extent ofthe number of shares subject to this option which are purchasable upon the dateof such termination of employment. If the Employee dies during such three-monthperiod, this option shall be exercisable by the Employees personalrepresentatives, heirs or legatees to the same extent and during the sameperiod that the Employee could have exercised this option on the date of his orher death.

 

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

 

(e) The Employee agrees that he will not exercise this option, and thatthe Company will not be obligated to issue any shares of Common Stock pursuantto this option agreement, if the exercise of the option or the issuance of suchshares would constitute a violation by the Employee or by the Company of anyprovision of any law or regulation of any governmental authority or any stockexchange or transaction quotation system. Whether or not the issuance of sharescovered 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 arepresentation in writing in form and substance satisfactory to the Company tothe effect that he is acquiring such shares for his own account for investmentand not with a view to, or for sale in connection with, the distribution ofsuch shares or any part thereof.

 

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

 

----

 

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

 

(i)            Individuals who, as ofthe date hereof, constitute the entire Board of Directors of the Company(Incumbent Directors”) cease for any reason to constitute at least a majorityof the Board; provided, however, that any individual becoming a director subsequentto the date hereof whose election, or nomination for election by the Company’sstockholders, was approved by a vote of at least a majority of the thenIncumbent Directors shall be considered as though such individual was anIncumbent Director, but excluding, for this purpose any such individual whoseinitial assumption of office occurs as a result of either an actual orthreatened election contest, as such terms are used in Rule 14a-1l under theSecurities Exchange Act of 1934, as amended (Exchange Act”) or other actual orthreatened 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 ofthe Company is affected, any subsidiary of the Company), or any sale, lease, orother transfer (in one transaction or a series of transactions contemplated orarranged by any party as a single plan) of all or substantially all of theassets of the Company (each of the foregoing being an Acquisition Transaction”)where (1) the stockholders of the Company immediately prior to such AcquisitionTransaction would not immediately after such Acquisition Transactionbeneficially own, directly or indirectly, shares or other ownership interestsrepresenting in the aggregate fifty one percent (51%) or more of (a) the thenoutstanding common stock or other equity interests of the corporation or otherentity surviving or resulting from such merger, consolidation orrecapitalization or acquiring such assets of the Company, as the case may be(the ‘Surviving Entity”) (or of its ultimate parent corporation or otherentity, if any), and (b) the Combined Voting Power of the then outstandingVoting Securities of the Surviving Entity (or of its ultimate parent corporationor other entity, if any) or (2) the Incumbent Directors at the time of theinitial approval of such Acquisition Transaction would not immediately aftersuch Acquisition Transaction constitute a majority of the Board of Directors,or similar managing group of the Surviving Entity (or of its ultimate parentcorporation or other entity, if any), or (B) any plan or proposal for theliquidation or dissolution of the Company; or

 

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

 

----

 

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

 

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

 

(3)           provided, further, thatif any Person referred to in paragraph (I) or (2) of this Subsection (iii)shall thereafter become the beneficial owner of any additional Common Stock orother Voting Securities of the Company (other than pursuant to a stock split,stock dividend or similar transaction), then a Change in Control shall bedeemed 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 ofsuch terms as used in Rule 405 under the Securities Act of 1933, as amended (‘SecuritiesAct’), or any successor rule.

 

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

 

(3)           Person” shall mean anyindividual, 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 rulesand regulations thereunder); provided, however, that Person shall not includethe Company, any of its subsidiaries, any employee benefit plan of the Companyor any of its majority-owned subsidiaries or any entity organized, appointed orestablished by the Company or such subsidiaries for or pursuant to the terms ofany such plan.

 

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

 

----

 

3.             Payment ofPurchase Price.

 

(a) Payment of the purchase price for shares purchased upon exercise ofthis option shall be made by delivery to the Company of cash or otherverifiable funds (wire transfer, cashier’s check, money order) payable to theorder 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 ofCommon Stock held by the Employee for at least six months and having a fairmarket value (as determined by the Board of Directors of the Company inaccordance with the terms of the Plan) equal to or less than the aggregatepurchase price of the shares to be purchased, and any difference shall be paidby cash or check.

 

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

 

4.             Delivery of Shares.

 

The Company shall, upon receipt of the purchase price, and verificationof funds for the number of shares purchased and paid for, make prompt deliveryof such shares to the Employee, provided that if any law or regulation requiresthe Company to take any action with respect to such shares before the issuancethereof, then the date of delivery of such shares shall be extended for theperiod necessary to complete such action. No shares shall be issued anddelivered upon exercise of any option unless and until, in the opinion ofcounsel for the Company, any applicable registration requirements of theSecurities Act, any applicable listing requirements of any national securitiesexchange on which stock of the same class is then listed, and any otherrequirements of law or of any regulatory bodies having jurisdiction over suchissuance and delivery, shall have been fully complied with.

 

5.             Non-transferabilityof 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 shallbe transferred, assigned, pledged or hypothecated in any way (whether byoperation of law or otherwise) nor shall any such rights be subject toexecution, attachment or similar process. Upon any attempt to transfer, assign,pledge, hypothecate or otherwise dispose of this option or of such rightscontrary to the provisions hereof, or upon the levy of any attachment orsimilar process upon this option or such rights, this option and such rightsshall become null and void.

 

----

 

6.             No SpecialEmployment Rights.

 

Nothing contained in the Plan or this Agreement shall be construed ordeemed by any person under any circumstances to bind the Company or any of itssubsidiaries to continue the employment of the Employee for the period withinwhich this option may be exercised.

 

7.             No Rights as aStockholder.

 

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

 

8.             Withholding Taxes.

 

No certificates representing shares of Common Stock purchased hereundershall be delivered to or in respect of the Employee unless the amount of allfederal, state and local withholding tax requirements imposed upon the Companywith respect to the issuance of such shares of Common Stock has been remittedto the Company or unless provisions to pay such withholding requirements havebeen made to the satisfaction of the Committee.

 

9.             Qualificationunder Section 422.

 

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

 

10.           Certain Limits.

 

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

 

----

 

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

 

(b) If the Employee’s employment with the Company is terminated by theCompany without Cause (hereinafter defined) or by the Employee upon aConstructive Termination for Good Reason (hereinafter defined), in each casewithin one year following a Change in Control (a “Protected Termination”), thenthe provisions of this clause (b) will apply and clause (a) shall not beapplicable. If a Protected Termination occurs, then notwithstanding anything inthis Agreement to the contrary, if (I) any amounts due to the Employee underthis Agreement and any other plan or program of the Company constitute a “parachutepayment,” as such term is defined in Code Section 280G(b)(2), and (ii) the amountof the parachute payment, reduced by all federal, state and local taxesapplicable thereto, including the excise tax imposed pursuant to Code Section4999, is less than the amount the Employee would receive if he were paid threetimes his “base amount,” as defined in Code Section 280G(b)(3), less onedollar, reduced by all federal, state and local taxes applicable thereto, thenthe aggregate of the amounts constituting the parachute payment shall bereduced to an amount that will equal three times his base amount less onedollar.

 

(c) The determinations to be made with respect to this Section shall bemade by an accounting firm jointly selected by the Company’s Board of Directorsand the Employee and paid by the Company, and which may be the Company’sindependent 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, theCompany terminates Employee’s employment because (i) as a result of aninvestigation, the Employee shall (A) be found to have engaged in, (B) admit inwriting facts amounting to, or (C) be held civilly liable for, fraud,embezzlement or dishonesty, (ii) the Employee discloses Company trade secretsor confidential Company matters to unauthorized persons and such disclosuresare reasonably likely to be materially injurious to the Company, monetarily orotherwise, (Hi) the Employee, after reasonable notice and opportunity tocorrect his conduct, willfully refuses or continually neglects to substantiallyperform his duties and assigned work, or (iv) the Employee materially breachesany provision of any employment agreement with the Company.

 

(ii)           “ConstructiveTermination for Good Reason” means:

 

(1)           the Company has takenaction that results in a material diminution in the Employee’s position (otherthan titles and reporting requirements), authority, duties or responsibilitieswith the Company in effect immediately before the date of the closing of theChange in Control;

 

----

 

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

 

(3)           the Employee isactually transferred, or offered a proposed transfer, as evidenced in a writtencommunication from the Company to the Employee, to another location other thanthe location at which he was primarily employed immediately preceding theChange in Control, unless that new location is a major operating unit orfacility Of the Company that is located within 50 miles of the Employee’sprimary location as of the date immediately preceding a transfer; provided,however, (A) the Employee, within thirty (30) days from the date that he is givenwritten notice by the Company of such actual or proposed transfer, shallprovide the Committee or the Board with written notice that the transfer shallconstitute a Constructive Termination for Good Reason, (B) the Company, withintwenty (20) days of receipt of the notice, fails to provide the Employee withwritten notice rescinding the actual or proposed transfer and (C) if theCompany does not rescind the transfer, the Employee must terminate hisemployment due to Constructive Termination for Good Reason within forty (40)days following expiration of the twenty (20)-day period so that in any eventthe Employee shall have terminated his employment with the Company withinninety (90) days after the Employee first receives written notice from theCompany of such actual or proposed transfer.

 

11.           Miscellaneous.

 

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

 

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

 

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

 

 
| Date of Grant: |     | TANOX, INC. |
|----------------|----------|-------------|
|           |     | By:         |   |   |
|           | Title:   |        |   |
|           | Address: |        |   |
|                |          |             |  |  |  |  |  |  |

 

EMPLOYEE’SACCEPTANCE

 

----

 

Theundersigned hereby accepts the foregoing option and agrees to the terms andconditions thereof.

 
| EMPLOYEE  |   |
|-----------|--------|
|      |   |   |
| Signature |   |
|      |   |
| Address:  |   |   |   |
|           |        |  |  |  |

 

----

 

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         sharesof Common Stock, $01 par value per share, of the Company (“Common Stock”) at aprice of        per share, purchasableas set forth in and subject to the terms and conditions of this option and thePlan. This option is intended to qualify as an incentive stock option (‘IncentiveStock Option”) within the meaning of Section 422 of the Internal Revenue Codeof 1986, as amended (the “Code”). The date of grant of this option ishereinafter referred to as the “date of grant.”

 

2.             Exercise of Optionand Provisions for Termination.

 

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

 

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

 

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

 

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

 

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

 

shares on the fifth anniversary of the dateof grant; so that, after the expiration of the *fifth*anniversary of the date of grant, the option shall be exercisable infull.

 

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

 

This option shall become fully exercisable, irrespective of thelimitations set forth above, provided that the Employee has been in continuousemployment since the date of grant, upon a Change in Control. This option maynot be exercised at any time after the tenth anniversary of the date of grant.

 

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

 

----

 

exercise shall be effective upon receipt bythe Treasurer of the Company of the written notice together with the requiredpayment.

 

(c) If the Employee ceases to be employed by the Company or one of itssubsidiaries for any reason, including retirement but other than death, thisoption shall immediately terminate; provided,however, that anyportion of this option which was otherwise exercisable on the date oftermination of the Employee’s employment may be exercised within thethree-month period following the date on which the Employee ceased to be soemployed unless termination was due to “cause” as determined by the Board ofDirectors or the Employee is found by the Board of Directors to have disclosedtrade secrets of the Company. In no event may this option be exercised afterthe tenth anniversary date. Any such exercise may be made only to the extent ofthe number of shares subject to this option which are purchasable upon the dateof such termination of employment. If the Employee dies during such three-monthperiod, this option shall be exercisable by the Employee’s personalrepresentatives, heirs or legatees to the same extent and during the sameperiod that the Employee could have exercised this option on the date of his orher death.

 

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

 

(e) The Employee agrees that he will not exercise this option, and thatthe Company will not be obligated to issue any shares of Common Stock pursuantto this option agreement, if the exercise of the option or the issuance of suchshares would constitute a violation by the Employee or by the Company of anyprovision of any law or regulation of any governmental authority or any stockexchange or transaction quotation system. Whether or not the issuance of sharescovered by the Plan have been registered pursuant to the Securities Act of1933, as amended, the Company may, at its election, require the Employee togive a representation in writing in form and substance satisfactory to theCompany to the effect that he is acquiring such shares for his own account forinvestment and not with a view to, or for sale in connection with, thedistribution of such shares or any part thereof.

 

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

 

----

 

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

 

(i) Individuals who, as of the date hereof, constitute the entire Boardof Directors of the Company (‘Incumbent Directors”) cease for any reason toconstitute at least a majority of the Board; provided, however, that anyindividual becoming a director subsequent to the date hereof whose election, ornomination for election by the Company’s stockholders, was approved by a voteof at least a majority of the then Incumbent Directors shall be considered asthough such individual was an Incumbent Director, but excluding, for thispurpose any such individual whose initial assumption of office occurs as aresult of either an actual or threatened election contest, as such terms areused in Rule 14a-11 under the Securities Exchange Act of 1934, as amended (“ExchangeAct”) or other actual or threatened solicitation of proxies or consents by oron 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 ofthe Company is affected, any subsidiary of the Company), or any sale, lease, orother transfer (in one transaction or a series of transactions contemplated orarranged by any party as a single plan) of all or substantially all of theassets of the Company (each of the foregoing being an “Acquisition Transaction”)where (1) the stockholders of the Company immediately prior to such AcquisitionTransaction would not immediately after such Acquisition Transactionbeneficially own, directly or indirectly, shares or other ownership interestsrepresenting in the aggregate fifty one percent (51%) or more of (a) the thenoutstanding common stock or other equity interests of the corporation or otherentity surviving or resulting from such merger, consolidation orrecapitalization or acquiring such assets of the Company, as the case may be(the ‘Surviving Entity”) (or of its ultimate parent corporation or otherentity, if any), and (b) the Combined Voting Power of the then outstandingVoting Securities of the Surviving Entity (or of its ultimate parentcorporation or other entity, if any) or (2) the Incumbent Directors at the timeof the initial approval of such Acquisition Transaction would not immediatelyafter such Acquisition Transaction constitute a majority of the Board ofDirectors, or similar managing group, of the Surviving Entity (or of itsultimate parent corporation or other entity, if any), or (B) any plan orproposal for the liquidation or dissolution of the Company; or

 

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

 

----

 

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

 

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

 

(3)           provided, further, thatif any Person referred to in paragraph (1) or (2) of this Subsection (iii)shall thereafter become the beneficial owner of any additional Common Stock orother Voting Securities of the Company (other than pursuant to a stock split,stock dividend or similar transaction), then a Change in Control shall bedeemed 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 ofsuch terms as used in Rule 405 under the Securities Act of 1933, as amended (“SecuritiesAct”), or any successor rule.

 

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

 

(3)           “Person” shall mean anyindividual, 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 rulesand regulations thereunder); provided, however, that Person shall not includethe Company, any of its subsidiaries, any employee benefit plan of the Companyor any of its majority-owned subsidiaries or any entity organized, appointed orestablished by the Company or such subsidiaries for or pursuant to the terms ofany such plan.

 

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

 

----

 

3.             Payment ofPurchase Price.

 

(a) Payment of the purchase price for shares purchased upon exercise ofthis option shall be made by delivery to the Company of cash or otherverifiable funds (wire transfer, cashier’s check, money order) payable to theorder 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 ofCommon Stock held by the Employee for at least six months and having a fairmarket value (as determined by the Board of Directors of the Company inaccordance with the terms of the Plan) equal to or less than the aggregatepurchase price of the shares to be purchased, and any difference shall be paidby cash or check.

 

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

 

4.             Delivery of Shares.

 

The Company shall, upon receipt of the purchase price, and verificationof funds for the number of shares purchased and paid for, make prompt deliveryof such shares to the Employee, provided that if any law or regulation requiresthe Company to take any action with respect to such shares before the issuancethereof, then the date of delivery of such shares shall be extended for theperiod necessary to complete such action. No shares shall be issued anddelivered upon exercise of any option unless and until, in the opinion ofcounsel for the Company, any applicable registration requirements of theSecurities Act, any applicable listing requirements of any national securitiesexchange on which stock of the same class is then listed, and any otherrequirements of law or of any regulatory bodies having jurisdiction over suchissuance and delivery, shall have been fully complied with.

 

5.             Non-transferabilityof 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 shallbe transferred, assigned, pledged or hypothecated in any way (whether byoperation of law or otherwise) nor shall any such rights be subject toexecution, attachment or similar process. Upon any attempt to transfer, assign,pledge, hypothecate or otherwise dispose of this option or of such rightscontrary to the provisions hereof, or upon the levy of any attachment orsimilar process upon this option or such rights, this option and such rightsshall become null and void.

 

----

 

6.             No SpecialEmployment Rights.

 

Nothing contained in the Plan or this Agreement shall be construed ordeemed by any person under any circumstances to bind the Company or any of itssubsidiaries to continue the employment of the Employee for the period withinwhich this option may be exercised.

 

7.             No Rights as aStockholder.

 

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

 

8.             Withholding Taxes.

 

No certificates representing shares of Common Stock purchased hereundershall be delivered to or in respect of the Employee unless the amount of allfederal, state and local withholding tax requirements imposed upon the Companywith respect to the issuance of such shares of Common Stock has been remittedto the Company or unless provisions to pay such withholding requirements havebeen made to the satisfaction of the Committee.

 

9.             Qualificationunder Section 422.

 

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

 

10.           Certain Limits.

 

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

 

----

 

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

 

(b) If the Employee’s employment with the Company is terminated by theCompany without Cause (hereinafter defined) or by the Employee upon aConstructive Termination for Good Reason (hereinafter defined), in each casewithin one year following a Change in Control (a “Protected Termination”), thenthe provisions of this clause (b) will apply and clause (a) shall not beapplicable. If a Protected Termination occurs, then notwithstanding anything inthis Agreement to the contrary, if (i) any amounts due to the Employee underthis Agreement and any other plan or program of the Company constitute a “parachutepayment,” as such term is defined in Code Section 280G(b)(2), and (ii) theamount of the parachute payment, reduced by all federal, state and local taxesapplicable thereto, including the excise tax imposed pursuant to Code Section4999, is less than the amount the Employee would receive if he were paid threetimes his “base amount,” as defined in Code Section 280G(b)(3), less onedollar, reduced by all federal, state and local taxes applicable thereto, thenthe aggregate of the amounts constituting the parachute payment shall bereduced to an amount that will equal three times his base amount less onedollar.

 

(c) For purposes of this Section 10:

 

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

 

(ii)           ‘ConstructiveTermination for Good Reason” means:

 

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

 

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

 

----

 

below the comparable level payable tosimilarly situated officers of the Company; or

 

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

 

11.           Miscellaneous.

 

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

 

(b)           All notices under thisAgreement shall be mailed or delivered by hand to the parties at theirrespective addresses set forth beneath their names below or at such otheraddress as may be designated in writing by either of the parties to oneanother.

 

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

 

 
| Date of Grant: |     | TANOX, INC. |
|----------------|----------|-------------|
|           |     |        |   |
|           |     | By:         |   |   |
|           | Title:   |        |   |
|           | Address: |        |   |
|                |          |             |  |  |  |  |  |

 

----

 

EMPLOYEE’SACCEPTANCE

 

Theundersigned hereby accepts the foregoing option and agrees to the terms andconditions thereof.

 
| EMPLOYEE  |   |
|-----------|--------|
|      |   |   |
| Signature |   |
|      |   |
| Address:  |   |   |   |
|           |        |  |  |  |

 

----

 

STOCK OPTION AGREEMENT

 

Agreement made effective as of the       dayof           , between TANOXBIOSYSTEMS, INC., a Texas corporation (the Company), and                        (Employee).

 

To carry out the purposes of the Tanox Biosystems, Inc. 1987 StockOption Plan (the Plan), a copy of which is attached hereto as Exhibit A, byaffording Employee the opportunity to purchase shares of the $01 par valuecommon stock of the Company (the Stock”), and in consideration of the mutualagreements and other matters set forth herein and in the Plan, the Company andEmployee 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                sharesof Stock, on the terms and conditions set forth herein and in the Plan, whichis incorporated herein by reference as a part of this Option. This Option isnot intended to constitute an incentive stock option, within the meaning ofsection 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 Optionshall be       per share.

 

3.             Exerciseof Option. Subject to the earlier expiration or termination of this Optionas herein provided, this Option shall be cumulative and may be exercised, bywritten notice to the Company, only at such time or times and for suchpercentage of the aggregate number of shares offered by this Option, determinedby the number of full years from the date of grant hereof to the date of suchexercise, 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 beexercised in full if, prior to full vesting, the Company is acquired, whetherby merger, sale of substantially all of its assets or sale of stock, iffollowing such transaction (including a series of related transactions) atleast 50% of the outstanding voting securities of the Company or its successorshall not be owned directly or indirectly by stockholders that beneficiallyowned voting securities of the

 

----

 

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

 

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

 

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

 

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

 

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

 

(c)           If Employee dies whilein the employ of the Company, Employee’s estate, or the person who acquiresthis 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 hundredeighty (180) days following the date of employee’s death (subject to thelimitation set forth in Paragraph IV of the Plan as to the maximum amount ofStock as to which this Option may first become exercisable in any calendaryear).

 

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

 

----

 

Stock. For purposes of this Agreement, fairmarket value of the Stock shall be determined in accordance with the provisionsof the Plan and any Stock delivered to the Company hereunder shall be requiredto meet the holding period requirements set forth in the Plan. No fraction of ashare of Stock shall be issued by the Company upon exercise of a option or accepted by the Company in payment of theexercise price thereof; rather, Employee shall provide a cash payment for suchcash amount as is necessary to effect the issuance and acceptance of only wholeshares of Stock.

 

Unless and until a certificate or certificates representing such sharesshall have been issued by the Company to Employee, Employee (or the personpermitted to exercise this Option in the event of Employee’s death) shall notbe or have any of the rights or privileges of a shareholder of the Company withrespect to shares acquirable upon an exercise of this Option.

 

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

 

5. Status of Stock. The Company may register for issue under theSecurities Act of 1933, as amended (the “Act”) the shares of Stock acquirableupon exercise of this Option, and may keep such registration effectivethroughout the period this Option is exercisable. In the absence of sucheffective registration or an available exemption from registration, under theAct, exercise of this Option and delivery of shares of Stock acquirable upon suchexercise will be delayed until registration of such shares is effective or anexemption from registration under the Act is available. The Company intends touse its reasonable efforts to ensure that no such delay will occur. If thestock is not registered and an exemption from registration under the Act isavailable upon an exercise of this Option, Employee (or the person permitted toexercise this Option in the event of Employee’s death or incapacity), ifrequested by the Company to do so, will be required to execute and deliver tothe Company in writing an agreement containing such representations and otherprovisions as the Company may require to evidence Employee’s qualification toacquire the Stock and otherwise assure compliance with applicable securitieslaws.

 

No sales or disposition of shares of Stock acquired upon exercise ofthis Option shall be made in the absence of a registration statement being onfile with respect to such shares under the Act unless an opinion of counselsatisfactory to

 

----

 

the Company that such sale or dispositionwill not constitute a violation of the Act or any other applicable securitieslaws is first obtained.

 

If the shares of Stock acquirable upon exercise of this Option are notregistered for issue under the Act, the Company, in its sole discretion, mayrequire that Employee execute a buy-sell or other agreement, in form andsubstance satisfactory to the Company, which provides certain restrictions onEmployee’s right to transfer the shares of Stock and provides the Company andcertain of the other shareholders with rights to purchase the Employee’s Optionor shares of Stock acquired by Employee upon the happening of certain events,including, without limitation, death, divorce, death of spouse, termination ofemployment, or voluntary or involuntary transfer of Stock. Such agreement mayhave such other provisions as the Company determines to be necessary toreasonably restrict transfer of the shares of Stock or rights thereto to otherpersons.

 

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

 

6. Employment Relationship. Employee shall be considered to bein the employment of the Company as long as Employee remains an employee ofeither the Company, a parent or subsidiary corporation (as defined in section425 of the Code) of the Company, if any, or a corporation or a parent orsubsidiary of such corporation assuming or substituting a new option for thisOption. Any question as to whether and when there has been a termination ofsuch employment, and the cause of such termination, shall be determined by theBoard of Directors of the employing corporation, and its determination shall befinal.

 

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

 

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

 
|   | TANOX  BIOSYSTEMS, INC. |
|--------|-------------------------|
|   |                    |
|   | By:                     |   |   |
|   | Title:President         |
|   |                    |
|   |                    |   |
|   | Employee                |
|        |                         |  |  |  |

 

----