EXHIBIT 10.16


                    SETTLEMENT AND CROSS-LICENSING AGREEMENT

   This Settlement and Cross-Licensing Agreement ("Agreement") is entered into
effective as of July 8, 1996 ("Effective Date") between Tanox Biosystems, Inc.,
a Texas corporation, with its principal offices at 10301 Stella Link, Houston,
Texas 77025 ("Tanox") and Genentech, Inc., a Delaware corporation, with its
principal offices at 460 Point San Bruno Boulevard, South San Francisco,
California 94080-4990 and Genentech International Limited, a Bermuda
corporation, with its principal offices at Reid House, 31 Church Street,
Hamilton HM 12 Bermuda (the term "Genentech" as used herein shall mean
Genentech, Inc., and/or Genentech International Limited, as appropriate).

   Tanox and Genentech, Inc. are parties to a lawsuit, Civil Action No.
H-94-0189, in the United States District Court for the Southern District of
Texas, Houston Division, styled TANOX BIOSYSTEMS, INC. V. GENENTECH, INC. ET AL.
resulting from the consolidation of Civil Action No. H-94-0239, styled TANOX
BIOSYSTEMS, INC. V. GENENTECH, INC., ET AL. with Civil Action No. H-94-0189,
styled GENENTECH, INC. V. TANOX BIOSYSTEMS, INC. (the "Lawsuit"), which they
desire to settle.

   Tanox and Genentech, together with Ciba-Geigy, Ltd. ("Ciba"), have also
reached an agreement in principle under which Genentech and Tanox and Ciba would
merge their respective anti-IgE antibody projects and such agreement has been
memorialized in an Outline of Terms (a copy of which is attached hereto as
Exhibit 1), which Tanox, Genentech and Ciba are executing to be effective
simultaneously with this Agreement and which provides for the development and
commercialization of one or more anti-IgE products (the "Multiparty
Transaction").

   In addition to their execution of the Outline of Terms, Tanox and Genentech
wish to enter into this agreement to: (i) release and indemnify each other from
and settle all claims which each may have against the other in connection with
the Lawsuit; (ii) license certain patent rights which each of the Parties has
and desires to obtain from the other; and (iii) reflect all other agreements
between the Parties relating to the settlement of the Lawsuit, the Multiparty
Transaction, and the licensing of such patents by each Party to the other.


                                       1
<PAGE>
   Therefore, Tanox and Genentech agree as follows:

   1.0 DEFINITIONS. In addition to the words otherwise used as defined terms
throughout this Agreement, the words set forth below will have the meanings
indicated when used in this Agreement.

       1.1"AFFILIATE" shall mean (i) an organization fifty (50%) percent or more
of the voting stock of which is owned and/or controlled directly or indirectly
by a Party; (ii) an organization which directly or indirectly owns and/or
controls fifty percent (50%) or more of the voting stock of a Party; (iii) an
organization which is directly or indirectly under common control of a Party
through common share holdings; or (iv) an organization as to which a Party can
demonstrate that the operation and management of such organization is under the
control, directly or indirectly, of the Party.

       1.2"AGGREGATE ANNUAL NET SALES" shall mean the aggregate of Net Sales
each calendar year for all Genentech Licensed Products.

       1.3"ALL CLAIMS" shall mean all existing and future claims, demands, and
causes of action, known or unknown, pending or threatened, for all existing and
future damages and remedies (i) that arise out of or are in any way related to
the Incident and (ii) that were brought, could have been brought, or were sought
to be brought in the Lawsuit. Under this definition, "All Claims" includes but
is not limited to all claims, demands, lawsuits, debts, accounts, covenants,
liens, encumbrances, agreements, actions, counterclaims, cross-actions,
liabilities, obligations, losses, attorney's fees, costs, expenses, remedies,
and causes of action of any nature, whether in contract or in tort, or based
upon fraud or misrepresentation, breach of duty or common law, or arising under


                                       2
<PAGE>
or by virtue of any judicial decision, federal, state or foreign statute or
regulation, for past, present, and future damages, property or economic damage,
and for all other losses and damages of any kind, including BUT NOT LIMITED TO
the following: all actual damages; all exemplary and punitive damages; all
penalties of any kind, including WITHOUT LIMITATION any tax liabilities or
penalties; lost profits or goodwill; consequential damages; damages ensuing from
loss of credit; damages ensuing from breach of the covenant or duty of good
faith and fair dealing; damages ensuing from breach of any federal, state, or
foreign antitrust law; damages ensuing from breaches of confidential and
fiduciary duties; damages ensuing from breach of contract; damages ensuing from
actual or constructive fraud; and prejudgment and postjudgment interest, costs,
and attorney's fees.


       1.4"ANTI-IQE ANTIBODY(IES)" shall mean an antibody directed against the
immunoglobulin IgE as an antigen, fragments or conjugates of such antibodies,
and other constructs comprising antibodies which are derived from or contain any
of the above-specified components.

       1.5"COMBINATION PRODUCT" shall mean any pharmaceutical formulation or
method or system for use in humans which contains (i) an Anti-IgE Antibody and
(ii) at least one other ingredient or substance which is also Therapeutically
Active or a device that enhances application and use of an Anti-IgE Antibody and
is sold as part of a product or system that contains an Anti-IgE Antibody.
"THERAPEUTICALLY ACTIVE" shall mean biologically active but shall not include
diluent, vehicles or specific adjuvants or any other ingredient or substance
which does not have any, or has only incidental, therapeutic properties when
present alone and is included to aid or enhance the activity of an Anti-IgE
Antibody.

       1.6"CONSIDERATION" shall mean the value or benefit to each of the
Parties, respectively, of the licenses, royalties, payments and agreements
contained herein and in the Outline of Terms and all other mutual promises,
covenants, agreements, releases, and representations set forth in this
Agreement.


                                       3
<PAGE>
       1.7"CROSS-LICENSE PROVISIONS" shall mean those provisions of this
Agreement set forth in Sections 4.0, 5.0, 6.0 and 7.0.

       1.8"FIRST COMMERCIAL SALE" shall mean the date of the first commercial
sale to an independent third party by a Party or its sublicensee of a Licensed
Product in a country following appropriate regulatory approval to sell such
Licensed Product in such country.

       1.9"GENENTECH LICENSED PRODUCT" shall mean any pharmaceutical formulation
or product or method or system which contains an Anti-IgE Antibody (excluding
any Anti-IgE Antibody identified and synthesized by Tanox and/or Ciba) and which
is made, used or sold by Genentech or a sublicensee of Genentech hereunder and
which is not a product made, used or sold by Genentech or a sublicensee of
Genentech under the Outline of Terms or Definitive Agreement.

       1.10 "GENENTECH NET SALES" shall mean the gross invoiced sales price
charged by Genentech or its sublicensees hereunder for Genentech Licensed
Products in arm's length sales to third parties (excluding sales for clinical
trial purposes), after deduction of the following items, to the extent that such
items were incurred during such calendar quarter with respect to sales of
Genentech Licensed Products hereunder regardless of the calendar quarter in
which such sales were made, are included in the price charged, and do not exceed
reasonable and customary amounts in the market in which such sale occurred:

   (i)   trade and quantity discounts or rebates;

   (ii)  credits or allowances given or made for rejection or return of and for
         uncollectible amounts on previously sold Genentech Licensed Products or
         for retroactive price reductions to distributors holding existing
         product inventories to conform to reductions in the price charged for
         new purchases of product;


                                       4
<PAGE>
   (iii) any tax or government charge (other than an income tax) levied on the
         sale, transportation or delivery of a Genentech Licensed Product and
         borne by the seller thereof; and

   (iv)  any charges for freight or insurance in a CIF (cost, insurance,
         freight) sale.

       1.11 "GENENTECH PATENTS" shall mean those patents owned in whole or in
part now or in the future by Genentech and those patents to which Genentech has
a license as of the Effective Date or in the future acquires a license and under
which Genentech is free to grant a sublicense to Tanox for a Tanox Licensed
Product, and which contain a Valid Claim covering the manufacture, use or sale
of an Anti-IgE Antibody or a Tanox Licensed Product; provided, however, with
respect to patents to which Genentech is a licensee, Tanox provides notice to
Genentech that it wishes to receive a sublicense and agrees to pay Genentech
such royalties, fees or similar payments that Genentech is obligated to make to
its licensor for the grant of the license or for the manufacture, use or sale of
a Tanox Licensed Product by Tanox or its sublicensee, adjusted as appropriate
for the scope of the sublicense granted.

       1.12 "GENENTECH TERRITORY" shall mean every country in the world and the
territories and possessions of each such country, other than South Korea, North
Korea, People's Republic of China, Taiwan, Singapore and Hong Kong.

       1.13 "INCIDENT" shall mean the negotiations, beginning in 1989 and ending
in December 1993, between Tanox and Genentech with regard to a potential
collaboration in the identification and development of anti-immunoglobulin E
("anti-IgE") monoclonal antibodies and anti-IgE therapy; the agreements entered
into pursuant to those negotiations, as well as any supplements or amendments to
those agreements ("the


                                       5
<PAGE>
Collaboration Agreements"), including but not limited to a Confidentiality
Agreement dated (by Tanox) March 29, 1989 and a Biological Material Transfer and
Confidentiality Agreement dated (by Tanox) July 27, 1989; negotiations
concerning the construction and meaning of the Collaboration Agreements; the
performance of the Collaboration Agreements; any interference in the performance
of the Collaboration Agreements; any statements regarding the performance of the
Collaboration Agreements; any acts or events prior to or subsequent to the
negotiation or execution of the Collaboration Agreements that form the basis of
any cause of action alleged in or that could have been alleged in the Lawsuit;
any other matters arising out of the Collaboration Agreements; the use
heretofore by Genentech of information provided by Tanox to Genentech or to any
of Genentech's employees or agents pursuant to the Collaboration Agreements (or
otherwise during the time period of such negotiations 1989 to December 1993);
the solicitation and obtaining of licensing rights heretofore from third parties
in the area of monoclonal antibody research and technology; the research,
development and commercialization of anti-IgE monoclonal antibodies and/or
anti-IgE therapy heretofore; any infringement heretofore of patents rights held
at any time by the Parties to this Agreement regarding recombinant
immunoglobulin preparations and monoclonal antibody identification and
development; and any statements or representations heretofore made by either
Party regarding research, development, and commercialization of anti-IgE
monoclonal antibodies and/or anti-IgE therapy.

       1.14 "LICENSED PRODUCT" shall mean either a Genentech Licensed Product or
Tanox Licensed Product, as appropriate.

       1.15 "NET SALES" shall mean either Tanox Net Sales or Genentech Net
Sales, as appropriate.

       1.16 "OUTLINE OF TERMS" shall mean the agreement between Tanox, Genentech
and Ciba attached hereto as Exhibit 1 which sets forth the basic terms agreed by
such parties with respect to the joint development and commercialization of
Anti-IgE Antibodies and which is intended to be superseded by a definitive
agreement(s) as contemplated by Section 8.2 of the Outline of Terms, which
agreement(s) is referred to as the ("Definitive Agreement").


                                       6
<PAGE>
       1.17 "PARTY" shall mean, when used in the singular, either Tanox or
Genentech, as appropriate, and "PARTIES" shall mean Tanox and Genentech.

       1.18 "PERSON" OR "PERSONS" shall include any natural person, as well as
any entity such as a corporation, partnership, proprietorship, or business
association.

       1.19 "PIVOTAL CLINICAL TRIAL" shall mean a controlled study in humans of
the efficacy and safety of a Genentech Licensed Product which is prospectively
designed to demonstrate statistically whether that Genentech Licensed Product is
effective for use in a particular indication and is intended to be sufficient,
if successful, (together with other necessary clinical trials) to obtain
approval from the U.S. Food and Drug Administration to sell that Genentech
Licensed Product in the United States. A Pivotal Clinical Trial could include a
Phase II clinical trial appropriately designed to be within this definition
(sometimes referred to as a Phase II/III trial) and would include a Phase III
clinical trial (as such terms are used generally in connection with
identification of clinical trial protocols).

       1.20 "PRODUCT LICENSE APPLICATION" shall mean an application, filed with
the U.S. Food and Drug Administration and accepted by that agency for filing,
for the purpose of seeking approval to sell a Genentech Licensed Product in the
United States.

       1.21 "TANOX LICENSED PRODUCT" shall mean any pharmaceutical formulation
or product or method or system (i) which contains an Anti-IgE Antibody
identified and synthesized by Tanox and/or Ciba, or (ii) other IgE inhibiting
antibodies within Tanox's MIGIS(R) program, and which, but for the licenses
granted hereunder, would infringe a Valid Claim of a Genentech Patent in the
country in which such formulation, product, method or system is made, used or
sold by Tanox or a sublicensee of Tanox.



                                       7
<PAGE>
       1.22 "TANOX NET SALES" shall mean the gross invoiced sales price charged
by Tanox or its sublicensees hereunder for Tanox Licensed Products in arm's
length sales to third parties (excluding sales for clinical trial purposes),
after deduction of the following items, to the extent that such items were
incurred during such calendar quarter with respect to sales of Tanox Licensed
Products hereunder regardless of the calendar quarter in which such sales were
made, are included in the price charged, and do not exceed reasonable and
customary amounts in the market in which such sale occurred:

   (i)   trade and quantity discounts or rebates;

   (ii)  credits or allowances given or made for rejection or return of and for
         uncollectible amounts on previously sold Tanox Licensed Products or for
         retroactive price reductions to distributors holding existing product
         inventories to conform to reductions in the price charged for new
         purchases of product;

   (iii) any tax or government charge (other than an income tax) levied on the
         sale, transportation or delivery of a Tanox Licensed Product and borne
         by the seller thereof; and

   (iv)  any charges for freight or insurance in a CIF (cost, insurance,
         freight) sale.

       1.23 "TANOX PATENTS" shall mean those patents owned in whole or in part
now or in the future by Tanox and those patents to which Tanox has a license as
of the Effective Date or in the future acquires a license and under which Tanox
is free to grant a sublicense to Genentech for a Genentech Licensed Product, and
which contain a Valid Claim covering the manufacture, use or sale of an Anti-IgE
Antibody or a Genentech Licensed Product; provided, however, with respect to
patents to which Tanox is a licensee, Genentech provides notice to Tanox that it
wishes to receive a sublicense and agrees to pay Tanox such royalties, fees or
similar payments that Tanox is obligated to make to its licensor for the grant
of the license or for the manufacture, use or sale of a Genentech Licensed
Product by Genentech or its sublicensee, adjusted as appropriate for the scope
of the sublicense granted.


                                       8
<PAGE>
       1.24 "VALID CLAIM" shall mean a subsisting claim of an issued and
unexpired patent that has not been held invalid, unpatentable or unenforceable
by a decision of a governmental body or count of competent jurisdiction, that is
unappealable or unappealed within the time allowed for appeal, and that has not
been rendered unenforceable through disclaimer.

       2.0 MUTUAL RELEASE, INDEMNIFICATION AND SETTLEMENT AGREEMENT

           2.1  DISMISSAL OF LAWSUIT. Tanox and Genentech agree as follows:

               (i)  Tanox and Genentech will each file motions to dismiss their
                    respective claims in the Lawsuit against each other, with
                    prejudice; and

               (ii) each of the Parties shall bear its own costs of court
                    incurred.

           2.2 RELEASE OF GENENTECH. For the Consideration, including the
agreements set forth in this Section 2, Tanox hereby RELEASES, ACQUITS, and
FOREVER DISCHARGES Genentech and (i) all of its present or former agents,
employees, officers, directors, shareholders, partners, joint venturers, and
attorneys; (ii) all companies, partnerships, joint ventures, or firms affiliated
with or subsidiary to, Genentech; (iii) its predecessors, successors, and
assigns; (iv) all other persons, partners, joint venturers, firms, partnerships,
joint ventures, and corporations for whose conduct Genentech may be liable; and
(v) all of its insurers from All Claims that have accrued or that may ever
accrue to Tanox or any person or persons now or hereafter claiming by, through,
or under Tanox.


                                       9
<PAGE>
           2.3 RELEASE OF TANOX. For the Consideration, including the agreements
set forth in this Section 2, Genentech RELEASES, ACQUITS, and FOREVER DISCHARGES
Tanox and (i) all of its present or former agents, employees, officers,
directors, shareholders, partners, joint venturers, and attorneys; (ii) all
companies, partnerships, joint ventures, or firms affiliated with or subsidiary
to Tanox; (iii) its predecessors, successors, and assigns; (iv) all other
persons, partners, joint venturers, firms, partnerships, joint ventures, and
corporations for whose conduct Tanox may be liable; and (v) all of its insurers
from All Claims that have accrued or that may ever accrue to Genentech or any
person or persons now or hereafter claiming by, through, or under Genentech.

           2.4 NO ADMISSION OF LIABILITY. The payment of any of the
Consideration is not an admission of liability and may not be so construed.
Genentech vigorously denies the position taken by Tanox in the Lawsuit and Tanox
acknowledges the highly disputed nature of its claims in the Lawsuit. Tanox
vigorously denies the position taken by Genentech in the Lawsuit, and Genentech
acknowledges the highly disputed nature of its claims in the Lawsuit. Each Party
acknowledges that this agreement is made as a compromise to avoid further
expense and to terminate for all time the controversies which were asserted,
could have been asserted, or were sought to be asserted in the Lawsuit.

           2.5 INDEMNIFICATION BY TANOX. Tanox agrees to INDEMNIFY and to DEFEND
and to HOLD HARMLESS Genentech and (i) all of its present or former agents,
employees, officers, directors, shareholders, partners, joint venturers, and
attorneys; (ii) all companies, partnerships, joint ventures, or firms affiliated
with or subsidiary to, Genentech; (iii) its predecessors, successors, and
assigns; (iv) all other persons, partners, joint venturers, firms, partnerships,
joint ventures, and corporations for whose conduct Genentech may be liable; and
(v) all of its insurers from All Claims, together with all costs, expenses, and
legal fees, that may be asserted against Genentech by any person, entity, firm,
or corporation claiming by, through, or under Tanox, that arise out of the
incident and/or the Lawsuit.


                                       10
<PAGE>
           2.6 INDEMNIFICATION BY GENENTECH. Genentech agrees to INDEMNIFY and
to DEFEND and to HOLD HARMLESS Tanox and (i) all of its present or former
agents, employee, officers, directors, shareholders, partners, joint venturers,
and attorneys; (ii) all companies, partnerships, joint ventures, or firms
affiliated with or subsidiary to Tanox; (iii) its predecessors, successors, and
assigns; (iv) all other persons, partners, joint venturers, firms, partnerships
joint ventures, and corporations for whose conduct Tanox may be liable; and (v)
all of its insurers from All Claims, together with all costs, expenses, and
legal fees, that may be asserted against Tanox by any person, entity, firm, or
corporation claiming by, through, or under Genentech, that arise out of the
Incident and/or the Lawsuit.

           2.7 WITHDRAWAL OF OPPOSITION. Genentech agrees that, simultaneously
with the filing of motions of dismissal under Section 2.1 above, it will file
all documents necessary to withdraw its pending opposition in the European
Patent Office to Tanox's patent No. EP-B-407392 relating to Anti-IgE Antibodies.

           2.8 EXEMPTION FROM PROTECTIVE ORDER. Notwithstanding the terms of the
protective order agreed in connection with the Lawsuit, the Parties agree that,
except for any persons reasonably excluded by notice from a Party to the other
prior to the execution of this Agreement, the employees, experts and consultants
of a Party having access to information during the course of the Lawsuit will
not be prohibited from participating in ongoing development and
commercialization activities associated with the Anti-IgE Antibody projects of
such Party and/or development and commercialization activities of the Parties
pursuant to the Outline of Terms or Definitive Agreement.

           2.9 REPRESENTATIONS OF TANOX. Tanox makes the representations and
warranties to Genentech set forth in Exhibit 2.

           2.10 REPRESENTATIONS OF GENENTECH. Genentech makes the
representations and warranties to Tanox set forth in Exhibit 3.


                                       11
<PAGE>
           3.0 EFFECTIVENESS OF CROSS-LICENSE PROVISIONS.

               3.1 OUTLINE OF TERMS. Simultaneously with the execution of this
Agreement, the Parties are executing the Outline of Terms. The Outline of Terms
and Definitive Agreement, together with that certain Development and Licensing
agreement dated May 11, 1990, between Tanox and Ciba (the "D & L Agreement"),
shall among them govern the development and commercialization of one or more
Anti-IgE Antibodies which have been identified and synthesized by Tanox, Ciba,
or Genentech before July 1, 1996. The Parties also acknowledge that, contingent
on the occurrence of certain events as set forth in Paragraphs 3.2 through 3.5
below, the Cross-License Provisions shall become effective in lieu of or in
addition to the Outline of Terms and Definitive Agreement. Notwithstanding any
representations and warranties in this Agreement to the contrary, the Parties
acknowledge that in the event of a conflict between this Agreement and the
Outline of Terms and Definitive Agreement, the Outline of Terms and Definitive
Agreement shall prevail and that the Parties are aware of Ciba's position (and
expressly disagree with and have advised Ciba of such disagreement) that it is
the exclusive licensee of Tanox Patents for Anti-IgE Antibodies. Each Party
agrees that it shall be solely responsible for any claims, damages (including
costs, expenses, and legal fees), or other liabilities of any nature asserted
against it by Ciba or any third party arising out of or in any way resulting
from the grant by Tanox to Genentech of rights hereunder to the Tanox Patents.
Further, Genentech acknowledges that the Outline of Terms does not limit or
prohibit in any way the exercise by Tanox of its rights under the D & L
Agreement with respect to Tanox Licensed Products, except as expressly stated in
the Outline of Terms or Definitive Agreement. Tanox acknowledges that the
Outline of Terms will not extend its independent rights of parallel product
development under the D & L Agreement to Anti-IgE Antibodies identified and
synthesized by Genentech.

               3.2 THIRD PARTY ACTIONS. If the Multiparty Transaction requires
approval from any regulatory or governmental authority or agency in the United
States, the European Union or its member countries, any other country in Europe,
or in Japan, or if


                                       12
<PAGE>
any governmental authority brings any action, formal or informal, against one or
more of the Parties to the Outline of Terms or Definitive Agreement in an effort
to enjoin, preclude, or prevent the Multiparty Transaction in whole or in part
("Government Action"), then the Parties shall meet and consider, in good faith,
how they should lawfully proceed in response to such event. If the Parties have
been unsuccessful either (i) after exhausting all reasonable possibilities which
do not jeopardize the timely commercialization of a Licensed Product or (ii) by
August 1, 1997, whichever is the last to occur, in obtaining any such approval
in any country where such approval is required, or in resolving the Government
Action, as the case may be, then upon notice by one Party to the other, the
Cross-License Provisions shall immediately become effective within any country
or countries in which any such approval has not been or cannot be obtained or
where any Government Action is being pursued.

               3.3 TERMINATION OF MULTIPARTY TRANSACTION. If the Outline of
Terms (or the Definitive Agreement if in effect), is terminated at any time,
then upon notice by either Party to the other the Cross-License Provisions shall
immediately become effective.

               3.4 ADDITIONAL PRODUCTS. If either Party should at any time
require a license of the type provided by the other Party under the
Cross-License Provisions for a Licensed Product that such Party may lawfully
develop notwithstanding the Multiparty Transaction, then such Party requiring
the license shall provide notice to the other of such requirement and,
immediately upon such notice, the Cross-License Provisions shall become
effective with respect to such Licensed Product.

               3.5 MUTUAL AGREEMENT. At any time after the execution of this
Agreement, if the Parties jointly agree in writing that the Cross-License
Provisions should be implemented, then the Cross-License Provisions shall become
effective as provided in such agreement.


                                       13
<PAGE>
               3.6 CROSS-LICENSE DATE. The Cross-License Provisions shall become
effective immediately upon the date the notice required under Sections 3.2, 3.3,
and 3.4, respectively is given in accordance with Section 13.4 ("Cross-License
Date") and shall be effective for the purpose or purposes specified in any such
notice and to the extent set forth in this Agreement.

    4.0 LICENSES TO GENENTECH UNDER TANOX PATENTS.

               4.1 GRANT OF LICENSE. Effective commencing upon the Cross-License
Date, Tanox grants to Genentech under all Tanox Patents, on a country-by-country
basis in the Genentech Territory, an exclusive, sublicenseable license to the
extent necessary to make, have made, use, sell, have sold and import Genentech
Licensed Products for the treatment, prophylaxis or diagnosis of any disease or
condition in humans; provided, however, that with respect to Genentech Licensed
Products containing an Anti-IgE Antibody identified and synthesized before June
1, 1997, and/or Tanox Patents issued before June 1, 1999, the foregoing
limitation "to the extent necessary" shall not be applicable.

               4.2 ROYALTIES. For the Consideration, including the licenses
granted herein, Genentech shall pay Tanox, on a country-by-country basis, the
following royalties on Net Sales of Genentech Licensed Products by Genentech and
its sublicensees:

   (a)   for sales in the United States:

         (i)    a royalty of * of Net Sales of Genentech Licensed Products
                covered in the United States by a Valid Claim of a Tanox Patent;
                or

         (ii)   a royalty of * of Net Sales of Genentech Licensed Products
                not covered in the United States by a Valid Claim of a Tanox
                Patent; and

                                       14
<PAGE>
   (b)   for sales in each country in the Genentech Territory by Genentech and
         its sublicensees, other than the United States, in which a Genentech
         Licensed Product is covered in that country by a Valid Claim of a Tanox
         Patent:

         (i)    a royalty of * of Net Sales of all such Genentech Licensed
                Products if the Aggregate Annual Net Sales for all such
                countries are * or less; and

         (ii)   a royalty of * of Net Sales of all such Genentech Licensed
                Products if the Aggregate Annual Net Sales for all such
                countries are between * and *; and

         (iii)  a royalty of * of Net Sales of all such Genentech Licensed
                Products if the Aggregate Annual Net Sales for all such
                countries are greater than *; and

   (c)   in each country in the Genentech Territory, other than the United
         States, where there is no Valid Claim of a Tanox Patent covering a
         Genentech Licensed Product, a royalty of * of Net Sales of all such
         Genentech Licensed Products.

      The foregoing royalties shall be payable in each country until the latter
of (i) a period of ten (10) years from First Commercial Sale of a Genentech
Licensed Product in such country or (ii) the expiration of all Valid Claims of
Tanox Patent(s) in such country which a Genentech Licensed Product sold in such
country would infringe but for the licenses granted herein. At such time as
royalties are no longer payable hereunder in a country, the license granted to
Genentech with respect to such country in Section 4.1 shall thereafter be fully
paid up and royalty-free in perpetuity.

      Genentech shall be entitled to deduct from the royalties payable with
respect to any country hereunder, * of the aggregate royalties required to be
paid to a third party(s)


                                       15
<PAGE>
under license(s) entered into after the Effective Date where such royalties are
paid for the manufacture, use or sale of an Anti-IgE Antibody as part of a
Genentech Licensed Product in such country to avoid infringing a Valid Claim of
such third party's patents; provided, that such deduction in any calendar year
shall in no event exceed * of the royalties otherwise payable to
Tanox in such country for that calendar year, except the United States, and, in
the United States, such deduction shall in no event exceed * of
Genentech's Net Sales in a calendar year if a Valid Claim of a Tanox Patent
covers the Genentech Licensed Products in the United States or *
of Genentech's Net Sales in a calendar year if no Valid Claim of a Tanox Patent
covers the Genentech Licensed Products in the United States. For purposes of
computing the deduction permitted hereunder, the percentage royalty payable to
any such third party with respect to which such deduction is permitted shall not
exceed the usual percentage royalty charged by such third party to others or the
royalty charged to Ciba, whichever may be less.

         4.3 TANOX EXCLUSIVE TERRITORIES. Genentech agrees that it will not
manufacture or sell a Genentech Licensed Product or provide a Genentech Licensed
Product for sale or knowingly contribute to or assist in the manufacture or sale
of a Genentech Licensed Product in any country outside the Genentech Territory.

    5.0 LICENSES TO TANOX.

         5.1 GRANT OF LICENSE. As additional consideration for the granting of
the licenses under Section 4.0 by Tanox, effective commencing upon the
Cross-License Date, Genentech grants to Tanox under all Genentech Patents a
nonexclusive, worldwide, sublicensable license to the extent necessary to make,
have made, use, sell, have sold and import Tanox Licensed Products for the
treatment, prophylaxis or diagnosis of any disease or condition in humans and
animals; provided, however, that with respect to Tanox Licensed Products
containing an Anti-IgE Antibody identified and synthesized before *,
and/or Genentech Patents issued before *, the foregoing limitation
"to the extent necessary" shall not be applicable.


                                       16
<PAGE>
         5.2 ROYALTIES. Tanox will pay Genentech such royalties or other
license-related payments as Genentech is obligated to pay to any third party by
virtue of the manufacture, use or sale hereunder of any Tanox Licensed Product
by Tanox or any sublicensee of Tanox in any country pursuant to Section 5.1
above (excluding any royalties due from Ciba to Genentech or any such third
parties under the Outline of Terms or Definitive Agreement); provided, however,
that such royalties or other license-related payments shall be the only payments
required and shall be comprised of, to the extent applicable, (i) * of Net Sales
for Tanox Licensed Products manufactured by or for Tanox and sold or otherwise
transferred by Tanox under a sublicense pursuant to the * Agreement effective as
of * and Genentech, Inc. (for the purposes of this Agreement, Tanox and
Genentech agree that the royalties that Tanox would otherwise pay to Genentech
for a sublicense under * Agreement, but for the provisions of this Section 5.2,
is *; (ii) * of Net Sales under * Patents as those terms are used in the
agreement effective as of * between Genentech, Inc. and *; and (iii) * of Net
Sales under * Patents as those terms are used in the Agreement effective as of *
between Genentech, Inc. and *. To the best of Genentech's knowledge, there are
no other royalty obligations under licenses granted to Genentech existing as the
Effective Date hereof with respect to chimeric or humanized monoclonal Anti-IgE
Antibodies produced in mammalian cell systems which Tanox would be obligated to
pay pursuant to this Section 5.2. and Genentech warrants that it has not
assigned any patent applications it may have pending relating to Anti-IgE
Antibodies to any third party.

   6.0   ACCESS TO LICENSES.

         6.1 MUTUAL REPRESENTATIONS. Tanox represents to Genentech that it does
not have knowledge of any restrictions existing as of the Effective Date which
would prevent it from granting licenses to the Tanox Patents as provided under
this agreement. Genentech represents to Tanox that it does not have knowledge of
any restrictions existing


                                       17
<PAGE>
as of the Effective Date which would prevent it from granting licenses to the
Genentech Patents as provided under this agreement. If any Patents of a Party
which would otherwise be included within the licenses granted herein now or in
the future are not licensable or sublicensable under the respective
Cross-License Provisions of this Agreement because of contractual restrictions
to which such Patents are subject, then such Party shall take reasonable actions
in an effort to permit the other Party to secure the benefits of such rights for
the purposes intended herein in light of the restrictions to which it is
subject, including, without limitation, the agreement of each Party not to sue
the other Party for infringement of any such Patents.

         6.2 THIRD PARTY LICENSES. If either Party obtains exclusive access for
the allergy field to a patent owned and/or controlled by a third party which is
necessary to make have made, use or sell a Licensed Product, then such Party
will either (i) permit the other Party to obtain co-exclusive rights to such
patent for such field, if possible, or (ii) acquire a license to such patent for
such field free of any restrictions which would limit such Party's right to
sublicense to the other Party as required under this Agreement, including
preservation of such other Party's sublicense rights hereunder.

   7.0 ROYALTY PAYMENTS.

         7.1 PAYMENT DATES. Royalties payable hereunder shall be paid within 100
days of the end of each calendar quarter for Net Sales for that calendar quarter
(with respect to all uses of "calendar quarter" in this Agreement, the first
calendar quarter in each year ends on March 31, with succeeding calendar
quarters ending each 3 months thereafter). Such payment shall be accompanied by
a statement showing the amount of each Licensed Product sold in each country,
the Net Sales of each Licensed Product in that country's currency in each
country in which Net Sales occurred, the royalties payable in local currency,
the applicable exchange rate as set forth in Section 7.3 below for that
currency, and the royalties payable in U.S. Dollars.


                                       18
<PAGE>
         7.2 RECORDS AND ACCOUNTING. A Party shall keep and require its
sublicensees to keep complete and accurate records of the latest three (3)
calendar years of Net Sales with respect to which a royalty is payable under
this Agreement. The Party receiving royalties shall have the right at its own
expense to have an independent, certified or chartered public accountant,
reasonably acceptable to the Party paying royalties, review the paying Party's
records upon reasonable notice and during reasonable business hours for the
purpose of verifying the payments provided for in this Agreement. This right may
not be exercised more than once for any calendar year with respect to the
records of the paying Party and each of its sublicensees. Should such review
lead to the discovery of an under reporting of royalties due hereunder of
greater than two percent (2%), the Party under reporting such royalties, in
addition to promptly paying the unpaid royalties, shall pay the full cost and
expense of such review, plus interest on such unpaid royalties at the rate of
10% per annum from the date any such under reporting occurred to the day paid.

         7.3 CURRENCY OF PAYMENTS. All payments under this Agreement shall be
made in United States Dollars by wire transfer (or such other reasonable means
as the receiving Party may direct) to such bank account as the receiving Party
may designate from time to time. If a wire transfer is to be made, the remitting
Party shall provide notice at least five (5) days prior to the date of transfer
of the amount of payment and the date it is to be received. Such notice should
be given to the Treasurer of the receiving Party at the address set forth at the
beginning of this Agreement or such other address as the receiving Party may
subsequently direct. Any payments due hereunder on sales outside of the United
States shall first be calculated in the currency in which sales took place and
then converted to United States Dollars at the average of the average spot rate
published in the Wall Street Journal for the last business day of each of the
three (3) months of the calendar quarter for which royalties are payable.

    If by law, regulation or fiscal policy of a particular country, remittance
of royalties in United States Dollars is restricted or forbidden, notice thereof
will be promptly given to the receiving Party, and payment of the royalty shall
be made by the deposit thereof in local


                                       19
<PAGE>
currency to the credit of the receiving Party in a recognized banking
institution designated by the receiving Party. When in any country the law or
regulations prohibit both the transmittal and deposit of royalties on sales in
such a country, royalty payments shall be suspended for as long as such a
prohibition is in effect and as soon as such prohibition ceases to be in effect,
all royalties which the paying Party would have been under obligation to
transmit or deposit but for the prohibition, shall forthwith be deposited or
transmitted promptly to the extent allowable. If a Party is required to pay or
withhold any income tax or other tax with respect to royalty payments, such
Party shall first (i) furnish the receiving Party, in writing, with the
satisfactory evidence that such payment or withholding is required, (ii) provide
reasonable assistance in claiming any exemption from any such deduction which
may be available, and (iii) provide satisfactory documentation to confirm the
payment of the tax.

         7.4 COMBINATION PRODUCT NET SALES. In determining the Net Sales of
Combination Products, Net Sales shall first be calculated in accordance with the
definition of Net Sales and then multiplied by the percentage value of the
Licensed Product contained in the Combination Product, such percentage value
being the quotient obtained by dividing the current market price of the Licensed
Product by the sum of the separate current market prices of the Licensed Product
and the other ingredients which are Therapeutically Active or the device
contained in the Combination Product. The current market price of each
Therapeutically Active ingredient or the device and of the Licensed Product
shall be for a quantity comparable to that contained in the Combination Product
and of the same class, purity and potency. When no current market price is
available for a Therapeutically Active ingredient or device or a Licensed
Product in a Combination Product, the Party with the Combination Product shall
calculate a commercially reasonable hypothetical market price for such
ingredient or device or Licensed Product, allocating the same proportions of
costs, overhead and profit as are then allocated to all similar substances then
being made and marketed by that Party marketing the Combination Product and
having an ascertainable market price. The current market price shall be
determined with respect to the Licensed Product and other Therapeutically Active


                                       20
<PAGE>
ingredients or devices in the country in which such sales of Combination
Products occur to the extent practicable. In the event of any dispute regarding
determination of Net Sales for a Combination Product, the Party with such
Combination Product shall pay royalties in accordance with the definition of Net
Sales notwithstanding this Section 7.4 or on such other agreed basis until such
dispute is resolved. Upon resolution of any such dispute, any excess royalties
which may have been paid shall be promptly reimbursed, plus interest on any such
excess royalties at the rate of * per annum from the date any such excess
royalties were paid to the date of reimbursement.

         8.0 PAYMENTS TO TANOX. For the Consideration, including settlement of
the Lawsuit, execution of the Outline of Terms, and grant of the licenses by
Tanox herein, Genentech shall pay Tanox the * payment due on execution
of this Agreement and dismissal of the Lawsuit within five (5) days of the
occurrence of such event and the remaining sums set forth on Exhibit 4 hereto
within thirty (30) days of the date upon which each remaining event described on
Exhibit 4 occurs with respect to any Genentech Licensed Product that has been
covered by the claims of a Tanox Patent and/or any anti-IgE Product (as that
term is used in the Outline of Terms) that is subject to the Outline of Terms of
Definitive Agreement. The obligations hereunder are acknowledged to be in
addition to any other obligations of Genentech to Tanox under the Outline of
Terms or Definitive Agreement. With respect to the amounts payable hereunder,
Genentech shall receive a credit of * which shall be applied against
royalties due Tanox hereunder or under the Outline of Terms and Definitive
Agreement at such time as the total annual net sales of Genentech Licensed
Products that have been covered by the claims of a Tanox Patent and anti-IgE
Products sold under the Outline of Terms and Definitive Agreement exceed
*.

         9.0 ADDITIONAL LICENSES. In addition to and without limitation of the
license granted to Tanox under Section 5.0, Genentech agrees to grant certain
additional licenses to Tanox as provided herein. Subject to all of Genentech's
existing licenses and existing agreements that restrict Genentech's ability to
grant licenses and subject to the additional


                                       21
<PAGE>
restrictions set forth below, Genentech agrees to grant to Tanox, upon written
request from Tanox, a worldwide, nonexclusive, nonsublicenseable (except to
Affiliates, but only in conjunction with the license of a specific product)
license under patents owned by Genentech and set forth on Exhibit 5 hereto, to
make, have made, use, sell, have sold and import products for *, except that
such products shall not include those (i) that are the subject of a prior
exclusive license by Genentech to a third party; (ii) that are the subject of an
active research or development program of Genentech or its Affiliates; or (iii)
that compete with, or will compete with, a then current product of Genentech or
its Affiliates or a product in an active research and/or development program of
Genentech or its Affiliates; provided however, that if any such patents desired
by Tanox shall be subject to exclusive rights to a third party which would
prevent the license desired by Tanox, Genentech agrees that Tanox shall have the
right to obtain a sublicense, if possible, from any such third party on terms
agreed between Tanox and such third party. Tanox agrees that to the extent
Genentech would deprive itself of its right to practice the patents thereby,
Genentech shall not be required pursuant hereto to grant sublicense rights to
Tanox under those patents known as the "Boss" and "Cabily" patents for any
antibodies set forth on Exhibit 6 which are the subject of co-exclusive rights
between Genentech and * with respect to such patents. Except for those patents
and patent applications listed on Exhibit 7, Genentech represents and warrants
that it has no existing patents or patent applications and, except for licenses
from The City of Hope and Celltech Limited, is not a licensee of any patents
with claims which cover the composition of the molecules set forth on Exhibit 6
and agrees that Tanox may rely on this representation and warranty in pursuing
the development and commercialization of such molecules. Notwithstanding the
foregoing restrictions, but expressly subject to certain agreements between
Genentech and F. Hoffmann-La Roche Ltd. and Roche Holdings, Inc. ("Roche")
covering rights to Genentech's patents, Genentech also represents and warrants
that it will grant a worldwide, nonexclusive, nonsublicenseable (except to
Affiliates, but only in conjunction with the license of a specific product)
license to Tanox under all future patents owned by it in whole or in part with
claims which are necessary to make, use, or sell the Tanox molecules set forth
on Exhibit

                                       22
<PAGE>
6 so long as Genentech does not currently have an active clinical development
program involving any such Tanox molecule for the indication being pursued by
Tanox. To the extent that Genentech is a licensee of patents which are necessary
to make, use or sell any Tanox molecule on Exhibit 6 or which is also covered by
the patents set forth on Exhibit 5, until Genentech has offered a sublicense to
Tanox and Tanox has refused such a sublicense, Genentech agrees that it will not
sue, or provide affirmative assistance in any suit against, Tanox for
infringement of any such patents. Any license granted to Tanox pursuant hereto
for the patents set forth on Exhibit 5 shall be at a royalty rate and on other
terms to be mutually agreed upon but which shall be no less favorable to Tanox
than that granted to any other licensee of the patents set forth on Exhibit 5
where the license is for the patents listed and where there is no other
substantial consideration for the license granted other than the usual
consideration sought by Genentech for such licenses. If any patents subject to
license or sublicense hereunder have no comparable royalty rates or terms, the
Parties agree to negotiate in good faith the royalty rate and terms on which any
such license or sublicense will be granted. Subject to the limitations set forth
above, Tanox may exercise its right to such a license or sublicense, without
threat of suit or penalty from Genentech, with respect to a product subject to
this Section 9.0 at any time prior to the First Commecial Sale of such product
in the first country in which such event occurs and the Parties shall then
negotiate and execute a license agreement for that product and the patents
subject to this Section 9.0. If Tanox should ever have under development a
product which could be subject to the restrictions on receiving a license set
forth herein, then Genentech or Tanox should notify the other of such
possibility prior to taking any other actions. If the Parties are unable to
resolve the issues prior to the time Tanox files for approval to market such
product in any country, which resolution could include a collaboration or
cross-licensing opportunity or Tanox's express agreement not to manufacture or
market for commercial sale (as such term is used in connection with the
definition of ("First Commercial Sale") in a country in which a Valid Claim of
any Genentech patent covering such product may exist, then Genentech shall be
entitled to pursue such legal or other actions as Genentech may determine, in
its sole discretion, to be appropriate under the circumstances.


                                       23
<PAGE>
         10.0 TANOX MANUFACTURING FACILITY. With respect to Tanox's pilot
manufacturing facility in Houston, Texas, if subsequent to the Selection Date,
as defined in the Outline of Terms, such facility is not utilized by Tanox or
Ciba for the manufacture of Anti-IgE Antibodies, Genentech agrees to discuss, in
good faith, a potential arrangement with Tanox for the manufacture of clinical
research material for Genentech in the circumstance where Genentech does not
have sufficient capacity at that time to manufacture its own clinical research
material needs.

         11.0 CONFIDENTIALITY. In connection with preparation and during the
term of this Agreement, one Party may disclose to the other or receive from the
other written information relating to the subject matter of this Agreement which
information, if so identified in writing either pursuant to this Section 11.0 or
otherwise upon disclosure, shall be considered to be the disclosing Party's
Confidential Information. Each Party agrees that it will take the same steps to
protect the confidentiality of the other Party's Confidential Information as it
takes to protect its own proprietary and confidential information. Each Party
shall protect and keep confidential and shall not use, publish or otherwise
disclose to any third party, except as permitted by this Agreement (or the
Outline of Terms or Definitive Agreement) or with the other Party's written
consent, the other Party's Confidential Information for a period of five (5)
years from the date of termination of the Cross-Licensing Provisions or for 10
years, whichever is longer. For the purposes of this Agreement, Confidential
Information shall not include such information that (i) was lawfully known to
the receiving Party at the time of disclosure; (ii) was generally available to
the public or was otherwise part of the public domain at the time of disclosure
or became generally available to the public or otherwise part of the public
domain after disclosure other than through any act or omission of the receiving
Party in breach of this Agreement; (iii) became known to the receiving Party
after disclosure from a source that had a lawful right to disclose such
information to others; or (iv) is required to be disclosed by the receiving
Party to comply with applicable laws, to defend or prosecute litigation or to
comply with governmental regulations, provided that the receiving Party provides
prior written notice of such disclosure to the other Party and takes reasonable
and lawful actions to avoid and/or minimize the degree of such disclosure.


                                       24
<PAGE>
      Notwithstanding the above, the Parties may disclose Confidential
Information to their legal representatives, to Affiliates and their legal
representatives, and to consultants (to the extent such disclosure is intended
to further the purposes contemplated under this Agreement) and provided such
legal representatives, Affiliates and consultants have agreed in writing to be
bound to protect the confidentiality of such information in a manner at least as
restrictive as that generally set forth herein.

         12.0 TERM: DEFAULT; SURVIVAL.

                12.1 TERM. Except as otherwise set forth herein, the
Cross-Licensing Provisions and Sections 9.0 and 10.0 of this Agreement shall
terminate at such time following the First Commercial Sale as royalties are no
longer owed by either Party hereunder in any country in the world.

                12.2 TERMINATION. (a) Subject to the simultaneous or prior
termination of its participation in the Outline of Terms and Definitive
Agreement, and all other development and commercialization activities relating
to Anti-IgE Antibodies and Genentech Licensed Products which are subject to this
Agreement and have been covered at any time by a claim of a Tanox Patent,
Genentech may terminate the provisions of Section 4.0, Section 8.0 and Section
9.0 of this Agreement upon thirty days prior written notice to Tanox (but for
Section 9.0, such termination shall be effective only with respect to products
which are not already under development at the time of such termination). Upon
such termination, Roche shall have the option, exercisable for a period of 90
days after Genentech's termination, to assume all of Genentech's rights and
obligations with respect to Anti-IgE Antibodies and Genentech Licensed Products
hereunder. If Roche does not exercise this option by the end of the 90 day
option period, any licenses granted to Genentech by Tanox under Section 4.0 will
immediately terminate, and Genentech shall


                                       25
<PAGE>
grant Tanox a royalty-free, non-exclusive license under Genentech's Patents,
know how and other technology to make, have made, use, sell, have sold or import
Anti-IgE Antibodies and Genentech Licensed Products existing as of the date of
such termination and which have been covered at any time by a claim of a Tanox
Patent.

         In addition, if Genentech terminates this Agreement pursuant to the
foregoing paragraph and Roche does not exercise its option to assume Genentech's
rights and obligations hereunder, Tanox shall have the option for a period of
120 days following the date of termination to acquire from Genentech on mutually
agreeable and commercial reasonably terms Genentech's. Anti-IgE Antibodies and
Genentech Licensed Products existing as of the date of such termination and
which have been covered at any time by a claim of a Tanox Patent, as well as
cell lines producing such materials or substances used in the development and
commercialization of such Antibodies or Products, including data and development
information relating thereto. If Tanox fails to exercise its option and
Genentech thereafter desires to license or sell such Antibodies or Products to a
third party, Genentech shall not license or sell such Antibodies or Products on
terms that are in the aggregate more favorable to such third party than those
terms that Genentech offered to Tanox unless Genentech first offers such
Antibodies or Products to Tanox on such more favorable terms.

         Genentech represents and warrants that it does not presently intend to
terminate this Agreement pursuant to this Section 12.2(a) and is not presently
aware of any existing development activities within Genentech or elsewhere which
would give rise to an Anti-IgE Antibody or Genentech Licensed Product which
Genentech would consider developing following a termination pursuant to this
Section 12.2 (a).

                (b) Tanox may terminate the provisions of Section 5.0 of this
Agreement upon thirty days prior written notice to Genentech. Upon any such
termination, any licenses granted to Tanox by Genentech thereunder will
immediately terminate.

         12.3 DEFAULT. Failure by either Party (the "defaulting Party") to
comply with any of the material obligations contained in this Agreement shall
entitle the other Party (the nondefaulting Party") to give the defaulting Party
notice specifying the nature of the default and requiring it to cure such
default. If such default is not cured within the sixty (60) day period after the
receipt of such notice, the nondefaulting Party shall be entitled, except as
otherwise specifically provided in this Agreement (including, without
limitation, Tanox's right to receive payments under Section 8.0 so long as the
Outline of Terms or Definitive Agreement continue in effect) and subject to any
arbitration award under Section 13.12 (b), to terminate all or any part of this
Agreement or the licenses granted herein and without prejudice to any other
rights conferred on it by this Agreement.

         12.4 SURVIVAL OF PROVISIONS. Except to the extent termination is
expressly permitted herein, the agreements and obligations of the Parties shall
survive to the extent and/or for the purposes provided herein.

    13.0  GENERAL PROVISIONS.

         13.1 ADEQUACY OF CONSIDERATION. By signing this Agreement, each Party
to this Agreement acknowledges the receipt by such Party and the sufficiency to
such Party of the Consideration.

     13.2 Disputes with Ciba. In connection with the Multiparty Transaction,
Genentech agrees that without Tanox's express consent, to the extent consistent
with any obligations Genentech may have as a result of any process to which it
is subject, such as subpoena, deposition or the like during the course of such
dispute, it will not voluntarily or at the request of Ciba interfere with,
participate in, or actively attempt to influence the outcome of any dispute
which may arise between Tanox and Ciba in connection with or relating to the D &
L Agreement, unless such dispute is substantially likely to have a material
effect on Genentech.

                                       27
<PAGE>
         13.3 GUARANTY. Genentech, Inc. absolutely and unconditionally
guarantees the prompt and punctual payment and performance when due of the
obligations of Genentech International Limited to Tanox under this Agreement.
This is a continuing guaranty applicable to and guaranteeing any and all
obligations and liabilities of every kind and character of Genentech
International Limited to Tanox and Genentech, Inc. waives any right to require
that any action be brought against Genentech International Limited or any other
person or entity. Genentech, Inc. also expressly waives all rights to which it
may be entitled by virtue of Chapter 34 of the Texas Business and Commerce Code.

         13.4 NOTICES. All notices which may be required pursuant to this
Agreement (i) shall be in writing, (ii) shall be addressed, in the case of
Genentech (except as otherwise specified herein), to the Corporate Secretary at
the address set forth at the beginning of this Agreement, and in the case of
Tanox to the President at the address set forth at the beginning of this
Agreement, (or to such other person or address as either Party may so designate
from time to time), (iii) shall be mailed, postage-prepaid, by registered mail
or certified mail, return receipt requested, or transmitted by courier for hand
delivery or sent by express courier service, and (iv) shall be deemed to have
been given on the date of receipt if sent by mail or on the date of delivery if
transmitted by courier or express courier service.

         13.5 ENTIRE AGREEMENT. This Agreement, the Outline of Terms, and the
Definitive Agreement to be concluded hereafter are the entire agreements between
the Parties regarding the subject matter hereof, and there are no prior written
or oral promises or representations not incorporated herein or therein. No
amendment or modification of the terms of this Agreement shall be binding on
either Party unless reduced to writing and signed by an authorized officer of
the Party to be bound.

         13.6 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective successors and permitted
assigns. This Agreement shall not be assignable by either Party without the
other's prior written consent, except that this Agreement (with the exception of
Section 9.0 which shall not be assignable without Genentech's prior written
consent, which will not be unreasonably withheld) may be assigned in whole or in
part to an Affiliate or a successor to all or substantially all of a Party's
business by merger, sale of assets, sale of stock or otherwise.


                                       28
<PAGE>
         13.7 WAIVER. The waiver by a Party hereto of any breach of or default
under any of the provisions of this Agreement or the failure of a Party to
enforce any of the provisions of this Agreement or to exercise any right
thereunder shall not be construed as a waiver of any other breach or default or
as a waiver of any such rights or provisions hereunder.

         13.8 SEVERABILITY. If any part of this Agreement shall be invalid or
unenforceable under applicable law, such part shall be ineffective only to the
extent of such invalidity or unenforceability, without in any way affecting the
remaining parts of this Agreement. In addition, the part that is ineffective
shall be reformed in such a manner as to as nearly approximate the intent of the
Parties as possible.

         13.9 PUBLICITY. The Parties acknowledge that certain information
contained in this Agreement will be set forth in a press release with agreed
upon text and release date and time following the execution of this Agreement.
Except for the information in that disclosure, neither Genentech nor Tanox shall
issue any public statement concerning this Agreement or the transactions
contemplated by this Agreement without the other Party's reasonable prior
written consent; provided, however, that either Party may disclose the
transaction or the terms hereof or thereof from time to time without the other
Party's consent (i) if such consent has been requested and not received and such
information is set forth in disclosures to investors and prospective investors
in the securities of a Party in compliance with laws, rules and regulations
covering any such transactions or such Party has a written opinion from outside
counsel that it is otherwise required by law to disclose the transaction or the
terms thereof, or (ii) to the extent that similar disclosure has been previously
approved by the Parties pursuant to this Section 13.9. The foregoing
notwithstanding, Tanox may disclose the terms of this Agreement to its existing
shareholders, investment bankers and other financial consultants, and
prospective investors in Tanox, provided that any such recipient of such
information must agree in writing prior to disclosure to be bound to protect the
confidentiality of that information for a period of at least three (3) years and
in a manner at least as restrictive as that generally set forth in Section 11.0
above.

                                       29
<PAGE>
         13.10 NO PARTNERSHIP. Nothing in this Agreement is intended or shall be
deemed to constitute a partnership, agency, employer-employee or joint venture
relationship between the Parties. No Party shall incur any debts or make any
commitments for the other.

         13.11 SURVIVAL OF REPRESENTATIONS. All agreements and representations
made by the parties in this Agreement shall survive the execution and delivery
of this Agreement, the payment and receipt of Consideration, and the execution
and delivery of any other instrument, or the taking of any other actions
required or provided for in this Agreement.

         13.12 DISPUTE RESOLUTION. Any dispute, controversy or claim arising out
of or relating to the validity, enforceability or performance of this Agreement,
including disputes relating to alleged breach or termination of this Agreement
but excluding any determination as to the validity of the Parties' patents
(hereinafter, the "Dispute"), shall be settled in accordance with the provisions
of this Section 13.12, and no Party can initiate any litigation in connection
with a Dispute except to enforce an arbitration award under Section 13.12 (b).
If a Party intends to begin mediation or arbitration to resolve a Dispute, such
Party shall provide written notice to the other Party informing such other Party
of such intention and the issues to be resolved. From the date of such request
and until such time as any matter has been finally settled by mediation or
arbitration, the running of the time periods contained in Section 12.3 in which
a Party must cure a breach of this Agreement shall be suspended as to the
subject matter of the Dispute.


                                       30
<PAGE>
         (a) MEDIATION. The Parties have entered into the Agreement in good
faith and in the belief that it is mutually advantageous to them. It is with
that same spirit of cooperation that they pledge to attempt to resolve any
dispute amicably and without the necessity of litigation. Accordingly, they
agree that if any Dispute should arise, prior to the commencement of any legal
action, they will first seek to mediate their Dispute by mediation, with a
mediator mutually agreeable between the Parties. If the Parties are unable to
agree upon a mediator within ten (10) days of the date a Party has requested
mediation, either one of them may thereafter request JAMS/ENDISPUTE to designate
a mediator to preside over the mediation proceeding. The Parties agree to sign a
document agreeing that the mediation and mediator will be governed by the
provisions of Chapter 154 of the Texas Civil Practice and Remedies Code and such
other rules as the mediator prescribes. The Parties commit to participate in the
proceedings in good faith with the intention of resolving the Dispute, if at all
possible. The fees and expenses of the mediator will be shared equally by the
Parties. The mediator is disqualified as a witness, consultant, expert or
counsel for any Party with respect to the Dispute and any related matters.

         (b) BINDING ARBITRATION. If the Dispute has not been resolved by
mediation within sixty days after the request for mediation is made, then upon
the request of either party, the Dispute will be settled by binding arbitration
as provided in this Section 13.12 (b).

            (1) The arbitration shall be administered by the American
Arbitration Association ("AAA"), pursuant to its then current Commercial
Arbitration Rules, except as otherwise provided in this Section 13.12 (b). The
arbitration shall be conducted by a panel of three arbitrators ("the Panel").
The Panel shall be selected from a pool of arbitrators to be presented to the
Parties by AAA.

            (2) If a Party can demonstrate to the Panel that the complexity of
the issues or other reasons warrant the extension of one or more of the time
tables in the AAA rules, the Panel may extend such time tables, but in no event
shall the time tables be extended so that the proceeding extends more than 1
year from its beginning to the award.

                                       31
<PAGE>
            (3) The Parties (i) acknowledge that the issues that may arise in a
Dispute may involve a number of complex matters and (ii) confirm their intention
that each Party will have the opportunity to conduct complete discovery with
respect to all material issues involved in the Dispute in accordance with the
rules of the Federal Rules of Civil Procedure.

            (4) The Panel shall, in rendering its decision, apply the
substantive law of the state in which the proceeding takes place, without regard
to its conflict of laws provisions, except that the interpretation of and
enforcement of this Section 13.12 (b) shall be governed by the Federal
Arbitration Act. The Panel shall apply the Federal Rules of Evidence to the
hearing. The proceeding shall take place in San Francisco, California if
arbitration is initiated by Tanox and in Houston, Texas if arbitration is
initiated by Genentech. The fees of the Panel and AAA shall be paid in the
manner designated by the Panel under Section 13.12 (b) (6) below.

            (5) The Panel is empowered to award any remedy allowed by law,
including money damages, prejudgment interest and attorney's fees, and to grant
final, complete, interim, or interiocutory relief, including injunctive relief,
but excluding punitive damages and multiple damages. The Parties shall be deemed
to have waived any right to such punitive damages or multiple damages.

            (6) Unless the Panel directs otherwise pursuant to Section 13.12 (b)
(5) above, each Party shall bear its own legal fees. The Panel shall assess
costs, fees and expenses of the AAA and the Panel to the Parties in the manner
the Panel deems appropriate under the circumstances.

            (7) The arbitration proceeding shall be confidential and the Panel
shall issue appropriate protective orders to safeguard each Party's Confidential
Information. Except as required by law, no Party shall make (or instruct the
Panel to make) any public announcement with respect to the proceedings or
decision of the Panel without prior written consent of each other Party. The
existence of any Dispute submitted to arbitration, and the award, shall be kept
in confidence by the Parties and the Panel, except as required in connection
with the enforcement of such award or as otherwise required by applicable law.

                                       32
<PAGE>
         (c) ENFORCEMENT. For purposes of this Section 13.12, the Parties agree
to accept the jurisdiction of the federal counts located in the Southern
District of Texas with respect to arbitration proceedings initiated by Genentech
and with the Northern District of California with respect to arbitration
proceedings initiated by Tanox for the purposes of enforcing awards entered
pursuant to Section 13.12 (b) and for enforcing the agreements reflected in this
Section 13.12.

         13.13 AGREEMENT TO PERFORM NECESSARY ACTS. Each Party agrees to perform
any further acts and execute and deliver any and all further documents,
agreements, and/or instruments which may be reasonably necessary or desirable to
carry out or effect the provisions of this Agreement.

         13.14 COUNTERPARTS. This Agreement may be executed in counterparts, and
each such counterpart shall be deemed an original for all purposes.


GENENTECH, INC.                                 TANOX BIOSYSTEMS, INC.
By:                                             By: David Anderson
Title: CEO & President                          Title: Executive Vice President

GENENTECH INTERNATIONAL LIMITED
By: PETER MARTIN
Title: Director

                                       33
<PAGE>
                                                                       EXHIBIT 1


               OUTLINE OF TERMS FOR SETTLEMENT OF THE LITIGATIONS
             AMONG GENENTECH INC., GENENTECH INTERNATIONAL LIMITED,
                             TANOX BIOSYSTEMS, INC.
                             AND CIBA-GEIGY LIMITED
                              RELATING TO ANTI-IGE

                        INHIBITING MONOCLONAL ANTIBODIES

In 1993 Tanox sued Genentech for fraud and misappropriation of know-how in the
context of anti-IgE-antibody projects to which both companies are committed.
Genentech then sued Tanox and, later on Ciba for infringement of Genentech's US
"Cabilly" patent by their anti-IgE and anti-HIV monoclonal antibody projects.
Ciba and Tanox filed a counterclaim for invalidation of said patent. Tanox has
further filed certain patent applications on which some patent rights have
already been granted which may extend to Genentech's anti-IgE substance,
although Genentech does not agree that they do. Now the parties are willing to
settle all their pending litigations including potential future disputes
regarding anti-IgE antibodies on the basis of the following principles:

1. MERGER OF ANTI-IGE PROJECTS

   The anti-IgE-antibody projects of Genentech on the one side and Ciba/Tanox on
the other side shall be merged, but Genentech and Ciba/Tanox will continue to
take their respective anti-IgE antibodies through Phase II clinical trials
currently in progress or planned to be performed during 1996. Based upon the
results of these trials and other relevant considerations Genentech, Tanox and
Ciba shall jointly discuss and decide by June 1, 1997 at the latest which of the
anti-IgE antibodies shall be taken up in Phase III trials, be developed for
additional indications (if any), be submitted for marketing authorization and be
commercialized as a pharmaceutical product ("anti-IgE Product"). The final
Agreement(s) as referred to in Section 8.2 shall provide for procedures in case
of a disagreement between the parties. All development activities shall be
supervised by a Steering Committee on which each party is represented. The
merging of each party's anti-IgE-antibody projects and the development and
commercialization thereof according to this Outline of Terms shall extend to all
IgE inhibiting antibodies (including fractions or derivatives thereof) which
have been identified and synthesized by either party hereto *

<PAGE>
2. SHARING OF DEVELOPMENT COST

   All development activities for the anti-IgE Project/Product including such
things as the manufacture of the clinical material, the conduct of clinical
trials, the development of the process to make anti-IgE antibodies and required
supporting activities/services and fees which are necessary for obtaining the
NDA in the USA and the marketing authorization(s) in Europe shall be pooled
between Genentech and Ciba. This cost pooling shall commence as of the date on
which the selection of the anti-IgE Product for further development has been
made (the "Selection Date").

   These pooled costs shall be allocated to the US development cost account on
the one side and the Europe development cost account on the other side on a pro
rata basis to be agreed upon according to the prospective sales potential for
the anti-IgE Product in each of the two territories.

   The development cost allocated to the US shall be shared between Ciba and
Genentech in the ratio of *, whereas the development cost for Europe -subject to
Section 11 hereafter- shall be borne as to * by Ciba and as to * by Genentech.

   Any additional development cost required for the commercialization of the
anti-IgE Product in territories outside the US and Europe shall be borne
exclusively by Ciba/Tanox according to the Development and Licensing Agreement
between Tanox and Ciba dated May 11, 1990, and the amendment thereto relating to
the territories of Taiwan, Korea, Singapore, China and Hong Kong (the "D&L
Agreement"), subject to additional cost obligations for Japan which may arise
according to Section 11 hereafter.

3. COMMERCIALIZATION

   3.1 The anti-IgE Product shall be commercialized in the US under one brand
under a co-promotion scheme by Ciba and Genentech to be further elaborated and
agreed upon. In lieu of Tanox's right under the D&L Agreement to participate in
such co-promotion in the US, Tanox will be entitled to the payments set forth in
Section 5.1 hereafter.

   All the cost for the manufacturing/purchase of anti-IgE Product and all the
cost for its marketing and sale in the US including all supporting and auxiliary
activities and royalties to third parties (if any) shall be shared between Ciba
and Genentech on a * basis.

<PAGE>
   All the net profits from the commercialization of the anti-IgE Product in the
US shall be shared between Ciba and Genentech on a * basis.

   3.2 The anti-IgE Product shall be commercialized in Europe exclusively by
Ciba, subject to Section 11 hereafter. All the cost for the
manufacturing/purchase of the anti-IgE Product and all the cost for its
marketing and sale including all supporting activities and royalties to Tanox on
the one hand and third parties (if any) and all the net profits from the
commercialization of the anti-IgE Product in Europe shall be shared between Ciba
and Genentech on the basis of * (Ciba): * (Genentech).

   3.3 In all countries in the world other than US and Europe, Ciba shall have
exclusive rights for the commercialization of the anti-IgE Product, subject to
certain rights which Tanox has in Taiwan, Korea, Singapore, China and Hong Kong
according to a separate agreement and the rights for Japan as set out in Section
11 hereafter. No specific compensation shall be due to Genentech by Ciba for
these rights.

4. MANUFACTURE

   Ciba and Genentech together with Tanox (to the extent they are exercising
their rights of co-manufacturing) shall share in the responsibility for assuring
adequate product supply necessary for commercialization of the anti-IgE Product.
Genentech shall, on request of Ciba, manufacture the jointly selected anti-IgE
Product up to a quantity of * of the anti-IgE antibody per year and shall sell
the anti-IgE Product to the appropriate selling organizations in the US, Europe
and the rest of the world at a price equal to the full manufacturing cost as
defined in the Appendix hereto, plus an uplift of *. The parties also shall
consider and, as appropriate, reach agreement on plans to assure adequate
product supply in the event such * quantity is insufficient to meet projections
for product requirements reasonably established by mutual agreement of the
parties. The parties acknowledge that such manufacturing by Genentech and any
manufacturing by Ciba shall be subject to Tanox's co-manufacturing rights under
the D&L Agreement and the terms of a manufacturing and supply agreement to be
negotiated between Tanox and the purchasing party in the manner contemplated by
the D&L Agreement. Tanox agrees to waive its rights to compensation for
relinquishing its rights under the D&L Agreement to manufacture * of such *
which may be manufactured by Genentech, but Tanox does not waive its right
prospectively to exercise its co-manufacturing rights. If Genentech terminates
its cooperation hereunder, it shall continue to be bound by the above supply
obligation for a reasonable period of time to establish an alternative supply
source for the anti-IgE Product, such period to be mutually agreed upon in the
Definitive Agreement.

<PAGE>
   The manufacturing price paid to Genentech shall constitute a cost element in
the calculation of the cost/net profit to be shared according to Sec. 3.1
paragraphs 2 and 3 and Sec. 3.2 paragraph 2.

   In the event that there should not be enough anti-IgE Products available to
meet the requirements of the different markets the available quantities shall be
allocated pro rata to the respective potential in these markets.

5. ROYALTIES AND MILESTONE PAYMENTS TO TANOX

   5.1 Tanox is entitled to a royalty on the net sales of the anti-IgE Product
in the USA, as set out in the D&L Agreement, which amounts to * of such US net
sales (or * if there is no valid Tanox patent), plus (i) * on * of such US net
sales, payable by Genentech, and (ii) * of Ciba's net profits from the
commercialization of the anti-IgE Product in the US, payable by Ciba.

   5.2 For the sales of the anti-IgE Product in Europe and the rest of the
world, Tanox shall be paid the royalties specified in the D&L Agreement.

   5.3 The milestone payments payable to Tanox specified in the D&L Agreement
shall become due regardless of whether the anti-IgE Product selected originates
from Tanox or Genentech and, except for payments due for NDA/PLA submission and
approval in Japan, shall be included in the cost to be shared according to
Section 2 above.

   5.4 Payments made to Tanox in connection with development activities
undertaken by Tanox for the anti-IgE Project/Product after the Selection Date
shall be included in the cost to be shared according to Section 2 above. The
parties acknowledge and agree that for 1996 the already approved Tanox budget
will continue. For 1997 the Tanox budget will be similar to that of 1996, unless
Genentech, Tanox and Ciba conclude that activities at Tanox for 1997 would
result in a significant reduction of Tanox's 1997 budget. In such event Ciba,
Genentech and Tanox will negotiate in good faith an appropriate payment in
addition to such reduced budget covering Tanox's reasonable cost for phaseout of
its activities. Such payment, however, shall not exceed * of the budget
calculated for the last full 12 months prior to the Selection Date. For
subsequent years thereafter, development activities which should be undertaken
by Tanox so as to maintain its active involvement will be agreed by Ciba,
Genentech and Tanox and a Tanox budget will be submitted for approval in
accordance with current procedures.

<PAGE>
6. LICENSES

   Each party hereto shall grant to the other party any and all licenses and/or
sublicenses (to the extent possible and subject to payment of the appropriate
royalty or other payment amount due to third parties, such payment to be borne
or shared by the parties as otherwise provided herein, or if not provided
herein, then only if the party sublicensed pays such royalty or amount) under
their respective present and future patent rights, other intellectual property
rights, licenses, know-how, technology, cell lines, materials, etc. they own
and/or control to the extent they are required for or are to be used by the
parties as jointly agreed for the development, manufacture, use and sale of the
anti-IgE Product. No other compensations for these licenses shall be due than
those set out in this outline.

   Each party hereto represents that it does not have knowledge of any such
rights that it currently owns and to which it currently has a license which
cannot be made accessible to the other parties hereto.

   To the extent any such rights of a party are not licensable or sublicensable
such party shall take reasonable actions to permit the commercialization of the
anti-IgE Product on a reasonable basis in the light of the restrictions to which
it is subject.

7. SETTLEMENT

   7.1 The parties hereto shall dismiss all claims filed in the lawsuits against
each Genentech and F. Hoffmann-La Roche Ltd. and its three affiliates concerned
on the one side and Ciba and Tanox on the other side pending and consolidated
with the US District Court for the Southern District of Texas, Houston Division
(the "Litigation").

   7.2 Except as may be otherwise agreed between some of the parties hereto,
each party shall bear all cost and expenditure incurred by it under or in
connection with the above lawsuits.

8. CONDITIONS PRECEDENT

   8.1 The parties are aware that the envisaged terms of settlement set out
herein might need clearance by the relevant authorities and agree to cooperate
via their internal and external experts in this respect.

<PAGE>
   8.2 The parties shall negotiate in good faith and enter into (a) detailed
agreement(s) (the "Detailed Agreement") implementing and completing the terms
outlined herein within 6 months from the execution of this Outline.

9. PUBLICATIONS

   Unless otherwise agreed in advance in writing among all parties hereto, none
of the parties hereto shall directly or indirectly make any public statement,
press release or give any information to the public about this Outline of Terms
and the Detailed Agreement to be entered into pursuant hereto. However, this
restriction shall not apply to disclosure of information which the parties
acknowledge will be set forth in press release with agreed upon text and release
date and time, to be prepared following execution of the Outline of Terms, and
to statements, information, or announcements required by law, regulation or
administrative action to be disclosed including disclosure to (prospective)
investors in the securities of a party. In such event, the parties shall
promptly coordinate to the extent possible, the wording of any such disclosures.
This restriction on publication shall not be applicable to disclosures made to
third parties who are subject to non-disclosure or confidentiality obligations.

10.   CONFIDENTIALITY

   10.1 Any information and data disclosed by a party to another party hereto
(the "Receiving Party") in the context of the selection, development and
commercialization of the anti-IgE Product shall be kept strictly confidential by
the Receiving Party, shall not be disclosed to any third party by the Receiving
Party and shall not be used by the Receiving Party for any purpose other than
those contemplated under this Outline of Terms, the D&L Agreement and the
Detailed Agreement.

   10.2 The obligations set out in Section 10.1 above shall not apply to
information and data of which the receiving party can show that it:

        (i)  is or has become generally available to the public otherwise than
             through violation of the obligation set out in Section 10.1 above;

        (ii) has been received from a third party who did not acquire it
             directly or indirectly from the disclosing party.

   Notwithstanding the above, the parties may disclose such information (a) to
the extent as required to be disclosed to comply with applicable laws, to defend


<PAGE>
or prosecute litigation or to comply with governmental regulations including
disclosure to (prospective) investors in the securities of a party, provided
that the receiving party provides prior written notice of such disclosure to the
disclosing party and takes reasonable and lawful actions to avoid and/or
minimize the degree of such disclosure, and (b) to their legal representatives,
to affiliates and their legal representatives, and to consultants to the extent
such disclosure is intended to further the purposes contemplated under this
Outline of Terms, the D&L Agreement, and the Detailed Agreement, provided such
legal representatives, affiliates and consultants are covered by obligations of
confidentiality with respect to such information no less stringent than those
set forth herein, and further (c) in connection with publications, lectures,
seminars or other presentations with respect to which all parties hereto have
agreed in advance in writing.

11.   RIGHTS RESERVED TO ROCHE

   11.1 The parties acknowledge that Genentech is a party to certain agreements
with F. Hoffman-La Roche Ltd. and certain of its affiliates (collectively,
"Roche") under which Roche has certain rights to products being developed by
Genentech (the "G/R Agreements"). In the event Roche exercises its rights under
the G/R Agreements, Genentech and Roche have requested that certain rights to
participate in the commercialization of the anti-IgE Product be reserved to
Roche. Subject to receipt by Ciba and Tanox of a joint notification by Roche and
Genentech of Roche's exercise of rights under the G/R Agreements and to its
joinder in this Outline of Terms and the Detailed Agreement implementing and
completing the terms outlined herein, the parties agree to reserve for Roche's
benefit certain rights to participate in commercialization of the anti-IgE
Product in Europe and Japan as set forth in this Section 11.

   11.2 For Europe and Japan, Roche shall have an option to participate in the
commercialization of the anti-IgE Product according to the following terms:

   Roche's option, which shall be established and may be exercised on a
country-by-country basis, will be subject to the anti-IgE Product having a
significant "general practitioner potential" ("GP potential") in each country.
The GP potential of the anti-IgE Product is characterized in particular by the
following (cumulative) criteria: (i) clinical activity in patients with mild to
moderate allergic asthma and/or allergic rhinitis is demonstrated; (ii) a
patient friendly formulation (e.g. inhalation device or pen for autoinjection);
(iii) safety profile of the Product and its application is adequate for
self-administration; (iv) dose level and cost for the galenical formulation
and/or a device, such as to permit pricing accepted for reimbursement by social
security schemes in the respective country with a sufficient gross margin to
support the business case for co-promotion.

<PAGE>
   The envisaged commercialization scheme in Europe would be a co-promotion by
Roche of the anti-IgE Product sold by Ciba wherever legally possible and, in
those countries in Europe where no co-promotion is possible, each of Ciba and
Roche may market and sell the anti-IgE Product under different trademarks on its
own. The commercial terms and conditions e.g. modus of exercising of the option
(until submission of marketing authorization to the competent authorities at the
latest), time and manner in which reimbursement/sharing of development costs
will occur, and manner in which co-promotion sales will be attributed to each
party, etc., will be part of the detailed agreement(s) referenced in Section
8.2. It is understood, however, that each Ciba and Roche should be able to make
bookings of sales in the same order of magnitude.

   11.3 For each country in Europe in which Roche exercises its option, Ciba
agrees to share profits on a * basis under a co-promotion scheme, subject also
to a * sharing of all development and commercialization costs as provided in
Sections 2 and 3 above, in lieu of the * cost and profit sharing for Europe
otherwise provided in such Sections 2 and 3. For any country in Europe in which
Roche chooses not to exercise its option, the cost and profit sharing ratios
will continue to be * between Ciba and Genentech, as set out in Section 3.2
paragraph 2 above. In case of a co-marketing in a country Ciba and Roche shall
negotiate in good faith the terms and conditions of such co-marketing in that
country on the basis of a * sharing of the pertaining development cost, but,
with respect to that country no sharing of marketing cost nor profit sharing
neither between the co-marketing parties nor according to sections 2 and 3 above
shall apply. If Roche exercises its option hereunder only for a limited number
but not for all countries in Europe, then the costs to be shared in each country
in which Roche exercises its option(s) will be based on a allocation of all
development and commercialization costs attributable to Europe on a pro rata
basis to each such country in a manner to be agreed upon according to the
prospective sales potential for the anti-IgE Product in each of the countries in
Europe. Profits for each such country will be based on total sales revenues for
the anti-IgE Product in each such country.

   11.4 At the time Roche exercises its option for any country in Europe, Roche
and Genentech shall notify Ciba of their agreement regarding which of them will
be responsible for the costs to be shared or whether each will share a portion
thereof and regarding the manner in which they will participate in the profits
to be shared. Such notice will be accompanied by payment of an amount sufficient
to reduce Ciba's share in those costs already shared on a * basis to *.

   11.5 In Japan, subject to Roche's participation in co-development of the
anti-IgE Product for Japan, Roche shall have an option to market and sell the
approved anti-IgE Product on its own under a different trademark. To maintain
its rights for Japan hereunder, Roche shall have twelve (12) months from the
date of execution of this Outline of Terms in which to notify Ciba and Tanox of
its
<PAGE>
     election to participate in the development of the anti-IgE Product for
Japan. At such time as Roche notifies Ciba of such election, Roche shall be
obligated to reimburse Ciba for * of all development costs incurred by Ciba for
development in Japan since the Selection Date and Roche shall be entitled
immediately to participate with Ciba/Tanox in the development activities in
Japan on the basis of a * sharing of development cost including the milestone
payments to Tanox due on filing and grant of NDA/PLA in Japan, as specified in
the D&L Agreement. In the event that it should become evident that the anti-IgE
Product has no GP Potential in Japan, contrary to prior expectations, Ciba
and/or Roche may chose to terminate the joint development in Japan, and Ciba
shall retain all further rights to development and commercialization of the
anti-IgE Product in Japan against reimbursement of Roche's development cost
including mile-stone payment, if any incurred.

     11.6 The parties acknowledge that the detailed agreement(s) contemplated
under Section 8.2 will contain provisions which complete and implement the terms
outlined in this Section 11. The parties agree that Roche may participate in
negotiations relating to such provisions whether or not Roche has exercised its
rights under the G/R Agreements so that Roche will have the opportunity to
participate in establishing the detailed terms governing the rights reserved to
Roche hereunder.

12. EARLY TERMINATION

     Genentech may terminate the cooperation hereunder at any time during the
     development of the Anti-IgE Product by giving 120 days prior notice to Ciba
     and Tanox and paying all amounts due hereunder up to such termination date.
     If Genentech terminated its cooperation hereunder, Roche shall have the
     option exerciseable for a period of 30 days after Genentech's termination,
     to assume all of Genentech's rights and obligations hereunder. If Roche
     does not exercise such option, all of Genentech's rights under this
     cooperation, except for rights with respect to which Roche has exercised
     its options under Section 11, shall revert to Ciba, which shall be entitled
     to continue the development and to commercialize the Anti-IgE Product on
     its own or with Roche, as the case may be, without further compensation to
     Genentech, an which shall assume Genentech's obligations hereunder.

     Ciba may terminate the cooperation hereunder at any time during the
     development of the Anti-IgE Product by giving 120 days prior notice to
     Genentech and Tanox and paying all amounts due hereunder up to such
     termination date. Such notice also shall act as notice to Tanox of Ciba's
     termination of the D&L Agreement. In such even, subject to the right of the
     parties hereunder, the termination
<PAGE>
     provisions of the D&L Agreement shall govern such termination. Genentech
     and, as applicable, Roche shall be entitled to continue development in the
     U.S., Europe, and Japan, as the case may be, in Ciba's stead, subject to
     assuming Ciba's obligations hereunder, and to reimbursing Tanox for any
     compensation which may be payable by Tanox to Ciba as a result of such
     termination. Tanox shall have and retain exclusive rights for the
     commercialization of the Anti-IgE Product in all other countries in the
     world.

13. BINDING NATURE

     The contents of this Ouline of Terms represent the bona fide intent of the
     parties. The parties hereto shall use all reasonable effort to complete the
     final agreement(s) as referred to in Section 8.2 above as soon as
     reasonably practicable. It is understood, however, that unless and until
     the said formal agreement(s) is/are completed and entered into the parties
     (including their legal successors) shall be legally bound by and shall
     operate under the terms reflected in the present Outline of Terms, which
     shall be governed by the laws of the State of New York without regard to
     conflict of law principles.

Tanox Biosystems Inc.:                                  Date____________________



Genentech Inc.:                                         Date____________________



Genentech International Limited:                        Date____________________



Ciba-Geigy Limited:                                     Date____________________
<PAGE
                                                  > APPENDIX TO OUTLINE OF TERMS


DEFINITION OF FULLY BURDENED MANUFACTURING COST

Genentech's Fully Burdened Manufacturing Cost shall mean:

(a)  the actual direct cost associated with the manufacture of the Anti-IgE
     Product, i.e. direct material cost, direct labor cost, direct equipment
     cost, direct facility expense, direct quality control expense, direct
     energy cost, direct environmental expense, provided, however, that such
     actual direct cost shall not include cost associated with idle plant
     capacity, plus

(b)  an allocation of Genentech's overhead cost associated with such
     manufacture, up to a maximum of fifty percent of the actual price cost,
     which allocation for manufacturing overhead shall be made in accordance
     with U.S. Generally accepted cost accounting principles consistently
     applied by Genentech across all similar pharmaceutical manufacture
     operations, plus

(c)  Genentech's allocable intellectual property acquisition, licensing and
     royalty cost paid to third parties (except Tanox) upon the sale of Anti-IgE
     Products to third parties, plus

(d)  any other costs borne by Genentech for transport, customs clearance and
     storage of Anti-IgE Product, to the extent necessary (i.e. freight, duty,
     insurance and warehousing).

<PAGE>
                                   EXHIBIT 2
                    REPRESENTATIONS AND WARRANTIES BY TANOX


(a)  Before executing this Agreement, Tanox became fully informed of the terms,
     contents, conditions, and effect of this Agreement.

(b)  Tanox is a corporation duly organized, existing, and in good standing under
     the laws of the State of Texas.

(c)  Tanox possesses all requisite power and authority to enter into and perform
     this Agreement and to carry out the transactions contemplated herein.

(d)  Tanox has taken all necessary corporate and legal action to authorize the
     execution, delivery, and performance of this Agreement.

(e)  No consent or authorization of, filing with or any other act by or in
     respect of any other person (including any shareholder or creditor) or
     court is required in connection with the settlement of All Claims as set
     forth in this Agreement or with the execution, delivery, or performance by
     Tanox or the validity or enforceability as to Tanox of this Agreement.

(f)  This Agreement has been duly executed and delivered by Tanox and
     constitutes a legal, valid and binding obligation of Tanox enforceable
     against Tanox in accordance with its terms.

(g)  No promise or representation of any kind has been made to Tanox or by
     anyone acting for Tanox, except as is expressly stated in this Agreement.

(h)  Except for certain claims or portions thereof which may have been assigned
     to its attorneys, Tanox is the lawful owner of All Claims asserted by Tanox
     in the Lawsuit and has not assigned, pledged, or in any other manner sold
     or transferred any right, title, interest, or claim that arises out of or
     is the subject of the Incident and/or the Lawsuit.

(i)  In entering this Agreement, Tanox has had the benefit of the advice of
     lawyers of its own choosing; and Tanox enters this Agreement freely, by
     Tanox's own choice, and judgment, and without duress or other influence.

(j)  Tanox understands that this Agreement is a full, final, and complete
     release of the other Party to this Agreement and that the Consideration
     includes the ONLY benefits Tanox shall ever receive from such Party as a
     result of the Incident and the Lawsuit.

(k)  Tanox recognizes that the recitations contained in this Agreement are
     contractual and not a mere recital.

<PAGE>
                                    EXHIBIT 3
                  REPRESENTATIONS AND WARRANTIES BY GENENTECH


(a)  Before executing this Agreement, Genentech became fully informed of the
     terms, contents, conditions, and effect of this Agreement.

(b)  Each of Genentech, Inc. and Genentech International Limited is a
     corporation duly organized, existing, and in good standing under the laws
     of the respective state, country, or jurisdiction under which they each
     have been organized.

(c)  Genentech possesses all requisite power and authority to enter into and
     perform this Agreement and to carry out the transactions contemplated
     herein.

(d)  Genentech has taken all necessary corporate and legal action to authorize
     the execution, delivery, and performance of this Agreement.

(e)  No consent or authorization of, filing with or any other act by or in
     respect of any other person (including any shareholder or creditor) or
     court is required in connection with the settlement of All Claims as set
     forth in this Agreement or with the execution, delivery, or performance by
     Genentech or the validity or enforceability as to Genentech of this
     Agreement.

(f)  This Agreement has been duly executed and delivered by Genentech and
     constitutes a legal, valid and binding obligation of Genentech enforceable
     against Genentech in accordance with its terms; provided, that this
     representation is not intended to apply to Section 2.7 of the Agreement.

(g)  No promise or representation of any kind has been made to Genentech or by
     anyone acting for Genentech, except as is expressly stated in this
     Agreement.

(h)  Genentech is the lawful owner of All Claims asserted by Genentech in the
     Lawsuit and has not assigned, pledged, or in any other manner sold or
     transferred any right, title, interest, or claim that arises out of or is
     the subject of the incident and/or the Lawsuit.

(i)  In entering this Agreement, Genentech has had the benefit of the advice of
     lawyers of its own choosing; and Genentech enters this Agreement freely, by
     Genentech's own choice, and judgment, and without duress or other
     influence.

(j)  Genentech understands that this Agreement is a full, final, and complete
     release of the other Party to this Agreement and that the Consideration
     includes the ONLY benefits Genentech shall ever receive from such Party as
     a result of the incident and the Lawsuit.

(k)  Genentech recognizes that the recitations contained in this Agreement are
     contractual and not a mere recital.

<PAGE>
                                    EXHIBIT 4
                                 PAYMENT AMOUNTS


                        EVENT                                    PAYMENT AMOUNT
                    -------------                               ----------------

(a) Execution of this Agreement and dismissal of all claims in          *
    the Lawsuit as described in Paragraph 2.1 of this Agreement.

(b) Initiation of the first Pivotal Clinical Trial                      *

(c) Filing of the first Product License Application (or                 *
    equivalent in the U.S.)

(d) First approval by the Food and Drug Administration of a             *
    Product License Application (or equivalent in the U.S.)

(e) At such time as total annual net sales of all Genentech             *
    Licensed Products and Anti-IgE Antibody products sold
    under the Outline of Terms and Definitive Agreement
    first exceed *

If the total payment set forth above has been made by Genentech under this
Agreement for an event described above, no additional payment shall be due under
this Agreement for any subsequent occurrence that is covered by the language
describing that event.

<PAGE>
                                    EXHIBIT 5
                               SECTION 9.0 PATENTS


U. S. Patent Nos.    4,356,270
                     4,366,246
                     4,425,437
                     4,431,739
                     4,571,421
                     4,704,362
                     5,221,619
                     5,420,020

   and any and all patents maturing from applications that are divisionals,
continuations or continuations-in-part of the parent applications of any of the
foregoing; foreign counterparts, if any, of the foregoing; and any and all
reissues or extensions of any of the foregoing.

   U. S. Patent No. 4,816,567 and the claims relating to chimeric antibodies
found in patents or patent applications arising from divisionals, continuations
or continuations-in-part of any application from which U.S. Patent No. 4,816,567
claims priority (excluding U.S.S.N. 07/205,419 and foreign counterparts thereof)
as well as the foreign counterparts of the foregoing and any and all reissues,
reexaminations or extensions of the foregoing; and

   any patent issuing based on U.S.S.N. 07/205,419 (a continuation of the
application maturing into U. S. Patent No. 4,816,567) relating to the
coexpression of immunoglobulin chains in recombinant host cells, as well as the
divisionals, continuations or continuations-in-part of such application as well
as foreign counterparts, if any, of the foregoing; and any and all reissues,
reexaminations or extensions of the foregoing.


<PAGE>
                                    EXHIBIT 6
                           TANOX PRODUCT OPPORTUNITIES

   o   Allergen-specific human IgA antibodies for mucosal administration.

   o   Anti-HIV-1 neutralizing antibodies.

   o   MIGIS-mIgA antibodies (against a portion of membrane IgA).

   o   MIGIS-mIgG antibodies (against a portion of membrane IgG). o MIGIS-mIgM
       antibodies (against a portion of membrane IgM).

   o   Anti-Rh antibodies.

   o   Antibodies against adipocytes.

   o   Anti-tissue factor antibodies.

   o   Anti-complement pathway antibodies.

   o   Anti-Epstein Barr virus antibodies.

   o   Anti-mb-1 antibodies.

   o   Anti-drug resistant bacteria MAbs

   o   Therapeutic immunogen for treating human IgE-mediated diseases. o Novel
       anti-HIV binding protein and related products. o PLATAR (Polyvalent
       ligand against T-cell antigen receptors): Polyvalent binding
       fragments of T-cell receptors, including anti-CD3).

<PAGE>
                                    EXHIBIT 7

Foreign patents and applications based on U.S. Serial No. 07/110,255 entitled
METHOD AND THERAPEUTIC COMPOSITIONS FOR THE TREATMENT OF BLEEDING DISORDERS
filed October 20, 1987, which is a continuation-in-part of U.S. Serial No.
06/926,977

and

U.S. and foreign patents and applications based on U.S. Serial No. 07/237,585
entitled METHOD AND THERAPEUTIC COMPOSITIONS FOR THE TREATMENT OF MYOCARDIAL
INFARCTION filed August 25, 1988, which is a continuation-in-part of U.S. Serial
No. 07/209,665 filed June 21, 1988, which is a continuation-in-part of U.S.
Serial No. 110,2565 filed October 20, 1987, which is a continuation-in-part of
U.S. Serial No. 06/926,977 filed Nov. 4, 1986.