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EXHIBIT 10.17

CERTAIN INFORMATION IN THIS EXHIBIT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. IN ACCORDANCE WITH RULE 406 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, SUCH INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF SUCH OMITTED INFORMATION HAS
BEEN INDICATED WITH AN ASTERISK(*).

                                  CONFIDENTIAL
                              TANOX BIOSYSTEMS INC.

                     Settlement and Participation Agreement

     This Settlement and Participation 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 F. Hoffmann-La Roche Ltd. with its principal offices
at CH-4070, Basal, Switzerland ("Roche"), Hoffmann-La Roche, Inc., Roche Holding
Ltd. and Roche Holdings, Inc., (collectively with Roche, the "Roche Entities").

     Tanox and the Roche Entities 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, Genentech, Inc. ("Genentech") and Ciba-Geigy Ltd. ("Ciba"), together
with the participation of Roche, also have reached an agreement in principle
under which Genentech and Tanox and Ciba would merge their respective anti-IgE
antibody projects. Such agreement has been memorialized in an Outline of Terms
which Tanox, Genentech, and Ciba are executing on the Effective Date and which
provides for the development and commercialization of one or more anti-IgE
products with the participation of Roche, should it exercise certain options
provided therein {the "Multiparty Transaction").

     Discussions relating to the Multiparty Transaction and settlement of the
Lawsuit also have culminated in an agreement between Tanox and Genentech
entitled Settlement and Cross-Licensing Agreement which has been executed prior
to or simultaneously with the Effective Date {the "Genentech Agreement") and in
certain additional agreements between Tanox and Roche relating to such
collaboration and to certain licensing relationships based on the Parties desire
to avoid the possibility of future disputes.

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     Therefore, Tanox and Roche agree as follows:

     1.0 DEFINITIONS. In addition 10 the words otherwise used as defined 1em1s
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 either Party; (ii) an organization which directly or indirectly owns and/or
controls fifty percent (50%) or more of the Voting stock of either Party; (iii)
an organization which is directly or indirectly under common control of either
Party through common share holdings; or (iv) an organization as to which either
Party can demonstrate that the operation and management of such organization is
under the control, directly or indirectly, of the Party.

     1.2 "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
or by virtue of any judicial decision, or 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

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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 post
judgment interest, costs and attorney's fees.

     1.3 "ANTI-IgE 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. ANTI-IgE ANTIBODY PRODUCT(S) means any
pharmaceutical formulation, product, method or system which contains an Anti-IgE
Antibody.

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

     1.5 "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 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 by

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Genentech of information provided by Tanox to Genentech pursuant to the
Collaboration Agreements or otherwise during such negotiations; 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.

     1.6 "OUTLINE OF TERMS" shall mean the agreement between Tanox, Genentech
and Ciba which sets forth the basic terms agreed by such parties with respect to
the joint development and commercialization of Anti-IgE Antibodies, with the
participation of Roche to the extent it exercises its options thereunder, and
which is intended to be followed and 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")].

     1.7 "PARTY" shall mean, when used in the singular, either Tanox or the
Roche Entities, as appropriate, and "Parties" shall mean Tanox and the Roche
Entities.

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

     1.9 "ROCHE ENTITIES" shall mean, jointly and severally, each and all of the
following companies and their Affiliates (excluding Genentech): F. Hoffmann-La
Roche Ltd. Hoffmann-LaRoche, Inc., Roche Holding Ltd., and Roche Holdings, Inc.

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     2.0 MUTUAL RELEASE, INDEMNIFICATION AND SETTLEMENT AGREEMENT

     2.1 DISMISSAL OF LAWSUIT. Tanox and the Roche Entities agree as follows:

          (i)  Tanox will file a motion to dismiss its claims in the Lawsuit
               against the Roche Entities with prejudice; and

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

     2.2 RELEASE OF ROCHE ENTITIES. For the Consideration, including the
agreements set forth in this Section 2, Tanox hereby RELEASES, ACQUITS, and
FOREVER DISCHARGES the Roche Entities and (I) all of their 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, the Roche Entities; (iii) their predecessors,
successors, and assigns; (iv) all other persons, partners, joint venturers,
firms, partnerships, joint ventures, and corporations for whose conduct the
Roche Entities may be liable; and (v) all of their 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.

     2.3 RELEASE OF TANOX. For the Consideration including the agreements set
forth in this Section 2, the Roche Entities RELEASE, ACQUIT, and FOREVER
DISCHARGE 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 the Roche
Entities or any person or persons now or hereafter claiming by, through, or
under the Roche Entities.

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     2.4 NO ADMISSION OF LIABILITY. Agreement to the Consideration is not an
admission of liability and may not be so construed. The Roche Entities
vigorously deny 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 the Roche Entities in the Lawsuit, and
the Roche Entities acknowledges the highly disputed nature of their defenses 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 the Roche Entities and (i) all of their 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, the Roche Entities; (iii) their predecessors,
successors, and assigns; (iv) all other persons, partners, joint venturers,
firms, partnerships, joint ventures, and corporations for whose conduct the
Roche Entities may be liable; and (v) all of their insurers from All Claims,
together with all costs, expenses, and legal fees, that may be asserted against
the Roche Entities by any person, entity, firm, or corporation claiming by,
through, or under Tanox, that arise out of the Incident and/or the Lawsuit.

     2.6 INDEMNIFICATION BY THE ROCHE ENTITIES. The Roche Entities agree 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,

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firm, or corporation claiming by, through, or under the Roche Entities that
arise out of the Incident and/or the Lawsuit

     2.7 NO OPPOSITION. The Roche Entities represent and warrant that they have
not filed any opposition in the European Patent Office to Tanox's patent No.
EP-B-407392 relating to Anti-IgE Antibodies or taken any other actions to
re oppose, request the examination of, or otherwise challenge the validity or
enforceability, directly or indirectly, of any Tanox patents covering Anti-IgE
Antibodies.

     2.8 ANTI-IgE ANTIBODY PATENTS. The Roche Entities represent and warrant to
Tanox that they do not have knowledge of any patents owned in whole or in part
and/or controlled by them which would prevent Tanox from being able to make, use
and sell Anti-IgE Antibodies. If Roche has exercised its option set forth in the
Outline of Terms (or Definitive Agreement) in a particular country or has
received a sublicense or assumed Genentech's rights and obligations under the
Genentech Agreement, then to the extent the Roche Entities should ever own in
whole or in part and/or control any such patents the Roche Entities agree to
grant to Tanox under all such patents a royalty-free, non-exclusive,
sublicensable license to make, have made, use, sell, have sold and import
Anti-IgE Antibodies for the treatment, prophylaxis or diagnosis of any disease
or condition in humans and animals in the country or territory with respect to
which Roche has exercised its options under the Outline of Terms (or Definitive
Agreement) or has received a sublicense or assumed Genentech's rights and
obligations under the Genentech Agreement.

     2.9 EXEMPTION FROM PROTECTIVE ORDER. Notwithstanding the terms of the
protective order agreed in connection with the Lawsuit, the Parties agree that
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
on-going development and commercialization activities associated with the
Anti-IgE Antibody projects of such Party

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and/or development and commercialization activities of the Parties pursuant to
the Outline of Terms or Definitive Agreement.

     2.10 REPRESENTATIONS OF TANOX. Tanox makes the representations and
warranties set forth in Exhibit 1 to the Roche Entities.

     2.11 REPRESENTATIONS OF ROCHE. The Roche Entities make the representations
and warranties set forth in Exhibit 2 to Tanox.

     3.0 BENEFICIARY OF AGREEMENTS. On the Effective Date, Tanox, Ciba and
Genentech have executed 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 Products (as such term is used in the Outline of Terms) which have been
identified and synthesized by Tanox, Ciba, or Genentech before *. Additionally,
on the Effective Date, Tanox and Genentech have executed the Genentech Agreement
which, among other things, grants certain additional license rights to such
parties which may be effective in addition to or in lieu of rights under the
Outline of Terms and Definitive Agreement. The Parties acknowledge that under
such agreements, including the Genentech Agreement, and subject to certain
agreements between Roche and Genentech, Roche will have certain rights to
participate in the development and commercialization of Anti-IgE Antibody
products.

     4.0 LICENSES FOR ANTI-IgE ANTIBODY PATENTS. If (i) Roche has exercised its
options set forth in the Outline of Terms (or Definitive Agreement) in a country
or has received a sublicense or assumed Genentech's rights and obligations under
the Genentech Agreement in a particular country and (ii) the Roche Entities
should ever desire to obtain exclusive access to a patent owned and/or
controlled by a third party which covers Anti-IgE Antibodies in such country in
any manner, then the Roche Entities will acquire rights to

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such patent in a manner which reserves for Tanox the opportunity to obtain
co-exclusive rights to such patent for Anti-IgE Antibodies in such country.

     5.0 ADDITIONAL LICENSES. Subject to all of the existing licenses and
existing agreements that restrict the ability of 1he Roche Entities to grant
licenses and subject to the additional restrictions set forth below, "the Roche
Entities agree to grant to Tanox, * except that such products shall not include
those (i) that are the subject of a prior exclusive license by the Roche
Entities to a third party; (ii) that are the subject of an active research or
development program of the Roche Entities; or (iii) that compete with, or will
compete with, a then current product of the Roche Entities or a product in an
active research and/or development program of the Roche Entities; * The Roche
Entities also agree to negotiate in good faith with Tanox on the availability *
The Parties agree to negotiate in good faith the royalty rate and terms on which
any license will be granted. Subject to the limitations set forth above, Tanox
may exercise its right to such a license, without threat of suit or penalty from
the Roche Entities, with respect to a product * If Tanox should ever have under
development a product which could be subject to the restrictions on receiving a
license set forth herein, then the Roche Entities 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 the

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activities of Tanox would constitute an infringement of a patent owned and/or
controlled by the Roche Entities pursuant to applicable laws, which resolution
could include a collaboration or cross-licensing opportunity or Tanox's express
agreement not to manufacture, develop or market in such country in which a valid
claim of any patent of the Roche Entities covering such product may exist, then
the Roche Entities shall be entitled to pursue such legal or other actions as
they may determine, in their sole discretion, to be appropriate under the
circumstances.

     6.0 CONFIDENTIALITY. In connection with preparation and during the term of
this Agreement, one Party may disclose to the other or receive written
information from the other relating to the subject matter of this Agreement
which information, if so identified in writing either pursuant to this Section
6.0 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 with the other Party's written consent, the other Party's
Confidential Information for a period of ten (10) years from the date of
disclosure, respectively, of any such Confidential Information. 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.

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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.

     7.0 TERM; DEFAULT; SURVIVAL.

     7.1 TERM. Except as otherwise set forth herein, this Agreement shall
terminate at such time following the first commercial sale of an Anti-IgE
Antibody product as royalties are no longer owed to Tanox by or as a result of
sales for the benefit of the Roche Entities or any Affiliate, excluding
Genentech or sales by or for the benefit of Genentech. Notwithstanding the
foregoing, this Agreement shall terminate upon the prior occurrence of the
expiration unexercised of any option rights which the Roche Entities may have
under the Outline of Terms or Definitive Agreement and the expiration
unexercised of any rights which the Roche Entities may have to receive a
sublicense or to assume Genentech's rights and obligations under the Genentech
Agreement.

     7.2 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 and without prejudice to any of its
other rights conferred on it by this Agreement, to terminate all or part of this
Agreement.

     7.3 SURVIVAL OF PROVISIONS. The obligations of the Parties under Sections
2.0 and 6.0 shall survive any termination of this Agreement, except to the
extent limited therein.

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     8.0 GENERAL PROVISIONS.

     8.1 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.

     8.2 NOTICES. All notices which may be required pursuant to this Agreement
(i) shal1 be in writing, (ii) shal1 be addressed, in the case of the Roche
Entities (except as otherwise specified herein), to Corporate Law, F.
Hoffmann-La Roche Ltd. at the address set forth at the beginning of this
Agreement and to Corporate Secretary, Hoffmann-La Roche, Inc., 340 Kingsland St,
Nutley, N.J. 07110, 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.

     8.3 ENTIRE AGREEMENT. This Agreement is the entire agreement between the
Parties regarding the subject matter hereof, and there are no prior written or
oral promises or representations not incorporated herein. 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.

     8.4 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto, Affiliates, 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 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.

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     8.5 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.

     8.6 SEVERABILITY. If any part of this Agreement shall be invalid or
unenforceab1e 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.

     8.7 PUBLICITY. Except for disclosure that settlement of the Lawsuit has
occurred, neither the Roche Entities nor Tanox shall issue any public statement
concerning 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 pursuant to 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 8.7. The foregoing notwithstanding, Tanox may
disclose the terms of this Agreement to its shareholders, investment bankers and
other financial consultants, and prospective investors in Tanox, provided that
the recipients of such information agree to be bound to protect the
confidentiality of that information for a period of at least three (3) years and
in a manner otherwise at least as restrictive as that generally set forth in
Section 6.0 above.

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     8.8 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.

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

     8.10 DISPUTE RESOLUTION. The laws of the State of New York shall govern the
construction and interpretation of this Agreement, and any action to enforce
this agreement or resolve any disputes shall be by binding arbitration conducted
pursuant to the then current American Arbitration Association ("AAA") Commercial
Arbitration rules in New York City, New York, such arbitration to be conducted
by a panel of three arbitrators selected from a pool of arbitrators to be
presented to the Parties by AAA.

     8.11 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.

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

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F. Hoffman-La Roche Ltd                         Roche Holding Ltd
By:   ILLEGIBLE                                 By:   ILLEGIBLE
Title: Authorized Signatory                     Title: Director

By:   ILLEGIBLE                                 By:   ILLEGIBLE
Title: Director                                 Title: Director

Hoffman-La Roche Inc.                           Roche Holdings, Inc
By:   ILLEGIBLE                                 By:   ILLEGIBLE
Title: V.P.                                     Title: Secretary

Tanox Biosystems, Inc.
By: David Anderson
Title: Executive Vice President

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                                   EXHIBIT 1
                    Representations and Warranties by Tanox

(a)  Before executing this Agreement, Tanox became fu11y 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 a1l necessary corporate and legal addition 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 2
              Representations and Warranties by The Roche Entities

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

(b)  The Roche Entities are corporations duly organized, existing, and in good
     standing under the laws of the respective states, cantons, and countries
     under which they have been organized.

(c)  The Roche Entities possess all requisite power and authority to enter into
     and perform this Agreement and to carry out the transactions contemplated
     herein.

(d)  The Roche Entities have 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
     the Roche Entities or the validity or enforceability as to the Roche
     Entities of this Agreement.

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

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

(h)  In entering this Agreement, the Roche Entities have had the benefit of the
     advice of lawyers of its own choosing; and the Roche Entities enter this
     Agreement freely, by their own choice and judgment, and without duress or
     other influence.

(i)  The Roche Entities understand 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 the Roche Entities shall ever
     receive from such Party as a result of the Incident and the Lawsuit.

(j)  The Roche Entities recognize that the recitations contained in this
     Agreement are contractual and not a mere recital.EXHIBIT 10.18

CERTAIN INFORMATION IN THIS EXHIBIT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. IN ACCORDANCE WITH RULE 406 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, SUCH INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF SUCH OMITTED INFORMATION HAS
BEEN INDICATED WITH AN ASTERISK(*).

                           PATENT LICENSE AGREEMENT

                                    Between

                           PROTEIN DESIGN LABS, INC.

                                      and

                             TANOX BIOSYSTEMS, INC.

     This Agreement ("Agreement"). effective as of June 30, 1998 ("Effective
Date"). is made by and between PROTEIN DESIGN LABS, INC.. a Delaware corporation
having offices at 2375 Garcia Avenue, Mountain View, CA 94043, USA (hereinafter
"PDL") and TANOX BIOSYSTEMS, INC., a Texas corporation having offices at 10301
Stella Link, Houston, TX 77025 (hereinafter "TANOX").

                                    RECITALS

     A. TANOX intends to initially pursue development of humanized antibodies
against *

     B. TANOX desires to license certain patents owned or controlled by PDL
related to humanized antibodies directed against *; and

     C. PDL is willing to license to TANOX such rights under the terms and
conditions of this Agreement.

                                   AGREEMENT

NOW THEREFORE. in consideration of the mutual covenants herein contained and
intending to be legally bound, the parties agree as follows:

1. DEFINITIONS

     All references to Exhibits, Articles and Sections shall be references to
Exhibits, Articles and Sections of this Agreement. In addition, except as
otherwise expressly provided herein, the following terms in this Agreement shall
have the following meanings:

     1.01 "AFFILIATE" means, with respect to a party hereto, any corporate or
other entity which, directly or indirectly, controls, is controlled by, or is
under common control with such party where "control" means the ownership of not
less than 50% of the voting shares of a corporation, or decision-making
authority as to an unincorporated entity .

     1.02 "COMBINATION PRODUCT(S)" shall mean any product containing both a
pharmaceutically active agent or ingredient which constitutes a Licensed Product
and one or more other pharmaceutically active agents or ingredients which do not
constitute Licensed Products.

     1.03 "LICENSED PRODUCT(S)" shall mean therapeutic products of TANOX or
TANOX'S sublicensees that include an Antibody developed by or for TANOX, jointly
or otherwise, binding to

                                       1
<PAGE>
* whose development, manufacture, use or sale
would, but for a license under this Agreement, infringe a Valid Claim.
"Antibody" as used in the preceding sentence shall include, without limitation,
monospecific and bispecific antibodies; less than full-length antibody forms
such as Fv, Fab. and F(ab')2; single-chain antibodies; and antibody conjugates
bound to a toxin, label or other moiety. *

     1.04 "NET SALES" shall mean the aggregate gross revenues, whether in cash
or in kind, derived by or payable from or on account of the sale of Licensed
Products. less actual amounts incurred for (a) credits or allowances, if any,
actually granted on account of price adjustments, recalls, Rejection or return
of items previously sold, (b) excise and sales taxes, duties or other taxes
imposed on and paid with respect to such sales (excluding income or franchise
taxes of any kind) and (c) outer packing, freight and freight insurance costs.
All amounts deducted under this Section 1.04 shall be properly documented and
specified in any summary report provided to PDL under Section 3.07. If TANOX or
any of its Affiliates or sublicensees receive non-cash consideration for any
Licensed Product sold or otherwise transferred to an independent third party not
an Affiliate of the seller or transferor, the fair market value of such non-cash
consideration on the date of such transfer as known to TANOX, or as reasonably
estimated by TANOX if unknown; shall be included in the definition of Net Sales.

     1.06 "PDL PATENT RIGHTS" means the patent applications or patents (as well
as any foreign counterparts thereto) identified on EXHIBIT A, including any
additions, continuations, continuations-in-part or divisions thereof or any
substitute applications therefor; any patents issued with respect to such patent
applications, any reissues, extensions or patent term extensions of any such
patent, and any confirmation patents or registration patents or patents of
addition based on any such patents.

     1.07                              *

     1.08 "VALID CLAIM" means (a) any claim in any issued patent included in the
PDL Patent Rights which would be infringed but for the license granted under
Section 2.01 and which claim has not been disclaimed or held unenforceable or
invalid by a governmental agency or court of competent jurisdiction by a
decision beyond right of review and (b) any pending claims under PDL Patent
Rights which, if granted, would be infringed but for the license granted under
Section 2.01 and which pending claim would be a Valid Claim if the pending claim
were treated as granted, provided that examination has been timely requested for
such pending claims and they are otherwise being diligently prosecuted in an
effort to have them allowed and granted in an issued patent.

2. LICENSE

     2.01 LICENSE GRANT. Subject to the terms and conditions of this Agreement,
PDL hereby grants and TANOX hereby accepts a worldwide nonexclusive license
under the PDL Patent Rights, including the right to grant sublicenses in
accordance with Section 2.05 to make, import, have made, use or sell Licensed
Products.

     2.02                              *

                                       2
<PAGE>
     2.03                              *

     2.04                              *

     2.05 MOST FAVORED LICENSEE FOR IGE ANTIBODY ROYALTY RATE. * PDL agrees not
to grant a license under the Queen Patent (as defined in Exhibit A) to a third
party, other than a PDL Affiliate, for use of an antibody binding to the * with
a royalty rate less than * of net sales of licensed products incorporating such
antibody unless TANOX is provided the same royalty rate as such third party.

                                       3
<PAGE>
PDL shall promptly notify TANOX in the event that PDL proposes to grant such a
license under the Queen Patent to a third company with a royalty rate less than
* . Notwithstanding the foregoing, no reduction in royalties shall apply in the
following cases: (a) the third COMPANY PARTY pays consideration to PDL for at
least three (3) licenses under the Queen Patents that results in a reduced
royalty rate as part of a transaction with PDL; or (b) the licenses granted
under the Queen Patents by PDL are to a joint venture or as part of a similar
collaborative arrangement in which a part of contribution to the venture or
arrangement is a license from PDL under the Queen Patents. The parties agree to
execute such documents as may be reasonably necessary to carry out the purposes
of this Section 2.05.

     2.06 LIMITATION ON SUBLICENSES; NOTIFICATION. TANOX shall have the right to
grant sublicenses of its rights with respect to the Licensed Product under
Section 2.01 only in connection with the assignment or license by TANOX of a
Licensed Product to a third party. Notwithstanding the assignment or grant of a
sublicense by TANOX hereunder, TANOX shall remain obligated to pay all royalties
due to PDL with respect to the sale of Licensed Products by its assignee or
sublicensee. In addition, the grant of any sublicenses under Section 2.01 shall
be on terms and conditions which are subject to and subordinate to the terms of
this Agreement and TANOX shall remain fully responsible to PDL for the
performance of any and all such terms by its sublicensees. Promptly following
execution of any sublicense hereunder, but in any event not less than ten (10)
days thereafter, TANOX shall notify PDL of the identity of the sublicensee and
the scope of the sublicense.

     2.07 NO OTHER LICENSE RIGHTS. TANOX expressly acknowledges and agrees that,
except for the license expressly granted under Section 2.01, no rights to any
other PDL patents, patent applications, know-how or licenses are included in
this Agreement and that any royalties or payments that may be due to third
parties in order for TANOX to make, have made, use or sell Licensed Products
shall be the sole responsibility of TANOX.

3. PAYMENTS; ROYALTIES, REPORTS

     3.01 PAYMENTS. In consideration for the license granted by PDL under
Article 2 of this Agreement TANOX sha11 pay to PDL a nonrefundable signing and
licensing fee within fifteen (15) days of the Effective Date in the sum of *

     3.02 ROYALTIES TO PDL. Subject to reduction for any offset as provided in
Section 3.05, or withholding under Section 3.09(b), and in further consideration
of the rights and licenses granted under Article 2, TANOX shall pay to PDL a
royalty of * of the Net Sales of all Licensed Products sold by TANOX or its
Affiliates or sublicensees in each country until the last date on which there is
a Valid Claim that, but for a license granted to TANOX under this Agreement,
would be infringed by the making, using, having made or sale of that Licensed
Product in such country or by the manufacture of Licensed Product in the country
of manufacture.

     3.03 SALES AMONG AFFILIATES. Sales between and among TANOX and its
Affiliates of Licensed Products which are subsequently resold or to be resold by
such Affiliates shall not be subject to royalty, but in such cases royalties
shall accrue and be calculated on the sale of such Licensed Products to a
non-Affiliate.

                                       4
<PAGE>
     3.04 COMBINATION PRODUCTS. Net Sales in a particular country, in the case
of Combination Products for which the pharmaceutically active agent or
ingredient constituting a Licensed Product and each of the other
pharmaceutically active agents or ingredients not constituting Licensed Products
have established market prices in that country in the Territory when sold
separately, shall be determined by multiplying the Net Sales for each such
Combination Product by a fraction, the numerator of which shall be the
established market price for the Licensed Product(s) contained in the
Combination Product and the denominator of which shall be the sum of the
established market prices for the Licensed Product(s) plus the established
market prices for the other pharmaceutically active agents or ingredients
contained in the Combination Product. When such separate market prices are not
established in that country, then the parties shall negotiate in good faith to
determine a fair and equitable method of ca1cu1ating Net Sales in that country
for the Combination Product in question.

     3.05 ANNUAL MAINTENANCE FEE. In further consideration of the licenses
granted under Article 2, following the third (3rd) anniversary of the Effective
Date and not later than each anniversary thereafter within thirty (30) days
after receipt of an invoice from PDL, TANOX shall pay PDL a nonrefundable annual
maintenance fee in the amount of *. An amount of * of the annual maintenance fee
paid by TANOX hereunder shall be creditable against royalties payable to PDL
pursuant to Section 3.02 beginning in the year in which a Biologics License
Application ("BLA") or foreign equivalent thereof is filed with the U.S. Food
and Drug Administration (or any successor thereto, or a foreign counterpart
agency), with respect to a Licensed Product; provided that in no event shall any
portion of the annual maintenance fees paid prior to the year in which a BLA is
filed with respect to the Licensed Product be creditable against royalties
hereunder.

     3.06 CURRENCY CONVERSION. All amounts payable to PDL under this Agreement
shall be payable in U.S. Dollars by wire transfer to a bank account designated
by PDL. In the case of royalties on Net Sales, all amounts payable shall first
be calculated in the currency of sale and then converted into U.S. Dollars using
the average of the daily exchange rates for such currency quoted by Citibank,
N.A. for each of the last fifteen (15) banking days of each calendar quarter.

3.07 ROYALTY REPORTS.

     (a) CURRENT REPORTS. TANOX agrees to make written reports and royalty
payments to PDL within sixty (60) days after the close of each calendar quarter
during the term of this Agreement, beginning with the calendar quarter in which
the date of first sale following regulatory approval occurs. These reports shall
show for the calendar quarter in question Net Sales by TANOX, its Affiliates and
sublicensees of the Licensed Products in the Territory on a country-by-country
basis, details of the quantities of Licensed Products sold in each country and
the country of manufacture, if different, applicable offsets, withholding taxes
and the net royalty due to PDL thereon pursuant to Article 3. No later than at
the time of the making of each such report, TANOX shall make any payment due to
PDL of royalties for the period covered by such report.

     (b) TERMINATION REPORT. For each Licensed Product, TANOX also agrees to
make a written report to PDL within ninety (90) days after the date on which
TANOX, its Affiliates or sublicensees last sell that Licensed Product stating in
such report the same information required by quarterly reports for all such
Licensed Products made, sold or otherwise disposed of which were not previously
reported to PDL.

                                       5
<PAGE>
     3.08 INSPECTION. TANOX agrees to keep clear, accurate and complete records
for a period of at least three (3) years after each reporting period in which
Net Sales occur showing the manufacturing, sales and other disposition of
Licensed Products in the Territory in sufficient detail to enable the royalties
payable hereunder to be determined. TANOX further agrees to permit its books and
records to be examined by an independent accounting firm selected by PDL and
reasonably satisfactory to TANOX, from time-to-time but not more than once a
year. Such examination is to be made at the expense of PDL, except in the event
that the results of the audit reveal that TANOX underpaid PDL by six percent
(6%) or more, then the audit fees shall be paid by TANOX. Any such discrepancies
will be promptly corrected by a payment or refund, as appropriate.

3.09 WITHHOLDING.

     (a) PAYMENTS. All amounts payable under Sections 3.01 and 3.05 shall
represent the actual proceeds to be received by PDL, net of any withholding or
other taxes or levies that may be applicable to such payments. PDL agrees to
reasonably cooperate with TANOX in obtaining a refund of any withholding taxes
or levies paid by TANOX, if any, with respect to any payments to PDL hereunder.
In the event that PDL is successful in obtaining any refund of tax withholding
amounts paid by TANOX under this Agreement. PDL agrees to promptly remit such
refund amount to TANOX.

     (b) ROYALTY PAYMENTS. TANOX may withhold from royalties due to PDL amounts
for payment of any withholding tax that TANOX has actually paid to any taxing
authority with respect to the royalty payments due to PDL hereunder, provided
that such amounts are properly documented and specified in any summary report to
PDL hereunder. TANOX agrees to reasonably cooperate with PDL in obtaining a
foreign tax credit in the U .S. with respect to royalties due to PDL on the sale
or manufacture of Licensed Products at the sole expense of PDL.

4. PATENT PROSECUTION AND MAINTENANCE

     4.01 PROSECUTION. PDL hereby agrees that, at its own expense it will use
commercially reasonable efforts to:

     (a) prosecute any patent applications comprising the PDL Patent Rights and
     to secure the most extensive protection reasonably obtainable under the PDL
     Patent Rights; and

     (b) maintain the claims under the POL Patent Rights as valid and
     enforceable claims for the full term thereof.

     4.02 UPDATES. Upon the written request of TANOX (which request shall not be
made more than once per calendar year), PDL agrees to provide a written update
of the information relating to the PDL Patent Rights as set forth on EXHIBIT A.

     4.03 DEFENSE OF PDL PATENT RIGHTS. With respect to the PDL Patent Rights
licensed under this Agreement, PDL at its sole cost and expense agrees to take
all steps and proceedings and to undertake such other acts as PDL may, in its
sole discretion, deem necessary or advisable to restrain any infringement or
improper or unlawful use of the PDL Patent Rights and to recover any actual or
punitive compensation therefor. TANOX shall provide reasonable assistance to PDL
and permit PDL to have the sole right to take such steps, conduct any such
proceedings or undertake any such actions to restrain any infringement or
improper or unlawful use of the PDL Patent Rights, whether

                                       6
<PAGE>
or not TANOX is a party to such steps, proceedings or actions, all of which
shall be at PDL's expense. Any monies recovered from alleged infringers shall be
retained by PDL.

5. REPRESENTATIONS AND WARRANTIES; IDEMNIFICATION

     5.01 VALID AGREEMENT. Each party represents and warrants to the other that
it knows of no legal reason to prevent it from entering into this Agreement and
that the signatory hereto is duly authorized to execute and deliver this
Agreement.

     5.02 NO WARRANTY OF VA1IDITY, NON-INFRINGEMENT. Nothing in this Agreement
shall be construed as (a) a warranty or representation by PDL as to the validity
or scope of any PDL Patent Rights; or (b) a warranty or representation that any
Licensed Product made, used, sold or otherwise disposed of under the license
granted in this Agreement is or will be free from infringement of patents,
copyrights, trademarks, trade secrets or other rights of third parties.

     5.03 NO OTHER WARRANTIES. EXCEPT AS SPECIFICALLY SET FORM IN ARTICLE 5, PDL
MAKES NO REPRESENTATIONS OR WARRAN11ES OF ANY KIND, EITHER EXPRESS OR, IMPLIED,
WITH RESPECT TO ANY CELL LINES, ANTIBODIES OR LICENSED PRODUCTS DEVELOPED BY
TANOX UNDER THE LICENSE SET FORTH IN THIS AGREEMENT AND PDL FURTHER MAKES NO
EXPRESS OR IMPLIED WARRANTIES OF MERCHANT ABILITY OR FITNESS FORA PARTICULAR
PURPOSE, OR THAT THE USE OF ANY CELL LINES, ANTIBODIES, LICENSED PRODUCTS OR
OTHER MATERIALS DEVELOPED BY TANOX UNDER THE LICENSE SET FORTH IN THIS AGREEMENT
WILL NOT INFRINGE ANY THIRD PARTY RIGHTS.

     5.04 INDEMNIFICATION. TANOX shall at all times, during the term of this
Agreement and thereafter, indemnify and hold harmless PDL and its Affiliates,
sublicensees, directors, officers, agents and employees from any claim,
proceeding, loss, expense, and liability of any kind whatsoever (including but
not limited to those resulting from death, personal injury, illness or property
damage and including legal expenses and reasonable attorneys' fees) arising out
of or resulting from (a) any claim of patent infringement (direct or
contributory) or inducing patent infringement with respect to the activities of
TANOX and (b) the development, manufacture, holding, use, testing,
advertisement, sale or other disposition by TANOX, its Affiliates or
sublicensees, or any distributor, customer or representative of TANOX or anyone
in privity therewith, of any Licensed Product.

6. CONFIDENTIALITY

     6.01 PRIOR AGREEMENTS. This Agreement supersedes that certain Confidential
Disclosure Agreement entered into between PDL and TANOX of June 10, 1996;
provided, however, that with respect to all Confidential Information disclosed
thereunder and/or within the definition of "Confidential Information" in that
Confidential Disclosure Agreement, such Confidential Information shall be
subject to the terms and conditions of Section 6.02.

     6.02 CONFIDENTIALITY. PDL and TANOX acknowledge that in the course of
negotiations of this Agreement or other discussions between the parties of
prospective agreements or business relationships and/or in furtherance of the
interests of the parties hereunder that it ("Recipient") has received and/or may
receive confidential information of the other party ("Provider"). "Confidential
Information" means any and all data and information which (a) has been reduced
to tangible form and marked clearly and conspicuously with a legend identifying
its confidential or proprietary nature;

                                       7
<PAGE>
or (b) with respect to any oral presentation or communication, is or was
designated as confidential immediately before, during, or within a reasonable
time after the oral presentation or communication and such designation is
subsequently confirmed in writing; (c) is or was otherwise characterized by
Provider as confidential information; or (d) is subject to the terms and
conditions of this Section 6.02 as provided in Section 6.01 above.

Each party shall keep and protect as confidential, and shall not use for any
purpose (other than TANOX's use for the development and commercial exploitation
of Licensed Products or either party's use for specific purposes otherwise
contemplated by a business relationship entered between them), during the term
of this Agreement and for five (5) years after termination hereof, all
Confidential Information heretofore and hereafter supplied by the other,
provided however, that the foregoing obligation of confidentiality shall not
apply to the extent that any Confidential Information (a) is already known to
the Recipient at the time of disclosure, as evidenced by written record, or is
developed by Recipient thereafter in the course of work entirely independent of
any disclosure by the other party; (b) is publicly known prior to or becomes
publicly known after disclosure other than through acts or omissions of the
Recipient; (c) is disclosed in good faith to Recipient by a third party who is
not under obligations of non-disclosure to the Provider; or (d) is required to
be disclosed pursuant to an order of a court of law or governmental
agency; provided that the disclosing party shall advise the other party promptly
of any such disclosure requirement in order to permit such other party to
undertake efforts to restrict or limit the required disclosure including by
cooperating in drafting a protective order.

7. TERM AND TERMINATION

     7.01 TERM. Unless earlier terminated as provided in this Article 7, this
Agreement sha1l come into force on the Effective Date and shall continue until
the expiration of the last obligation of TANOX to pay royalties to PDL in
accordance with Article 3 above. Thereafter, with the exception of the surviving
clauses specified in Section 7.04, this Agreement shall terminate and all
licenses or sublicenses granted hereunder shall become fully paid-up,
irrevocable licenses.

     7.02 TERMINATION.

     (a) This Agreement may be terminated with respect to a license in any
country or in its entirety on sixty (60) days prior written notice by TANOX.

     (b) If either party shall at any time default in the payment of any
royalty, or the making of any report hereunder, or shall commit any material
breach of any covenant or agreement herein contained or shall make any false
report, and shall fail to have initiated and actively pursued remedy of any such
default or breach within sixty (60) days after receipt of written notice thereof
by the other party, that other party may, at its option, cancel this Agreement
and revoke any rights and licenses herein granted and directly affected by the
default or breach by notice in writing to such effect, but such act shall not
prejudice the right of the party giving notice to recover any royalty or other
sums due at the time of such cancellation, it being understood, however, that if
within sixty (60) days after receipt of any such notice the receiving party
shall have initiated and actively pursued remedy of its default, then the rights
and licenses herein granted shall remain in force as if no breach or default had
occurred on the part of the receiving party, unless such breach or default is
not in fact remedied within a reasonable period of time.

                                       8
<PAGE>
     (c) This Agreement may be terminated by either party upon the occurrence of
any of the following which is not stayed or vacated within ninety (90) days of
such occurrence: (i) petition in bankruptcy filed by or against the other party;
(ii) adjudication of the other party as bankrupt or insolvent; (iii) appointment
of a liquidator, receiver or trustee for all or a substantial part of the other
party's property; or (iv) an assignment for the benefit of creditors of the
other party.

     (d) To the extent pennitted under, applicable law, the license granted
under this Agreement may be terminated as to any country by PDL upon thirty (30)
days prior written notice in the event that TANOX challenges the Queen Patent in
that country.

     7.03 NO WAIVER. The right of either party to terminate this Agreement as
provided herein shall not be affected in any way by its waiver of, or failure to
take action with respect to, any previous failure to perform hereunder.

     7.04 SURVIVAL.

     (a) Termination for any reason hereunder shall not affect any accrued
rights or obligations of the parties arising in any manner under this Agreement
as of the date of termination. In any event, the confidentiality and indemnity
obligations and any accrued payment and reporting obligations under Articles 3,
5 and 6 shall survive any termination of this Agreement

     (b) Upon termination of this Agreement for any reason, PDL hereby grants
TANOX a license to sell within three (3) months of such termination any Licensed
Products in TANOX's or TANOX's sublicensee's inventory on the date of such
termination, which have not previously been sold ("Inventory"); provided,
however, that TANOX shall pay the royalties due on such Inventory, provide
related reports and allow a final audit in the amounts and manner provided for
in Section 3.08.

8. MISCELLANEOUS

     8.01 ASSIGNMENT. This Agreement may not be assigned by either party without
the prior written consent of the other, except to Affiliates upon prior written
notice to the other party, and except that either party may assign this
Agreement to a party which acquires all or substantially all of its business,
whether by merger, sale of assets or otherwise.

     8.02 ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties hereto with respect to the within subject matter and
supersedes all previous Agreements (except as provided in Section 6.01), whether
written or oral. This Agreement shall not be changed or modified orally, but
only by an instrument in writing signed by both parties.

     8.03 SEVERABILITY. If any provision of this Agreement is declared invalid
by a court of last resort or by any court, the decision of which appeal is not
taken within the time provided by law, then and in such event, this Agreement
will be deemed to have been terminated only as to the portion thereof which
relates to the provision invalidated by that decision and only in the relevant
jurisdiction, but this Agreement, in all other respects and all other
jurisdictions, will remain in force; provided, however, that if the provision so
invalidated is essential to the Agreement as a whole, then the parties shall
negotiate in good faith to amend the terms hereof as nearly as practical to
carry out the original interest of the parties, and, failing such amendment,
either party may submit the matter to a court of competent jurisdiction for
resolution.

                                       9
<PAGE>
     8.04 NOTICES. Any notice or report required or permitted to be given under
this Agreement shall be in writing and shall be sent by expedited delivery or
telecopied and confirmed by mailing, as follows and shall be considered
received three (3) days after such delivery:

If to PDL:                              Protein Design Labs. Inc.
                                        2375 Garcia Avenue
                                        Mt. View, California 94043 USA
                                        Attention: Chief Executive Officer

Copy to:                                Protein Design Labs, Inc.
                                        2375 Garcia Avenue
                                        Mt View, California 94043 USA
                                        Attention: General Counsel

If to TANOX:                            Tanox Biosystems, Inc.
                                        10301 Stella Link
                                        Houston, TX 77025 USA
                                        Attention: Nancy T. Chang,
                                        President and CEO

Copy to:                                Tanox Biosystems, Inc.
                                        10301 Stella Link
                                        Houston, TX 77025 USA
                                        Attention: Head of Legal Affairs

     8.05 CHOICE OF LAW. The validity, performance. construction, and effect of
this Agreement shall be governed by the laws of the State of California which
are applicable to contracts between California residents to be performed wholly
within California.

     8.06 WAIVER. None of the terms, covenants and conditions of this Agreement
can be waived except by the written consent of the party waiving compliance.

     8.07 FORCE MAJEURE. Neither party shall be responsible to the other for
failure or delay in performing any of its obligations under this Agreement or
for other non-performance hereof provided that such delay or non-performance is
occasioned by a cause beyond the reasonable control and without fault or
negligence of such party, including, but not limited to war, terrorism,
earthquake, fire, flood, explosion, discontinuity in the supply of power, court
order or governmental interference, act of God, strike or other labor trouble
and provided that such party will inform the other party as soon as is
reasonably practicable and that it will entirely perform its obligations within
a reasonable time after the relevant cause has ceased its effect.

     8.08 PUBLICITY. PDL will issue a press release concerning the parties'
entry into this Agreement and the amount of signing and licensing fees paid
hereunder, with the content of such release to be approved in advance by TANOX,
which approval shall not be unreasonably withheld. Except as required by law or
regulation, neither party shall publicly disclose the other terms and conditions
of this Agreement unless expressly authorized to do so by the other party, which
authorization shall not be unreasonably withheld, and both parties agree that
PDL shall not disclose the antigens which are the subject of this Agreement, or
TANOX's selection of any Substitute Antigen, without TANOX's

                                       10
<PAGE>
prior written consent; provided, however, that the parties may disclose such
terms and conditions to their respective investors, prospective investors,
advisors, and consultants under a written confidentiality agreement protecting
the confidentiality of the terms hereof as provided under Article 6, and to
their accountants and attorneys provided that such accountants and attorneys
agree to maintain the confidentiality of the terms hereof as provided under
Article 6, and TANOX may disclose such terms and conditions as deemed required
in connection with any public stock offering it elects to make. In the event
that disclosure shall be agreed upon then the parties will work together to
develop a mutually acceptable disclosure.

     8.09 HEADINGS. The captions used herein are inserted for convenience of
reference only and shall not be construed to create obligations, benefits, or
limitations.

     8.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and such
counterparts together shall constitute one agreement.

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.

PDL:                                                    TANOX:
PROTEIN DESIGN LABS, INC.                               TANOX BIOSYSTEMS, INC.
By: /s/ JON S. SAXE                                     By: /s/ NANCY T. CHANG
Jon S. Saxe                                             Nancy T. Chang
President                                               President and CEO

                                       11
<PAGE>
                                   EXHIBIT A

                               PDL PATENT RIGHTS

The following are patents and patent applications (the "Queen Patents") as of
the Effective Date filed in certain countries in the world and licensed under
the Agreement. The Queen Patents shall expressly include any foreign
counterparts thereto flied by PDL before or during the tenm of this Agreement.

1. European Patent number 0451216. Queen, "Humanized Immunoglobulins and Their
Production and Use".

2. U.S. patent divisional applications numbers 08/487,200, 08/477,728,
08/474,040 of issued U.S. patent number 5,530,101, Queen, "Improved Humanized
Immunoglobulins".

3. Japan patent application number 4-503758, Queen, et al. "Improved Humanized
Immunoglobulins".

4. U.S. Patent No. 5,693,761, Queen, et al. "Polynucleotides Encoding Improved
Humanized Immunoglobulins." issued December 2, 1997.

5. U.S. Patent No. 5,693,762, Queen, et. a1. "Humanized Immunoglobulins,"
issued December 2, 1997.

                                       12

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