<PAGE>
 
                                                                   EXHIBIT 10.56


                         STRATEGIC ALLIANCE AGREEMENT

                                    BETWEEN

                       TEXAS BIOTECHNOLOOGY CORPORATION

                                      AND

                               LG CHEMICAL, LTD.

                                     DATED

                               OCTOBER 10, 1996
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE> 
<CAPTION> 
                                                                        PAGE
                                                                        ----
<S>                                                                     <C> 
1.  DEFINITIONS.......................................................    1
        1.1   "AFFILIATE".............................................    2
        1.2   "CLOSING DATE"..........................................    2
        1.3   "CONFIDENTIAL INFORMATION...............................    2
        1.4   "COST OF GOODS SOLD" OR "COGS"..........................    2
        1.5   "DEVELOPMENT COSTS".....................................    2
        1.6   "DEVELOPMENT PARTNER"...................................    2
        1.7   "DEVELOPMENT PROGRAM"...................................    3
        1.8   "DISTRIBUTION COSTS"....................................    3
        1.9   "ENDOTHELIN RECEPTOR ANTAGONIST,".......................    3
        1.10  "ENDOTHELIN RECEPTOR ANTAGONIST PROGRAM.................    3
        1.11  "FDA"...................................................    3
        1.12  "FIRST COMMERCIAL SALE".................................    3
        1.13  "IMPROVEMENTS"..........................................    3
        1.14  "INDICATIONS"...........................................    4
        1.15  "MAJOR COUNTRY".........................................    4
        1.16  "MANUFACTURING COSTS"...................................    4
        1.17  "MILESTONE".............................................    4
        1.18  "NET SALES".............................................    5
        1.19  "NOVASTAN(R)"...........................................    5
        1.20  "PCT"...................................................    5
        1.21  "PRA"...................................................    5
        1.22  "PHASE I CLINICAL TRIALS"...............................    5
        1.23  "PHASE II CLINICAL TRIALS"..............................    5
        1.24  "PHASE III CLINICAL TRIALS".............................    5
        1.25  "PRODUCT"...............................................    5
        1.26  "PROJECT REPRESENTATIVE"................................    6
        1.27  "SELECTIN ANTAGONIST,"..................................    6
        1.28  "SELECTIN ANTAGONIST PROGRAM"...........................    6
        1.29  "SUBJECT TECHNOLOGY"....................................    6
        1.30  "TBC PATENTS"...........................................    6
        1.31  "TECHNOLOGY"............................................    7
        1.32  "TERRITORY".............................................    7
        1.33  "THIRD PARTY"...........................................    7
        1.34  "VALID PATENT"..........................................    7
        1.35  "WORK PLAN".............................................    7

2.  LICENSE TO LG CHEM. ..............................................    7
        2.1   EXCLUSIVE LICENSE.......................................    7
</TABLE> 

                                       i
<PAGE>
 
 
 
                               TABLE OF CONTENTS
                                  (Continued)

<TABLE> 
<CAPTION> 
                                                                        PAGE
                                                                        ----
<S>                                                                     <C> 
3.  DEVELOPMENT PROGRAM...............................................    9
        3.1   GOALS...................................................    9
        3.2   PROGRAM ADMINISTRATION..................................   10
        3.3   PERFORMANCE OF SERVICES.................................   12
        3.4   REGISTRATION............................................   12
        3.5   RECORDS AND DATA........................................   14
        3.6   VISIT OF FACILITIES.....................................   14

4.  OTHER RESEARCH/DEVELOPMENT COLLABORATION..........................   15

5.  PAYMENTS AND REPORTS..............................................   15
        5.1   ANNUAL RESEARCH PAYMENTS................................   15
        5.2   ROYALTIES...............................................   16
        5.3   AUDIT RIGHTS............................................   18
        5.4   PAYMENT CURRENCY........................................   18
        5.5   PAYMENT MECHANICS.......................................   18

6.  COMMERCIALIZATION.................................................   19
        6.1   TBC TO MANUFACTURE......................................   19
        6.2   LG CHEM RIGHTS TO MANUFACTURE...........................   20
        6.3   LG CHEM TO SELL IN TERRITORY............................   20
        6.4   TBC TO SELL.............................................   20

7.  TBC REPRESENTATIONS AND WARRANTIES................................   21
        7.1   NO THIRD PARTY AGREEMENTS...............................   21
        7.2   NO THIRD PARTY RIGHTS...................................   21
        
8.  PROPRIETARY RIGHTS................................................   21
        8.1   IMPROVEMENTS............................................   21
        8.2   PATENT PROSECUTION AND MAINTENANCE......................   22
        8.3   THIRD PARTY CLAIM OF INFRINGEMENT.......................   23
        8.4   INFRINGEMENT BY THIRD PARTIES...........................   24

9.  CONFIDENTIALITY...................................................   25
        9.1   GENERAL.................................................   25
        9.2   DISCLOSURE OF AGREEMENT.................................   26

10.  INDEMNIFICATION..................................................   26
       10.1   MUTUAL RIGHT TO INDEMNIFICATION.........................   26
</TABLE> 

                                      ii
<PAGE>
 
 
                               TABLE OF CONTENTS
                                  (Continued)

<TABLE> 
<CAPTION> 
                                                                        PAGE
                                                                        ----
<S>                                                                     <C> 
       10.2   TBC RIGHT TO INDEMNIFICATION............................   27
       10.3   PROCEDURE...............................................   27
       10.4   PRODUCT LIABILITY INSURANCE.............................   28

11. TERM AND TERMINATION..............................................   29
       11.1   LICENSE TERM............................................   29
       11.2   TERMINATION FOR BREACH..................................   29
       11.3   SURVIVAL OF OBLIGATIONS.................................   30

12. MISCELLANEOUS.....................................................   31
       12.1   FORCE MAJEURE...........................................   31
       12.2   RELATIONSHIP OF THE PARTIES.............................   31
       12.3   NOTICES.................................................   31
       12.4   SUCCESSORS AND ASSIGNS..................................   32
       12.5   AMENDMENTS AND WAIVERS..................................   32
       12.6   GOVERNING LAW...........................................   33
       12.7   DISPUTE RESOLUTION......................................   33
       12.8   SEVERABILITY............................................   35
       12.9   HEADINGS................................................   35
       12.10  EXECUTION IN COUNTERPARTS...............................   35
       12.11  ENTIRE AGREEMENT........................................   35
</TABLE> 

                                      iii

<PAGE>
 
                         STRATEGIC ALLIANCE AGREEMENT

        THIS STRATEGIC ALLIANCE AGREEMENT (the "Agreement") dated as of October 
10, 1996 is between Texas Biotechnology Corporation, a Delaware corporation 
("TBC"), and LG Chemical, Ltd., a Korean corporation ("LG Chem").

                                   RECITALS

        A. TBC and LG Chem desire to engage in a strategic alliance to research,
develop and commercialize certain small molecule endothelin receptor antagonist 
compounds and selectin antagonist compounds presently being developed by TBC as 
more particularly described below (the "Products").

        B. LG Chem is willing to (i) undertake certain research and development 
activities assigned to it hereunder, (ii) participate in the commercialization
of the Products in specified markets, and (iii) make certain research payments
for the research and development of the Products and royalty payments on the
terms and conditions specified herein in exchange for certain rights with
respect to the Products.

        C. TBC is willing to (i) undertake certain research and development 
activities assigned to it hereunder, (ii) provide partial funding for the 
research and development of the Products and (iii) grant certain rights with 
respect to the Products to LG Chem or its Affiliates in exchange for the right 
to receive research payments and royalty payments.

        In consideration of the foregoing and the mutual promises and covenants 
contained in this Agreement, the parties hereto agree as follows:

1.  DEFINITIONS.  The following capitalized terms used herein shall have the 
respective meanings set forth below. The accounting terms used but not defined 
herein shall have the meanings

<PAGE>
 
ascribed to them under United States Generally Accepted Accounting Principles
("GAAP"). Certain other capitalized terms are defined elsewhere in this
Agreement.

        1.1 "AFFILIATE" means a person or entity that directly or indirectly 
controls, is controlled by or is under common control with, a party to this 
Agreement. "Control" (and, with correlative meanings, the terms "controlled by" 
and "under common control with") means, in the case of a corporation, the 
ownership of more than 50% of the outstanding voting securities thereof or the 
right to acquire such securities within 60 days and, in the case of any other
type of entity (including, without limitation, joint ventures), an interest that
results in the ability to direct or have a significant impact on the direction
of the management and policies of such entity or a significant ownership
position of no less than 25%.

        1.2 "CLOSING DATE" means October 15, 1996.

        1.3 "CONFIDENTIAL INFORMATION" means all proprietary information 
communicated to, learned of, developed or otherwise acquired by either party 
separately or jointly under this Agreement.

        1.4 "COST OF GOODS SOLD" OR "COGS" means TBC's Manufacturing Costs plus 
15% of the Manufacturing Costs.

        1.5 "DEVELOPMENT COSTS" means the direct and indirect costs, fees, 
out-of-pocket or other expenses, and reasonable allocated overhead incurred in 
the course of performing the work under the Development Program (excluding 
capital expenditures).

        1.6 "DEVELOPMENT PARTNER" means any Third Party with whom TBC has 
entered into an agreement concerning a geographic area outside the Territory, 
which agreement is currently ongoing, to collaborate on the Endothelin Receptor 
Antagonist and/or Selectin Antagonist Programs.

                                       2
<PAGE>
 
        1.7 "DEVELOPMENT PROGRAM" means research and development and other work,
as delineated in this Agreement, conducted by the parties hereunder on the
Products for the Indications, which may include clinical testing, regulatory
submissions and ongoing Product research and development performed in accordance
with the Work Plans.

        1.8 "DISTRIBUTION COSTS" means all freight and other transportation
costs actually incurred by TBC in the delivery of the Products to LG Chem,
including transportation costs to a storage facility, storage charges, Third
Party handling fees, insurance during transport and taxes payable for such
transportation or storage services. Distribution Costs incurred by TBC shall be
determined on a reasonable basis consistent with its internal cost accounting
system and reasonable industry practice.

        1.9 "ENDOTHELIN RECEPTOR ANTAGONIST," which is more particularly 
described in SCHEDULE 1 attached hereto, means a molecular compound under 
development by TBC which inhibits the binding of endothelin to a distinct cell 
surface receptor.

        1.10 "ENDOTHELIN RECEPTOR ANTAGONIST PROGRAM" means the research and 
development of the Endothelin Receptor Antagonist.

        1.11 "FDA" means the United States Food and Drug Administration.

        1.12 "FIRST COMMERCIAL SALE" means the first arms-length sale in the 
Territory pursuant to this Agreement to one or more Third Parties of any Product
following receipt of approval to commence manufacturing and selling such Product
from any one PRA.

        1.13 "IMPROVEMENTS" means any Technology that is discovered, developed
or otherwise acquired in the course of the Development Program hereunder that
may be useful in the manufacture, sale or use of the Products.

                                       3
<PAGE>
 
        1.14 "INDICATIONS" means, (a) with respect to the Endothelin Receptor 
Antagonist: (i) congestive heart failure*

                (b) with respect to the Selectin Antagonist: (i) asthma*

        1.15 "MAJOR COUNTRY" means any of the following: the Republic of Korea, 
Taiwan, China (including Hong Kong), Singapore, Indonesia, India, and Thailand.

        1.16 "MANUFACTURING COSTS" means (a) the direct material and labor costs
associated with manufacturing the Products, (b) overhead allocable to 
manufacture of the Products and (c) the amount paid to Third Parties to acquire 
manufactured Products, whether or not completed, and (d) Distribution Costs. 
Direct material costs include the costs of purchasing raw materials and
packaging components. Direct labor includes the costs of employees directly
employed in Product manufacturing, quality control or packaging. Overhead
allocated to manufacture of the Products shall be limited to (i) a reasonable
allocation of the cost of employees who have a direct relationship with Product
manufacturing, quality control or packaging, but who are not classified as
direct labor, which allocation shall be based on each such employee's time spent
in Product manufacturing, quality control or packaging as compared to time spent
on all such employee's work, and (ii) a reasonable allocation of facilities'
costs allocable to Product manufacturing, quality control and packaging.
Manufacturing Costs shall be determined on a reasonable and typical basis
consistent with TBC's internal cost accounting system and reasonable industry
practice or on actual charges from Third Parties.

        1.17 "MILESTONE" means those research and development milestones 
established by the parties to this Agreement in connection with the Work Plans.


*This information has been omitted in reliance on Rule 24-b under the Securities
 Exchange Act of 1934 and has been filed separately with the Securities and 
 Exchange Commission.






                                       4
<PAGE>
 
        1.18 "NET SALES" means the gross amount billed for Products sold 
pursuant to this Agreement to a Third Party, less discounts, duties , rebates, 
returns, credits, allowances, uncollectible sales, shipping and insurance
charges, sales taxes, tariffs and other governmental charges measured by the
amount billed.

        1.19 "NOVASTAN(R)" means a non-protein, synthetic small molecule
thrombin inhibitor developed by TBC that directly and selectively binds to and
inactivates thrombin in the blood plasma.

        1.20 "PCT" means the Patent Cooperation Treaty, a multinational
agreement pursuant to which member nations agree to recognize a uniform system
of patent protection.

        1.21 "PRA" means any applicable regulatory authority in any jurisdiction
included within the Territory which regulates the development, approval and 
marketing of pharmaceuticals.

        1.22 "PHASE I CLINICAL TRIALS" means the first phase of human clinical 
trials of a product required by the FDA or a PRA in which the product is tested 
to determine early safety profile, drug distribution patterns, and metabolism.

        1.23 "PHASE II CLINICAL TRIALS" means the second phase of human clinical
trials of a Compound required by the FDA or a PRA in which the Compound is 
tested in patients afflicted with a particular disease in order to gain 
preliminary evidence of efficacy, optimal dosage and expanded evidence of 
safety.

        1.24 "PHASE III CLINICAL TRIALS" means the third phase of human clinical
trials of a product required by the FDA or a PRA.

        1.25 "PRODUCT" means (a) TBC-11251, the lead candidate for TBC's 
Endothelin Receptor Antagonist (TBC-11251 is more particularly described in 
SCHEDULE 1 attached hereto), and/or (b)

                                       5
<PAGE>
 
TBC-1269, the lead candidate for TBC's Selectin Antagonist (TBC-1269 is more 
particularly described in SCHEDULE 2 attached hereto).

        1.26 "PROJECT REPRESENTATIVE" means an individual designated by a party 
pursuant to Section 3.2(a). All Project Representatives of a party may be 
changed at any time by written notice to the other party.

        1.27 "SELECTIN ANTAGONIST," which is more particularly described in 
SCHEDULE 2 attached hereto, means a molecular compound under development by TBC 
which inhibits the selectin-mediated adhesion of inflamed endothelium to the 
surface of white blood cells.

        1.28 "SELECTIN ANTAGONIST PROGRAM" means the research and development of
the Selectin Antagonist.

        1.29 "SUBJECT TECHNOLOGY" means all Technology owned or controlled by 
TBC as of the date hereof or owned or controlled by TBC hereafter during the
term of this Agreement, but only to the extent that such Technology relates to
the use, manufacture or sale of the Products. Technology "owned or controlled"
includes Technology as to which TBC has the right to grant or cause to be
granted sublicenses and/or immunity from suit.

        1.30 "TBC PATENTS" means (a) the patent applications listed on SCHEDULES
1 and 2 hereto and all patent applications hereafter filed that are owned by or
licensed to or otherwise acquired by TBC and which have one or more claims
covering Products, Subject Technology or Improvements, (b) any patent
application constituting an equivalent, reissue, extension, continuation-in-part
or a division of any of the foregoing, including foreign counterparts, and (c)
any patents issued upon any of the foregoing applications or any other patents
acquired by TBC relating to the Products, Subject Technology or Improvements.

                                       6
<PAGE>
 
        1.31 "TECHNOLOGY" means all (a) ideas, methods, inventions, techniques, 
processes, know-how, trade secrets and other information and all (b) products, 
formulations, and other natural and man-made materials.

        1.32 "TERRITORY" means the countries as set forth on SCHEDULE 3 attached
hereto.

        1.33 "THIRD PARTY" means any entity other than TBC, LG Chem or their 
Affiliates.

        1.34 "VALID PATENT" means a claim of an issued patent included within
the TBC Patents that has not expired or been withdrawn, canceled, disclaimed or
held invalid by a court or governmental agency of competent jurisdiction in an
unappealed or unappealable decision.

        1.35 "WORK PLAN" means a written summary of the tasks to be undertaken 
by each party during a particular calendar year in connection with the research 
and development of the Products, adopted by the parties in accordance with
Section 3.2(c). Each Work Plan will include reasonably detailed descriptions of
the tasks and work to be performed, the resources required to accomplish the
work, the costs associated with the planned work and whether TBC or LG Chem or
its Affiliates will be responsible for accomplishing each task.

2.  LICENSE TO LG CHEM.

        2.1 EXCLUSIVE LICENSE. Subject to the terms and conditions of this 
Agreement, TBC hereby grants to LG Chem a sole and exclusive right and license 
in the Territory to use and sell any of the Products for the indications as 
specified herein.

                (a) Sublicense. LG Chem shall have the right to grant
sublicenses in the Territory mutually satisfactory to both parties. To the
extent LG Chem grants a sublicense pursuant to this Agreement, it shall be
obligated to perform in full all of the obligations and agreements of such
sublicense, including payment of royalties.

                                       7
<PAGE>
 
                (b) ADDITIONAL INDICATIONS BY TBC. In the event TBC develops 
additional indications for the Products, TBC hereby agrees to give LG Chem 
advance notice of TBC's intention to negotiate the transfer, license or other 
disposition of such indications in the Territory. TBC shall not propose terms
to, or enter into active negotiations with, any Third Party in the Territory
regarding the transfer, license or other disposition of such additional
indications during the 90 day period following such notice to LG Chem unless LG
Chem notifies TBC that it is not interested in the matters set forth in such
notice. If LG Chem notifies TBC that it is interested in the matters specified
in such notice, the parties will immediately enter into good faith negotiations
to include such indications under this Agreement on mutually agreeable terms. If
the parties are unable to reach agreement within 60 days after commencement of
negotiations concerning such additional indications for the Products in the
Territory, then TBC shall be free to transfer, license or dispose of such
indications.

                (c) ADDITIONAL INDICATIONS BY LG CHEM. In the event LG Chem 
itself desires to develop additional indications for the Products in the 
Territory, TBC agrees to negotiate in good faith with LG Chem regarding LG
Chem's ability to receive license rights for such additional indications. If the
parties are unable to reach agreement within 60 days after commencement of
negotiations concerning such additional indications for the Products in the
Territory, then TBC shall be free to pursue such indications outside of this
Agreement.

                (d) RELINQUISHMENT OF INDICATION BY TBC. If TBC decides not to
complete an indication due to lack of appropriate data, lack of funds, small
market size, etc., then TBC will extend to LG Chem the right to complete the
indication for the Territory. TBC will provide LG Chem all clinical data
relative to the indication to that point. If LG Chem gains approval for the

                                       8

<PAGE>
 
indication in the Territory, TBC will negotiate in good faith a revised royalty 
rate schedule for the indication.

         (e)  BACKUP CANDIDATES.  If, during the term of this Agreement, TBC 
discovers, develops or utilizes one or more molecular compounds that it believes
in its good faith judgment will be more likely to be commercially viable than
TBC-11251 and/or TBC-1269 for, respectively, the Endothelin Receptor Antagonist
and the Selectin Antagonist in the treatment of the Indications (the "Backup
Candidates"), then such Backup Candidates will deemed to be Products under this
Agreement.

3.   DEVELOPMENT PROGRAM.

     3.1 GOALS.  Commencing upon completion of the initial Work Plan as set
forth in Section 3.2(c), TBC and LG Chem agree that they will continue research
and development on the Products for the Indications according to subsequent Work
Plans, with the goal of developing commercially marketable Products in the
shortest period of time practicable.

         (a)  TBC.  The parties contemplate that TBC shall be responsible for 
the discovery and origination of Products, the conduct of research outside of
the Territory regarding the development of the Products, clinical trials outside
of the Territory regarding the Products, and Patent filing, maintenance and
prosecution regarding the Products in all geographic areas. Any research and
development information generated by TBC's Receptor Antagonist and Selectin
Antagonist Programs will be shared without cost to LG Chem.

         (b)  LG CHEM.  The parties contemplate that LG Chem will be responsible
for clinical and (if required) preclinical trials in the Territory regarding the
Products for the Indications required for registration in the Territory, and for
the registration and sales of the Products for the


                                       9

<PAGE>
 
Indications in the Territory.  While the parties agree to use best efforts to 
achieve the goals of the Development Program, neither TBC nor LG Chem warrants 
or guarantees that its efforts will result in a marketable or approvable Product
or that the goals specified in the Work Plan will be achieved within the periods
set forth therein.

     3.2  PROGRAM ADMINISTRATION.

          (a)  PROJECT REPRESENTATIVES.  The parties shall each designate two 
Project Representatives to facilitate liaison between the parties, oversee and 
review the progress of the Development Program, determine the allocation of 
responsibilities between the parties for conducting the Development Program,
develop trial protocols, manage the clinical/regulatory process and discuss
potential competition and other relevant matters to assure rapid development and
commercialization of the Products.

         (b)   DISAGREEMENTS.  All decisions made hereunder relating to the 
Development Program shall require the approval of the Project Representatives.  
The Project Representatives shall attempt in good faith to reach consensus on 
all matters regarding the Development Program.  The Project Representatives 
shall promptly present any disagreements to the chief executive officers of the 
parties or their designees, who shall attempt resolution of the matter.  If such
executives or designees cannot promptly resolve such disagreement, then the 
dispute shall be resolved under the arbitration provisions of Section 12.7.

         (c)   WORK PLANS.  The Work Plan shall be the plan as approved by both 
parties in writing.  On or before January 1, 1997 the parties hereto will agree 
on an initial Work Plan for 1997.  Thereafter, each successive Work Plan adopted
shall be agreed upon and signed by an officer of both parties as soon as 
practicable at the beginning of the first quarter of the year covered by the


                                      10
<PAGE>
 
Work Plan and in any event, no later than March 31 of the year covered by the 
Work Plan.  The Project Representatives shall actively consult with one another 
throughout the term of the Development Program so as to adjust the specific work
performed under each Work Plan to conform to evolving developments in technology
and the results of the development work performed.  While minor adjustments to a
Work Plan may be made from time to time upon approval by the Project 
Representatives, significant changes to the scope or direction of a Work Plan 
must be agreed to in writing by each party, in the absence of which the most 
recently approved Work Plan shall remain in effect.

         (d)  MEETINGS.  The Project Representatives and other employees or 
consultants of the parties responsible for management of the Work Plan and the 
Development Program shall meet at least once every six months during the term of
this Agreement to establish and monitor Product Milestones and to review (i) 
relevant data, (ii) technical issues that have arisen, (iii) the design and 
conduct of preclinical and clinical trials and anticipated regulatory filings, 
(iv) budgets and expenditures; provided, that the budgets and expenditures of 
the Development Program shall at all times be wholly within the discretion of 
TBC, (v) competition, (vi) patent prosecution, (vii) progress on FDA submission 
and other regulatory or protocol issues and (viii) any other matters relevant to
the development of the Products.  Approximately two weeks prior to the scheduled
meeting, each party will present to the other a written summary of all relevant 
information to be presented at the meeting.  At such meetings, a Project 
Representative for each party shall deliver to the other a reasonably detailed 
written report which shall (1) describe the work performed by the respective 
party on the Development Program during the prior six month period and (2) if 
appropriate, recommend any revisions to the Work Plan that would improve the 
progress of the


                                      11
<PAGE>
 
Development Program.  Such meetings shall be at such times and at such locations
as may be agreed to by the parties.  Each party shall be responsible for its own
costs incurred in connection with such meetings.  The Project Representatives 
shall jointly prepare minutes summarizing the matters reviewed and any actions 
taken at such meetings and shall distribute such minutes to the parties within 
14 days following each meeting.  Each party may invite additional colleagues to 
participate at meetings as appropriate and acceptable to the other party.  TBC 
shall be responsible for the preparation and communication to LG Chem of the 
specific agenda of each meeting in advance of each meeting and either party may 
place items for consideration on the agenda.

     3.3  PERFORMANCE OF SERVICES.  Each party shall perform the research and 
development work assigned to it in a prudent and skillful manner in accordance, 
in all material respects, with the Work Plan then in effect and applicable laws.
Each party shall furnish all labor, supervision, facilities, supplies and 
materials necessary to perform the research and development work and other tasks
assigned to it in accordance with the Work Plan then in effect.  LG Chem shall 
make available to TBC for TBC's review and approval, which approval may not be 
unreasonably withheld or delayed, any materials LG Chem proposes to file in 
connection with any regulatory filings with a PRA.  Such materials shall be made
available to TBC sufficiently in advance of the anticipated filing date so as to
give it a reasonable opportunity to review and comment.  All responses by 
regulatory bodies received by LG Chem shall also be promptly disclosed to TBC.

     3.4   REGISTRATION.

         (a)   Within 12 months after a Product for an Indication is approved 
for commercial sale in the United States, LG Chem will apply and pay for 
registration in those countries in the 


                                      12
<PAGE>
 
Territory where the United States data package is sufficient and no additional 
clinical trials are required.

         (b)   In those countries in the Territory where the United States data 
package is not solely sufficient for registration and additional supporting 
studies are required before the Product for the Indication may be sold 
commercially, LG Chem will commence and pay for the required additional studies 
within six months of United States approval of the commercial sale of the 
Product for the Indication and apply for registration no later than 36 months 
after United States approval.

         (c)   In those countries in the Territory where neither the United 
States data package nor any other foreign country data is sufficient and LG Chem
must generate all data within the country for registration, and additional Phase
I, Phase II, and Phase III Clinical studies or the equivalent is required, LG 
Chem will initiate the necessary clinical trials within 12 months of United 
States approval of the commercial sale of the Product for the Indication and 
will complete such studies in a timely manner.

         (d)   In the event LG Chem chooses to conduct clinical trials in the 
Territory with regard to indications being developed outside the Territory by
TBC and TBC's Development Partners, LG Chem agrees that it will only conduct
these trials at its own expense and with prior approval of protocols by TBC and
TBC's Development Partners. Furthermore, LG Chem will provide on a regular basis
updates of the status of the clinical trials and any interim data results. LG
Chem will promptly make available to TBC and to TBC's Development Partners, at
no cost to TBC, all of the data from these trials that could be used in
regulatory submissions throughout the world by TBC or its Development Partners.
LG Chem also agrees that it will insure that the data filed with any PRA and/or
produced in clinical trials in the Territory will comply with all applicable PRA


                                      13
<PAGE>
 
standards and will use its commercially reasonable best efforts to comply with 
all applicable FDA standards.  In any case where responsibility for a regulatory
filing is assigned to a sublicensee, the applicable sublicense shall require the
sublicensee to afford the parties hereto the same review, approval and comment 
rights with respect to such regulatory filings as are set forth in this Section 
3.4.

         (e)   TBC agrees to use its commercially reasonable best efforts to 
assist LG Chem with regard to LG Chem's clinical trials in the Territory and to 
supply Products to LG Chem, as such is provided for under the terms of this 
Agreement, in a timely fashion.

     3.5   RECORDS AND DATA.  Each party shall maintain records in sufficient 
detail and in good scientific manner appropriate for patent and regulatory 
purposes, so as to properly reflect all work done and results achieved in the 
performance of the Work Plan and Development Program.  Such records shall 
include books, records, reports, research notes, charts, graphs, comments, 
computations, analyses, recordings, photographs, computer programs and 
documentation thereof, computer information storage means, samples of materials 
and other graphic or written data generated in connection with the Work Plan and
Development Program, including any data required to be maintained pursuant to 
applicable governmental regulations.  Each party shall provide the other the 
right to inspect all such records, and shall provide copies of all such 
requested records.

     3.6   VISIT OF FACILITIES.  Representatives of each party may, upon 
reasonable notice and at times reasonably acceptable to the other party, (a) 
visit the facilities where the Work Plan and Development Program are being 
conducted by the other party and/or the facilities where the other party 
manufactures a Product (or has a Product manufactured by a Third Party), (b) 
consult informally, during such visits and by telephone, with personnel of the 
other party performing work


                                      14
<PAGE>
 
on the Work Plan and Development Program and (c) with the other party's prior 
approval, which approval shall not be unreasonably withheld, visit the sites of 
any clinical  trials or other experiments being conducted by such other party in
connection with the Work Plan and Development Program, but only to the extent 
in each case as such trials or other experiments relate to the Work Plan and 
Development Program.  If requested by the other party, TBC and LG Chem shall 
cause appropriate individuals working on the Development Program to be available
for meetings at the location of the facilities where such individuals are 
employed at times reasonably convenient to the party responding to such request.

4.   OTHER RESEARCH/DEVELOPMENT COLLABORATION

     LG Chem will have a right of first discussion for a 90 day period, 
commencing on the Closing Date, concerning other unlicensed preclinical research
collaborations with TBC, during which period TBC will not enter into any
agreements with a Third Party relating to the license, development, or transfer
of any compounds currently being developed through TBC's research and
development programs other than the Endothelin Receptor Antagonist and Selectin
Antagonist Programs and Novastan(R).

5.   PAYMENTS AND REPORTS.

   5.1 ANNUAL RESEARCH PAYMENTS

     LG Chem will be responsible for funding a specified portion of the research
and development programs of the Products for the Indications conducted by TBC.  
LG Chem will make the following payments to TBC:

               Year                     Annual Research Payment
               ----                     -----------------------
               1996                            $100,000



                                      15
<PAGE>
 
               1997                            $2,000,000
               1998                            $2,000,000
               1999                            $2,000,000
               2000                            $2,000,000
               2001                            $2,600,000
              ------                          ------------
              Total                           $10,700,000

     The 1996 payment will be made on or before December 31, 1996 and all other 
payments for the other years will be made semiannually with 50% of each annual 
payment made on June 30 of the applicable year and 50% made on December 31 of 
the applicable year.  All such payments shall be made without any deduction for 
or on account of any taxes or other charges.

     5.2   ROYALTIES.

           (a)  ROYALTY RATES.  LG Chem or its Affiliates shall pay TBC an 
annual royalty based on the following percentages of Net Sales by LG Chem and 
its Affiliates of Products for the Indications in the Territory:  *

     Should the combined equity investment in TBC's common stock pursuant to
that certain Stock Purchase Agreement between TBC and LG Chem and that certain
Stock Purchase Agreement between TBC and the Investor Consortium (as defined
therein) ever equal *   (including funds received from LG Chem upon LG

* This information has been omitted in reliance on Rule 24b-2 under the 
  Securities Exchange Act of 1934 and has been filed separately with the 
  Securities and Exchange Commission.


                                      16
<PAGE>
 
Chem's exercise of the Option (defined therein), then each of the three rates 
used to calculate the royalties paid by LG Chem shall thereafter be reduced by *
All royalty payments by LG Chem or its Affiliates shall be made without any 
deduction, unless such deduction is required by law.  If deduction is required 
by current law and/or government authority the royalty payment shall be paid 
net, after such deduction.

       (b)  ADVANCE ROYALTY PAYMENTS.  LG Chem will make a $1 million advance 
royalty payment to TBC each time a Product for an Indication has been approved 
for the first time for commercial sale by both the FDA and by a PRA in a Major 
Country.  Any advance royalty payment made by LG Chem will be fully credited 
against future royalty payments from the sale of the same Product for the 
Indication, the approval of which resulted in the advance royalty payment.

       (c)  SUBLICENSE ROYALTIES.  In the event that LG Chem grants any 
sublicense hereunder in the Territory to any Third Party and in connection 
therewith receives royalties from such sublicensee based on such sublicensee's 
sales of a Product, LG Chem or its Affiliates shall pay TBC royalties on such 
sublicensee's sales at the rate specified in Section 5.2(a) unless LG Chem 
receives approval from TBC to pay at a different rate.  For purposes of 
calculating whether LG Chem has met minimum sales levels pursuant to Section 
11.2(b) hereof, or otherwise, sales of a Product by a sublicensee of LG Chem 
shall be attributed to LG Chem.

       (d)  REPORTS AND PAYMENT.  LG Chem shall keep, and shall require all 
Affiliates and sublicensees to keep, accurate records in sufficient detail to 
enable the amounts due to TBC to be determined.  LG Chem shall deliver to TBC 
within 60 days after the end of each calendar quarter a written accounting, 
including quantities and monetary amounts of sales of each Product by LG Chem 
and its Affiliates and sublicensees, on a country-by-country basis, and the 
amount of the royalty payments due to TBC for such quarter.  LG Chem or its 
Affiliates, simultaneously with the delivery of each such accounting, shall 
tender payment of all royalties shown to be due thereon.

* This information has been omitted in reliance on Rule 24-b under the 
  Securities Exchange Act of 1934 and has been filed separately with the 
  Securities and Exchange Commission.


                                      17
<PAGE>

       (e) TERMINATION OF ROYALTY PAYMENTS. LG Chem shall pay royalties to TBC
in accordance with this Section 5.2 as long as Valid Patents protecting the
Products are in force. Prior to United States patent expiration protecting the
Products, TBC and LG Chem will negotiate in good faith a reduced royalty
schedule, if required, relating to continued sales of Products by LG Chem in the
Territory.

       (f) The parties shall negotiate in good faith an adjusted royalty
schedule for sales in those countries in the Territory in which the patents
protecting the Products are not recognized as a matter of law.

    5.3 AUDIT RIGHTS. LG Chem shall permit TBC or its representatives to have
access, at TBC's own expense, no more than once in each calendar year during the
term of this Agreement and twice during the three calendar years following the
termination hereof, during regular business hours and upon reasonable notice, to
its records and books for the sole purpose of determining the appropriateness of
all amounts payable hereunder. If such examination reveals that such amounts
have been understated for any calendar year, LG Chem shall promptly pay the
amount of any underpayment; provided that if such examination was not conducted
by an independent accountant, LG Chem shall have the right to engage an
independent accountant at LG Chem's expense reasonably acceptable to TBC to
verify the results of such examination. If such independent accountant
determines that the amount of the underpayment is incorrect, such amount shall
be adjusted accordingly and, to the extent LG Chem has underpaid amounts owed
to TBC, shall be promptly paid by LG Chem. If, however, such examination reveals
that such amounts have been overstated for any calendar year, TBC shall promptly
refund the amount of any overpayment to LG Chem. Any sublicense granted by LG
Chem hereunder shall contain audit provisions substantially similar to those as
set forth in this Section 5.3.


                                      18
<PAGE>
 
     5.4 PAYMENT CURRENCY. All payments to be made under this Agreement shall be
made in United States dollars. In the case of sales in foreign currencies, the 
rate of exchange to be used in computing the amount of currency equivalent in 
United States dollars due to TBC for the relevant calendar quarter shall be made
at the rate of exchange prevailing on the last day of such calendar quarter 
published by a New York, New York money center bank which is  satisfactory to 
both parties.

     5.5 PAYMENT MECHANICS. All payments under this Agreement shall be made by 
wire transfer of immediately available funds to such account as the receiving 
party shall specify or by other payment method acceptable to the parties.

6. COMMERCIALIZATION.

     6.1 TBC TO MANUFACTURE. Subject to LG Chem's rights under Section 6.2, TBC 
will manufacture or subcontract the manufacture of all LG Chem's requirements 
for Products, subject to customary forecast and order procedures. If TBC or its 
subcontractor is manufacturing Products, TBC's (or its subcontractor's) 
responsibilities shall include all aspects of the manufacturing process, 
including maintenance of manufacturing inventory, quality control and shipment 
of Products (FOB United States factory) in accordance with orders placed by LG 
Chem. TBC and LG Chem will also agree to negotiate in good faith a manufacturing
agreement which will include provisions on forecasts, delivery time, quality 
control, quality assurance, delivery location, insurance, packaging, 
inventories, term and time of payment and such other provisions as are 
customarily included in agreements of this type. As compensation for such 
manufacturing services, TBC shall be entitled to receive payment of its COGS for
shipments of the Products (FOB United States factory) to be used by LG Chem for 
research purposes. Prior to the initiation of commercial sales within the 

                                      19
<PAGE>

Territory, the parties shall negotiate in good faith mutually agreeable transfer
price terms for shipments of the Products to be used by LG Chem in its
commercial operations. LG Chem shall have the right to audit at its expense the
manufacturer or submanufacturer of the Products or Products.

     6.2 LG CHEM RIGHTS TO MANUFACTURE. At any time during the term of this
Agreement, LG Chem may elect negotiate for rights to manufacture the Products,
in the Territory as well as worldwide. In such case, the parties shall enter
into good faith negotiations to include such under this Agreement on mutually
agreeable terms.

     6.3 LG CHEM TO SELL IN TERRITORY. Following regulatory approval in any
country in the Territory, LG Chem shall use its best efforts to market and sell
the Products for the Indications in such country. LG Chem will use all resources
in such marketing and sales efforts that it would use regarding any of its other
products with similar commercial potential. All terms of sale, including pricing
policies, credit terms, cash discounts and returns and allowances, shall be set
by LG Chem. LG Chem shall be responsible for invoicing its customers for
Products and collecting payment therefrom. LG Chem, in consultation with, and
approval by, TBC, will select the trademarks to be used, at no additional cost
to LG Chem, for the sale of the Products for the Indications in the Territory,
which selection will take into account the need for worldwide trademarks. TBC
will own any worldwide trademarks concerning the Products for the Indications.
LG Chem will own any non-worldwide trademarks regarding sales of the Products
for the Indications in the Territory and TBC will have the right to use such
trademarks outside the Territory at no cost to TBC.

     6.4 TBC TO SELL. TBC shall have all marketing and other rights to sell the
Products outside the Territory without compensation to LG Chem.

                                      20 




<PAGE>
 
7. TBC REPRESENTATIONS AND WARRANTIES. TBC represents and warrants to LG Chem as
follows:

     7.1 NO THIRD PARTY AGREEMENTS. As of the date hereof, there are no 
agreements with third parties relating to the Products.

     7.2 NO THIRD PARTY RIGHTS. TBC owns or possesses adequate licenses or other
rights to use all patents, patent rights, inventions and know-how necessary for
the manufacture, use and sale of the Products and to grant the licenses granted 
herein. To the best of TBC's knowledge, the manufacture, use or sale of the 
Products pursuant to this Agreement will not infringe or conflict with any Third
Party right or patent and TBC is not aware of any pending patent application 
that if issued would be infringed by the manufacture, use or sale of the 
Products pursuant to this Agreement. TBC has not received any notice from a 
Third Party that any manufacture, use or sale of the Products pursuant to this 
Agreement infringes or conflicts with any Third Party right or patent.

8. PROPRIETARY RIGHTS.

     8.1 IMPROVEMENTS. Improvements conceived or made solely by the employees of
either party during the term of this Agreement shall be the sole property of 
such party. Improvements made jointly by employees of both parties during the 
term of this Agreement shall be owned by TBC, but each party shall have the 
right to use such Improvements free of any royalty payments. All Improvements 
shall be automatically included in the license granted to LG Chem under Section 
2; provided, that the parties agree to negotiate in good faith appropriate 
modifications to the terms of this Agreement which reflect the fact that an 
Improvement has been jointly developed. TBC shall have a royalty-free, 
non-exclusive license, solely for the purposes of this Agreement, to make, use 
and sell outside the Territory under the terms of this Agreement any 
Improvements owned

                                      21
<PAGE>
 
by LG Chem. Each party shall promptly disclose to the other any Improvements 
developed by its employees or agents acting on its behalf. Each party agrees 
that all employees and other persons acting on its behalf under this Agreement 
shall be obligated under a binding written agreement to assign (or exclusively 
license in the case of academics) to such party, or as such party shall direct, 
all Improvements made or conceived by such employee or other person.

     8.2 PATENT PROSECUTION AND MAINTENANCE. The parties agree that they will
coordinate with each other in all reasonable respects the worldwide prosecution
of the TBC Patents, subject to the provisions of this Section 8. TBC shall be
responsible, at its expense, for filing, prosecuting and maintaining the TBC
Patents (except for Improvements owned exclusively by LG Chem) in all Major
Countries which recognize the PCT and shall bear all costs associated therewith.
Subject to the rights of LG Chem pursuant to this Section 8.2, TBC may in its
discretion choose not to pursue the filing, prosecution, and maintenance of
patent protection for the Products for the Indications for those countries
within the Territory that do not recognize the PCT. However, in the event that
LG Chem desires TBC to file in one or more of such countries within the
Territory, TBC and LG Chem will each bear half of the expenses related to the
filing, prosecution and maintenance of such patents. TBC shall furnish LG Chem
with copies of any TBC Patent application concerning Subject Technology or
Improvements sufficiently in advance of the anticipated filing date (but in no
event less than 5 working days before filing) so as to give LG Chem a reasonable
opportunity to review and comment. TBC shall also furnish copies to LG Chem of
all communications to and from relevant foreign patent offices in the Territory
regarding TBC Patents or Patent applications within a reasonable time prior to
filing such communication or promptly following the receipt thereof. TBC shall
reasonably consider any comments LG Chem may have related to such TBC Patent

                                      22
<PAGE>
 
applications or communications. LG Chem shall have the right at its expense to 
file, prosecute and maintain patents in the United States and all foreign 
countries on Improvements owned solely by it. TBC shall have the right to review
and comment on such filings and all patent office communications related thereto
to the same extent as LG Chem is permitted by this Section 8.2 with respect to 
TBC filings. Notwithstanding the foregoing, beyond best efforts, neither party 
assumes liability to the other for the successful prosecution of any patent 
application. However, if LG Chem shall fail to pay an annuity, tax or other 
maintenance fee with respect to a patent or patent application or otherwise 
decide not to pursue a patent relating to Improvements owned solely by LG Chem, 
it shall give TBC timely notice and the opportunity to take such action and 
assume all ownership rights to such patent or patent application.

     8.3 THIRD PARTY CLAIM OF INFRINGEMENT. Each party shall give the other 
prompt notice of each claim or allegation that the exercise of rights hereunder 
constitutes an infringement of one or more patents or other rights of a Third 
Party. TBC shall use all commercially reasonable efforts to defend the parties 
against any such claim or allegation with counsel of its own choice reasonably 
acceptable to LG Chem. The costs of such defense and any costs of settling or 
otherwise satisfying such claim (including damage awards, if any) shall be borne
as follows:

        (a) TBC COSTS. TBC shall bear all costs associated with claims based on 
any patent issued or patent application published as of the date of this 
Agreement. If LG Chem continues to sell the Products following notice of such 
claim against explicit requests to the contrary by TBC, then LG Chem shall have 
the obligation to satisfy all claims in connection with such continued sales 
activity. At all times, LG Chem shall the right to defend itself at its own 
expense against this with counsel of its own choice reasonably acceptable to 
TBC.

                                      23
<PAGE>
 
        (b) SHARED COSTS. The parties shall share equally all costs associated 
with claims not allocated under Section 8.3(a) above, namely, claims based on 
any patent or patent application that was not issued or published as of the date
of this Agreement; provided, that LG Chem may in the exercise of its best 
business judgment elect not to participate in the defense of such claims and 
in such case will not be obligated to share or pay any such costs.

        (c) COOPERATION. Each party agrees to cooperate with the other in the 
defense of any such claim or allegation, including, to the extent able, 
furnishing testimony by its employees and providing technical support and 
information as requested. Neither party shall settle or discontinue defense of 
any such case without the other's prior written consent, which shall not be 
unreasonably withheld. In the case of any proposed settlement involving a 
cross-license with a Third Party, neither party may unreasonably refuse to enter
into such a cross-license. The provisions of this Section 8.3(c) shall also 
apply to actions for declaratory relief which raise or are in response to an 
issue of infringement of a Third party patent.

     8.4 INFRINGEMENT BY THIRD PARTIES. Each party shall give the other party 
prompt written notice of any incident of infringement of TBC Patents that comes 
to its attention. The parties shall thereupon confer as to what steps are to be 
taken to stop or prevent such infringement. TBC agrees to use reasonable efforts
to stop any such infringement, but shall not be obligated to commence 
proceedings against the infringer. If TBC decides to commence proceedings, 
however, TBC shall be responsible for any legal costs incurred and will be 
entitled to retain any settlement or damage award received, and LG Chem agrees 
to cooperate with TBC in such proceeding. LG Chem shall have the right at its 
expense to engage its own counsel in connection with such proceedings. Should 
TBC decide not to commence proceedings, and should the infringement represent a 
substantial threat

                                      24
<PAGE>
 
to the commercial value of any Products, LG Chem shall be entitled (but not 
obligated) to do so in its own name and/or in TBC's name against the infringer, 
in which event LG Chem shall be responsible for all legal costs incurred, and 
will be entitled to retain any settlement or damage award received, and TBC 
agrees to cooperate with LG Chem in such proceedings and TBC shall have the 
right at its expense to engage its own counsel in connection with such 
proceedings.

9. CONFIDENTIALITY.

     9.1 GENERAL. Any party receiving Confidential Information pursuant to this 
Agreement shall maintain the confidential and proprietary status of such 
Confidential Information, keep such Confidential Information and each part 
thereof within its possession or under its control sufficient to prevent any 
activity with respect to the Confidential Information that is not specifically 
authorized by this Agreement and prevent the disclosure of any Confidential 
Information to any Third Party using the same degree of care it would use with 
respect to its own information of like importance; provided, however, that such 
restrictions shall not apply to any Confidential Information that is (a) 
independently developed outside the scope of this Agreement by employees of the 
receiving party having no access to or knowledge of the Confidential Information
disclosed hereunder, (b) in the public domain at the time of its receipt or 
thereafter becomes part of the public domain through no fault of the 
receiving party, (c) lawfully received without an obligation of confidentiality 
from a Third Party having the right to disclose such information, (d) released 
from the restrictions of this Section 8 by the express written consent of the 
disclosing party, (e) disclosed to any permitted assignee, sublicensee or 
subcontractor or customer of LG Chem or TBC, provided that such assignee, 
sublicensee, subcontractor or customer is subject to the provisions of this 
Section 8 or substantially similar provisions or (f) required by law, statute, 
rule or court order to be disclosed,

                                      25
<PAGE>
 
including requirements of the Securities and Exchange Commission, the FDA, any 
PRA, and other regulatory authorities, provided that the disclosing party uses 
commercially reasonable efforts to obtain confidential treatment of any such 
disclosure. Without limiting the generality of the foregoing, LG Chem and TBC 
each shall use all commercially reasonable efforts to obtain, if not already in 
place, confidentiality agreements from its respective relevant employees and 
agents, to protect the Confidential Information as herein provided.

     9.2 DISCLOSURE OF AGREEMENT. The parties shall coordinate efforts regarding
the preparation and distribution of press releases and other public 
announcements of this Agreement. Neither party shall make a public announcement 
or otherwise disclose the terms of this Agreement to any Third Party without 
giving prior notice to the other party and receiving no objection, except that 
the parties may without each other's consent disclose (a) the existence of this 
Agreement, (b) the identity of the other party and (c) the general subject 
matter of this Agreement. Each party shall also be permitted to make such 
disclosure of the terms of this Agreement as its counsel reasonably determines 
is necessary to comply with law, provided that such party shall use commercially
reasonable efforts to obtain confidential treatment of any such disclosure.

10. INDEMNIFICATION.

     10.1 MUTUAL RIGHT TO INDEMNIFICATION. Each party shall defend, indemnify 
and hold harmless the other and its directors, officers, employees and agents 
from and against any and all claims, liabilities, losses and expenses, including
attorneys' fees, incurred by or asserted against it or any of the foregoing 
arising out of the development, testing, manufacture, handling or storage of any
Product by such party, including without limitation (i) any actual or alleged 
bodily injury, death or property damage resulting from the use of any Product 
manufactured by such party, (ii) any actual

                                      26
<PAGE>
 
or alleged violation of law applicable to the development, testing, manufacture,
handling or storage of the Products by such party and (iii) any recall of a 
Product manufactured by such party that is ordered by a governmental agency or 
required by a confirmed Product failure as reasonably determined by the parties,
except as otherwise provided herein and except to the extent that such 
liabilities, losses and expenses result from the negligence or willful 
misconduct of a party, in which case the party who engaged in such negligence or
willful misconduct shall indemnify and hold harmless the other party and its 
directors, officers, employees and agents.

     10.2 TBC RIGHT TO INDEMNIFICATION. LG Chem shall defend, indemnify and hold
harmless TBC and its directors, officers, employees and agents from and against
any and all claims, liabilities, losses and expenses, including attorneys' fees,
incurred by or asserted against TBC or any of the foregoing arising out of a
misrepresentation regarding any Products by LG Chem, its Affiliates or
sublicensees which is not in accordance with approved Product claims or prior
TBC approval.

     10.3 PROCEDURE. Any person that intends to claim indemnification under this
Section 10 (an "Indemnitee") shall promptly notify the other party (the 
"Indemnitor") of any claim, in respect of which the Indemnitee intends to claim 
such indemnification, and the Indemnitor shall assume the defense thereof with 
counsel mutually satisfactory to the parties; provided, however, that an 
Indemnitee shall have the right to retain its own counsel, with the fees and 
expenses to be paid by the Indemnitor, if representation of such Indemnitee by 
the counsel retained by the Indemnitor would be inappropriate due to actual or 
potential differing interests between such Indemnitee and any other party 
represented by such counsel in such proceedings. The indemnity agreement in this
Section 10 shall not apply to amounts paid in settlement of any loss, claim, 
liability or action if such settlement is effected without the consent of the 
Indemnitor, which consent shall not be unreasonably withheld.

                                      27
<PAGE>
 
The failure to deliver notice to the Indemnitor within a reasonable time after 
the commencement of any such action, if prejudicial to its ability to defend 
such action, shall relieve such Indemnitor of any liability to the Indemnitee 
under this Section 10, but not any liability that it may have to any Indemnitee 
otherwise than under this Section 10. The Indemnitee and its employees and 
agents shall cooperate fully with the Indemnitor and its legal representatives  
in the investigation of any action, claim or liability covered by this 
indemnification. In the event that each party claims indemnity from the other 
and one party is finally held liable to indemnify the other, the Indemnitor 
shall additionally be liable to pay the reasonable legal costs and attorneys' 
fees incurred by the Indemnitee in establishing its claim for indemnity.

        10.4    PRODUCT LIABILITY INSURANCE. Each party shall use all 
commercially reasonable efforts to maintain product liability insurance with 
respect to its manufacture of the Products hereunder. Such insurance shall be in
such amounts and subject to such deductibles as the parties may agree based upon
standards prevailing in the industry at the time such manufacturing commences. 
At such time as a Product is being launched by a party for commercial sale, the 
parties shall attempt to maximize the product liability insurance coverage for 
both parties. TBC shall maintain such insurance for so long as LG Chem continues
to sell any Product manufactured by TBC, and thereafter for so long as TBC 
maintains insurance for itself covering such manufacture or sales. LG Chem shall
maintain such insurance for as long as LG Chem continues to sell any Product 
pursuant to this agreement manufactured by it, and thereafter for so long as LG 
Chem maintains insurance for itself covering such manufacture or sales.




                                      28
<PAGE>
 
11.     TERM AND TERMINATION.

        11.1    LICENSE TERM.  The term of LG Chem's license of the Products for
the Indications in the Territory, granted in Article 2, and the obligations of 
LG Chem granted thereunder shall terminate as to each Product in the Territory 
and any trademarks relating to the Products for the Indications shall revert 
back to TBC, upon the expiration of the last United States patent included in 
the TBC Patents relating to such Product; provided, however, that if patent 
protection afforded the Product in the Territory continues beyond the expiration
of the United States patent for such Product, the royalty rate for the sale of 
such Product shall not be adjusted pursuant to Section 5.2(e) until expiration 
of such foreign patent protection.

        11.2    TERMINATION FOR BREACH.

                (a)  GENERAL.  Either party may terminate this Agreement by 
written notice to the other in the event that (i) the other party fails to 
perform any material obligation hereunder or in that certain Stock Purchase 
Agreement (the "Stock Purchase Agreement") entered into between the parties as 
of the date hereof, and such failure is not cured within 60 days following 
prompt notice thereof from the non-defaulting party, or (ii) any bankruptcy, 
receivership, insolvency or reorganization proceedings are instituted by the 
other party or any such proceedings are instituted against the other party and 
not dismissed within 120 days. The bankruptcy of a party shall not give rise to 
the right of the bankrupt party to terminate any license granted herein.

                (b)  FAILURE OF LG CHEM TO MEET MINIMUM SALES LEVELS.  After 
United States approval of the sale of a Product for an Indication and the 
submission of an application for approval of the sale of such Product for the 
Indication in a Major Country, the parties shall in good faith negotiate minimum
sales levels for that Product for the Indication in Major Countries in the 
Territory




                                      29
<PAGE>
 
and for the entire Territory. Upon approval of the sale of such Product for the 
Indication in a Major Country in the Territory, LG Chem shall maintain the 
agreed-upon sales levels for that Product for the Indication in such country. In
the event LG Chem fails to maintain such sales levels, TBC shall have the right 
to terminate this Agreement as to such country and such Product per indication. 
Prior to exercising the right to such termination, TBC shall grant to LG Chem an
opportunity to cure such failure or to propose an alternative solution mutually 
acceptable to both parties for a sixty day period after receipt of LG Chem of 
notice from TBC of its intent to exercise such right.
        
        (c)     FAILURE OF LG CHEM TO REGISTER PRODUCTS. In the event LG Chem 
fails to register the Products for the Indications in a country in the Territory
in accordance with Section 3.4, TBC shall have the right to terminate this 
Agreement as to such country and such Product per indication. Prior to 
exercising the right to such termination, TBC shall grant to LG Chem an 
opportunity to cure such failure or to propose an alternative solution mutually 
acceptable to both parties for a sixty day period after receipt of LG Chem of 
notice from TBC of its intent to exercise such right.

        (d)     FAILURE OF TBC TO MEET MILESTONE.  LG Chem shall have the right 
to terminate this Agreement and shall not be responsible for future research 
payments to TBC under Section 5.1 in the event TBC fails to meet an Agreement 
Milestone, which Milestones will be established by the parties in accordance 
with Section 3.2(d). Prior to exercising the right to such termination, LG Chem 
shall grant to TBC an opportunity to cure such failure or to propose an 
alternative solution mutually acceptable to both parties for a sixty day period 
after receipt of TBC of notice from LG Chem of its intent to exercise such 
right.

  11.3  SURVIVAL OF OBLIGATIONS.  In the event of termination, LG Chem's license
rights shall revert automatically to TBC; provided, that no termination of this 
Agreement shall eliminate any




                                      30
<PAGE>
 
rights and obligations accrued prior to such termination. Promptly following any
termination of this Agreement, each party shall return all materials containing 
Confidential Information, except one copy that may be retained by counsel for 
each of the parties for record keeping purposes only. The provisions of Sections
8.3, 10, 11.3, 12.6 and 12.7 shall survive any termination of this Agreement. 
The provisions of Section 9 shall survive until 10 years after the expiration of
the license as to all of the Products.

12. MISCELLANEOUS

    12.1 FORCE MAJEURE. Each party shall be excused for any failure or delay in 
performing any of its obligations under this Agreement, if such failure or delay
is caused by Force Majeure. For purposes of this Agreement, "Force Majeure" 
shall mean any act of God, accident, explosion, fire, storm, earthquake, flood, 
drought, riot, embargo, civil commotion, war, act of war or any other 
circumstances or event beyond the reasonable control of the party prevented from
timely performing its obligations under this Agreement as a result of such 
circumstance or event.

    12.2 RELATIONSHIP OF THE PARTIES. The parties agree that each is acting as 
an independent contractor with respect to the other and nothing contained in 
this Agreement is intended, or is to be construed, to cause LG Chem and TBC to 
be deemed partners or joint venturers or TBC an agent of LG Chem. Neither party 
hereto shall have any express or implied right or authority to assume or create 
any obligations on behalf of or in the name of the other party or to bind the 
other party to any contract, agreement or undertaking.

    12.3 NOTICES. Any notice or other communication hereunder shall be in 
writing and shall be deemed given when so delivered in person, by overnight 
courier (with receipt confirmed) or by facsimile transmission (with receipt 
confirmed by telephone or by automatic transmission report)

                                      31
<PAGE>
 
or on the tenth business day after being sent by registered or certified mail 
(postage prepaid, return receipt requested), as follows (or to such other 
person's address as may be specified in writing to the other party hereto);

        Texas Biotechnology Corporation
        7000 Fannin, Suite 1920
        Houston, Texas 77030
        Attention: David B. McWilliams
        Telephone: (713) 796-8822
        Facsimile: (713) 796-8232

        LG Chemical, Ltd.
        LG Twin Tower
        20, Yoido-dong, Yongdungpo-gu
        Seoul 150-721, Korea
        Attn: Kyu D. Kim, Ph.D.
        Telephone: (02) 3773-7270
        Facsimile: (02) 3773-7967

   12.4 SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
shall inure to the benefit of, and be binding upon, LG Chem, TBC, and their
respective successors (including a successor pursuant to a merger of a party
hereto) and assigns. This Agreement, or any of the rights granted hereunder, may
be assigned by LG Chem or TBC to any of their respective Affiliates; provided,
that such assignment expressly provides that the assignor remains liable for its
obligations hereunder and the performance of its Affiliate under this Agreement.

   12.5 AMENDMENTS AND WAIVERS. No amendment, modification, waiver,
termination or discharge of any provision of this Agreement, nor consent to any
departure by LG Chem or TBC therefrom, shall in any event be effective unless
the same shall be in writing specifically identifying this Agreement and the
provision intended to be amended, modified, waived, terminated or discharged and
signed by the party against whom enforcement of such amendment is sought, and
each amendment, modification, waiver, termination or discharge shall be
effective only in the

                                      32 






































      

<PAGE>

specific instance and for the specific purpose for which given. No provision of 
this Agreement shall be varied, contradicted or explained by any oral agreement,
course of dealing or performance or any other matter not set forth in an 
agreement in writing and signed by the party against whom enforcement of such 
variance, contradiction or explanation is sought.

        12.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

        12.7 DISPUTE RESOLUTION. The parties agree to effect all reasonable
efforts to resolve any and all disputes between them in connection with this
Agreement in an amicable manner. The parties agree that any dispute that arises
in connection with this Agreement and which cannot be amicably resolved by the
parties shall be resolved by binding Alternative Dispute Resolution (ADR) in the
manner set forth in this Section 12.7. If a party intends to begin ADR to
resolve a dispute, such party shall provide written notice to the other party
informing the other party of such intention and the issues to be resolved.
Within ten (10) business days after its receipt of such notice, the other party
may, by written notice to the party initiating ADR, add additional issues to be
resolved. If the parties cannot agree upon the selection of a neutral within
twenty (20) business days following receipt of the original ADR notice, a
neutral shall be selected by the then President of the Center for Public
Resources (CPR), 680 Fifth Avenue, New York, New York 10019. The neutral shall
be a single individual having experience in the pharmaceutical industry who
shall preside in resolution of any disputes between the parties. The neutral
selected shall not be an employee, director or shareholder of either party or of
an Affiliate. Each party shall have ten (10) business days from the date the
neutral is selected to object in good faith to the selection of that person. If
either party makes such an objection, the then President of the CPR shall, as
soon as possible thereafter, select

                                      33
<PAGE>
 
another neutral under the same conditions as set forth above.  This second 
selection shall be final.

The ADR shall be conducted in the following manner:

        (a)     No later than forty-five (45) business days after selection, the
neutral shall hold a hearing to resolve each of the issues identified by the 
parties.

        (b)     At least five (5) days prior to the hearing, each party must 
submit to the neutral and serve on the other party a proposed ruling on each 
issue to be resolved.  Such proposed ruling shall contain no argument on or 
analysis of the facts or issues, and shall be limited to not more than fifty
(50) pages.

        (c)     The neutral shall not require or permit any discovery by any 
means, including depositions, interrogatories or production of documents.

        (d)     Each party shall be entitled to no more than twelve (12) hours 
of hearing to present testimony or documentary evidence.  The testimony of both 
parties shall be presented during consecutive calendar days.  Such time 
limitation shall apply to any direct, cross or rebuttal testimony, but such time
limitation shall only be charged against the party conducting such direct, cross
or rebuttal testimony.  It shall be the responsibility of the neutral to 
determine whether the parties have had the twelve (12) hours to which each is 
entitled.

        (e)     Each party shall have the right to be represented by counsel.  
The neutral shall have the sole discretion with regard to the admissibility of 
any evidence.

        (f)     The neutral shall rule on each disputed issue within thirty (30)
days following the completion of the testimony of both parties.  Such ruling 
shall adopt in its entirety the proposed ruling of one of the parties on each 
disputed issue.


                                      34
<PAGE>
 
        (g)     ADR shall take place in the city of New York, New York. All 
costs incurred for a hearing room shall be shared equally between the parties.

        (h)     The neutral shall be paid a reasonable fee plus expenses, which 
fees and expenses shall be shared equally by the parties.

        (i)     The ruling shall be binding on the parties and may be entered as
an enforceable judgment by a state or federal court having jurisdiction of the 
parties.

12.8    SEVERABILITY. If any provision hereof should be held invalid, illegal or
unenforceable in any respect in any jurisdiction, then, to the fullest extent 
permitted by law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry 
out the intentions of the parties hereto as nearly as may be possible and (b) 
such invalidity, illegality or unenforceability shall not affect the validity, 
legality or enforceability of such provision in any other jurisdiction.

12.9    HEADINGS. Headings used herein are for convenience only and shall not in
any way affect the construction of, or be taken into consideration in 
interpreting, this Agreement.

12.10   EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number 
of counterparts, each of which counterparts, when so executed and delivered, 
shall be deemed to be an original, and all of which counterparts, taken 
together, shall constitute one and the same instrument.

12.11   ENTIRE AGREEMENT. This Agreement, together with the Common Stock 
Purchase Agreement between the parties of even date herewith, contains the 
entire agreement and understanding of the parties hereto, and supersedes any 
prior agreements or understandings between the parties with respect to the 
subject matter hereof.




                                      35
<PAGE>
 
        IN WITNESS HEREOF, the parties hereto have caused this Agreement to be 
duly executed and delivered as of the date first above written.


                                        TEXAS BIOTECHNOLOGY CORPORATION

                                             /s/ D. B. McWILLIAMS
                                        By:  ___________________________
                                        Title: _________________________


                                        LG CHEMICAL, LTD.

                                             /s/ YUNG JAE CHOI
                                        By:  ___________________________
                                        Title:  ________________________  




                                      36
<PAGE>
 
                                  SCHEDULE I

                 DESCRIPTION OF TBC11251 AND RELEVANT PATENTS

1. Description of TBC11251
   -----------------------

TBC11251 is a sulfonamide based antagonist of endothelin binding to its 
receptors. The compound exhibits selectivity for binding to the A subtype of the
endothelin receptors relative to the B subtype. The chemical structure of 
TBC11251 is 4-chloro-3-methyl-5-(2-(2-(6-methylbenzo[d][1.3]dioxol-5-
yl)acetyl)-3-thienylsulfonamido)isoxazole (it is also referred to by 
N-(4-chloro-3-methyl-5-isoxazolyl)-2-[2-methyl-4,5-
(methylenedioxy)phenylacetyl]thiophene-3-sulfphonamide). The compound is also
referred to as various salt forms which include, but are not limited to, the
sodium phosphate salt (TBC11251Z) and the sodium salt (TBC11251Na).

2. Patents covering TBC11251 in the Territories

Application 1: PCT/US94/05755: "Sulfonamides and derivatives thereof that 
modulate the activity of endothelin" filed April 4, 1994. National filings for 
this patent were made in South Korea and Singapore. This application contains 
broad claims to the endothelin receptor antagonists.

Application 2: PCT/US96/04759: "Thienyl-, furyl, pyrrolyl-, and 
biphenylsulfonamides and derivatives thereof that modulate the activity of 
endothelin" filed April 4, 1996. The PCT countries which have been designated 
within the Territory are South Korea, North Korea, Singapore, Sri Lanka, Viet 
Nam, China and Mongolia. National filings have also been made in Taiwan, 
Philippines, Indonesia and Thailand. This application contains specific claims
to TBC11251 and related compounds.


<PAGE>
 
                                  SCHEDULE 2

                 DESCRIPTION OF TBC1269 AND RELEVANT PATENTS

1. Description of TBC1269
   ----------------------

*



2. Patents covering TBC1269 in the Territories
   -------------------------------------------

Application 1: PCT/US96/11032 *


Application 2: 08/650,653 *


Application 3: PCT/US95/05463 entitled "Binding of E-selectin, P-selectin or 
L-selectin to Sialyl-Lewis/x/ or Sialyl-Lewis/a/" filed April 28, 1995. This 
application covers other mannosylated biphenyl compounds which inhibit selectin 
binding to ligands. The national filings for this application will be filed in 
South Korea, China and Singapore.


Application 4: PCT/US95/05359 entitled "Compositions and methods for inhibiting 
the binding of E-selectin or P-selectin to Sialyl-Lewis/x/ or Sialyl-Lewis/a/" 
filed May 1, 1995. This application covers other mannosylated biphenyl compounds
which inhibit selectin binding to ligands. The national filings for this 
application will be filed in South Korea, China and Singapore.

------
*This information has been omitted in reliance to Rule 24-b under the Securities
 Exchange Act of 1934 and has been filed separately with the Securities and 
 Exchange Commission.


<PAGE>
 
                                  SCHEDULE 3

TERRITORY
---------

Republic of Korea
People's Republic of Korea
Taiwan
China (including Hong Kong)
Myanmar
Cambodia
Brunei
Phillippines
Indonesia
Malaysia-Singapore
Vietnam
India
Laos
Thailand
Pakistan
Bangladesh
Nepal
Sri Lanka
Mongolia
Afghanistan