TEXAS BIOTECHNOLOGY CORP /DE/, 10-Q, 1996-11-13

TEXAS BIOTECHNOLOGY CORP /DE/
10-Q, 1996-11-13
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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CONFORMED COPY
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR QUARTER ENDED SEPTEMBER 30, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File Number: 1-12574

TEXAS BIOTECHNOLOGY CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 13-3532643
- --------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

7000 Fannin, Suite 1920, Houston, Texas 77030
- -------------------------------------------------------------------------------
(Address of principal executive office) (Zip code)

(713) 796-8822
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

Not Applicable
- -------------------------------------------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No
----- -----

Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.

Class Outstanding at October 15, 1996
----- -------------------------------

Common Stock, $0.005 par value 25,454,434
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TEXAS BIOTECHNOLOGY CORPORATION

TABLE OF CONTENTS
-----------------

PAGE NO.
--------
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1: FINANCIAL STATEMENTS

Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 1

Consolidated Statements of Operations for the three months ended September 30, 1996
and 1995, the nine months ended September 30, 1996 and 1995, and the period from
August 2, 1989 (date of incorporation) through September 30, 1996 2

Consolidated Statements of Cash Flows the nine months ended
September 30, 1996 and 1995, and the period from August 2, 1989
(date of incorporation) through September 30, 1996 3

Notes to Consolidated Financial Statements 4

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14

PART II. OTHER INFORMATION

ITEM 1: Legal Proceedings 19

ITEM 2: Changes in Securities 19

ITEM 3: Defaults Upon Senior Securities 19

ITEM 4: Submission of Matters to a Vote of Security Holders 20

ITEM 5: Other Information 20

ITEM 6: Exhibits and Reports on Form 8-K 20

SIGNATURES 21

INDEX TO EXHIBITS 22

</TABLE>
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PART I FINANCIAL INFORMATION
- -------------------------------

ITEM 1. FINANCIAL STATEMENTS
- ------------------------------

TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, DECEMBER 31,
1996 1995
ASSETS ------------- ------------
------ (UNAUDITED)

Current assets:
Cash and cash equivalents $ 808,126 $ 5,724,264
Short term investments 11,738,650 8,195,307
Short term note receivable 122,500 122,500
Prepaids 278,072 554,208
Other current assets 385,267 547,391
------------- -------------
Total current assets 13,332,615 15,143,670

Equipment, furniture and fixtures, and leasehold improvements 7,611,538 7,529,415
Less: Accumulated depreciation and amortization (4,294,237) (3,746,586)
------------- -------------
Net property 3,317,301 3,782,829
------------- -------------
Total assets $ 16,649,916 18,926,499
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Accounts payable and accrued expenses $ 2,983,544 2,566,264
Deferred revenue 250,000 650,110
------------- -------------
Total current liabilities 3,233,544 3,216,374

Commitments and contingencies --- ---

Stockholders' equity:
Preferred stock, par value $.005 per share. At September 30, 1996 and
December 31, 1995, 5,000,000 shares authorized; none outstanding. --- ---
Common stock, par value $.005 per share. At September 30, 1996,
75,000,000 shares authorized; 24,203,600 shares issued and
outstanding. At December 31, 1995, 40,000,000 shares authorized;
17,439,365 shares issued and outstanding (notes 2, 3 and 5) 121,017 87,198
Additional paid-in capital 73,149,358 59,540,730
Deferred compensation expense (note 3) --- (46,177)
Deficit accumulated during the development stage (59,854,003) (43,871,626)
------------- -------------
Total stockholders' equity 13,416,372 15,710,125
------------- -------------
Total liabilities and stockholders' equity $ 16,649,916 $ 18,926,499
============= =============

FORM 10-Q See accompanying notes to consolidated financial statements Page 1
</TABLE>

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TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

<TABLE>
<CAPTION>
AUGUST 2, 1989
(DATE OF
INCORPORATION)
THREE MONTHS ENDED NINE MONTHS ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995 1996
---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Research agreements $ 1,100,000 3,338,027 4,295,110 5,638,247 15,333,796
Products and services 2,500 35,600 6,439 207,801 403,080
Grant revenue --- 30,391 1,727 206,939 668,951
----------- ---------- ---------- ---------- -----------
Total revenues 1,102,500 3,404,018 4,303,276 6,052,987 16,405,827
----------- ---------- ---------- ---------- -----------

Expenses:
Research and development 5,980,096 3,753,107 17,484,641 10,560,959 51,072,296
Charge for purchase of in-process
research and development --- --- --- 1,973,883 9,465,610
General and administrative 952,299 1,223,671 3,076,936 3,928,417 18,481,570
Restructuring and impairment of
intangible assets (note 9) --- --- 421,165 --- 1,064,915
----------- ---------- ---------- ---------- -----------
Total expenses 6,932,395 4,976,778 20,982,742 16,463,259 80,084,391
----------- ---------- ---------- ---------- -----------

Operating loss 5,829,895 1,572,760 16,679,466 10,410,272 63,678,564
----------- ---------- ---------- ---------- -----------

Other income (expense):
Interest income 199,811 285,333 697,089 960,540 3,916,208
Interest expense --- --- --- (969) (91,647)
----------- ---------- ---------- ---------- -----------

Net loss $ 5,630,084 1,287,427 15,982,377 9,450,701 59,854,003
=========== ========== ========== ========== ===========

Net loss per share $ 0.23 0.07 0.69 0.57 5.96
=========== ========== ========== ========== ===========

Weighted average common shares used to
compute net loss per share 24,188,708 17,439,365 23,053,607 16,516,343 10,045,776
=========== ========== ========== ========== ===========

FORM 10-Q See accompanying notes to consolidated financial statements Page 2
</TABLE>

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TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
AUGUST 2, 1989
(DATE OF
NINE MONTHS ENDED INCORPORATION)
SEPTEMBER 30, THROUGH
SEPTEMBER 30,
1996 1995 1996
------------ ------------ --------------
<S> <C> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (15,982,377) (9,450,701) (59,854,003)
Adjustments to reconcile net loss to net cash
used in operating activities:
Write-off of deferred offering costs related
to delayed offering --- --- 324,938
Depreciation and amortization 547,651 607,097 4,400,490
Interest expense converted on notes payable
to stockholders --- --- 87,755
Expenses paid with stock --- --- 24,500
Non cash acquisition costs expensed --- 1,973,883 9,465,610
Deferred compensation expense 46,177 70,505 287,158
Impairment of intangible assets --- --- 643,750
Change in operating assets and liabilities, net of
effect of acquisition:
(Increase) decrease in prepaids 276,136 --- (100,412)
(Increase) decrease in receivables 7,291 87,500 (82,995)
(Increase) decrease in other current assets 154,833 (75,833) (500,450)
Decrease in inventories --- --- 61,245
Increase in current liabilities 417,280 333,295 2,917,426
(Decrease) in deferred revenue (400,110) (1,378,620) (1,422,122)
-------------- ------------ ------------
Net cash used in operating activities (14,933,119) (7,832,874) (43,747,110)
-------------- ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements (82,123) (184,257) (7,303,078)
Purchase of short term investments (24,007,757) (20,949,220) (75,928,978)
Redemption of short term investments 20,464,414 25,049,002 64,190,328
Acquisition of subsidiary, net of cash acquired --- --- (167,331)
-------------- ------------ ------------
Net cash (used in) provided by investing activities (3,625,466) 3,915,525 (19,209,059)
-------------- ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable to stockholders and
related trusts --- --- 1,852,500
Proceeds from sale of common stock and option and
warrant exercises, net 13,642,447 --- 62,240,483
Repurchase of common stock --- --- (3,750)
Cost of delayed offering --- --- (324,938)
-------------- ------------ ------------
Net cash provided by financing activities 13,642,447 --- 63,764,295
-------------- ------------ ------------

Net increase (decrease) in cash and cash equivalents (4,916,138) (3,917,349) 808,126

Cash and cash equivalents at beginning of period 5,724,264 7,199,942 ---
-------------- ------------ ------------

Cash and cash equivalents at end of period $ 808,126 3,282,593 808,126
============== ============ ============
Supplemental schedule of noncash financing activities
$ --- 2,061,383 11,405,865
============== ============ ============

FORM 10-Q See accompanying notes to consolidated financial statements Page 3

</TABLE>

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TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995

(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

(a) Organization

Texas Biotechnology Corporation (the "Company" or "TBC"), a
biopharmaceutical company, applies innovative drug discovery
techniques and its specialized knowledge of the role of vascular cell
biology in cardiovascular disease to the design and development of
novel pharmaceutical compounds. The Company was incorporated in the
state of Delaware in 1989.

During the period from August 2, 1989, (date of incorporation)
through March 1990, the Company was largely inactive. Since that
time, the Company has been engaged principally in research and drug
discovery programs and clinical development of a drug compound. On
July 25, 1994, the Company acquired all of the outstanding common
stock of ImmunoPharmaceutics, Inc. ("IPI"), a San Diego, California
based company, in exchange for common stock of the Company. TBC
decided to consolidate the IPI operation into TBC in the first half
of 1996. (See note 9)

The Company is presently working on a number of long-term development
projects which involve experimental and unproven technology, which
may require many years and substantial expenditures to complete, and
which may be unsuccessful. To date, other than small amounts of
monoclonal antibody compounds and services produced and sold by IPI
(now discontinued), the Company has not developed or sold any
products, and no assurance can be given that the Company will be able
to develop, manufacture or market any products in the future. In
addition, no assurance exists that future revenues will be
significant, that any sales will be profitable, or that the Company
will have sufficient funds available to complete its research and
development programs or market any products which it may develop.
Accordingly, the Company is considered to be in the development stage
as it has not to date derived significant revenues from its planned
principal operations.

(b) Basis of Consolidation

The Company's consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary, IPI. All material
intercompany transactions have been eliminated. The Company's
consolidated financial statements include the activity related to IPI
since August 1, 1994.

Cash equivalents are considered to be those securities or instruments
with original maturities, when purchased, of three months or less. At
September 30, 1996, approximately $808,000 was invested in demand and
money market accounts. Short term investments are those investments
which have an original maturity of less than one year and greater
than three months. At September 30, 1996, the Company's short term
investments consisted of approximately $998,000 in U.S. Treasury
Bills and $10,741,000 in Corporate Commercial Paper. Cash equivalents
and short term investments are stated at cost, which approximates
market value. Interest income is accrued as earned.

On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 (Statement 115), Accounting for Certain
Investments in Debt and Equity Securities. Statement 115 provides for
the use of the amortized cost method for investments in debt
securities when

FORM 10-Q Page 4
<PAGE>

management has the positive intent and ability to hold such
securities to maturity. In connection with the adoption of Statement
115, the Company classified all short term investments as held to
maturity.

(d) Equipment and Leasehold Improvements

Equipment and leasehold improvements are stated at cost less
accumulated depreciation and amortization. Depreciation of furniture
and equipment is provided on the straight-line method over the
estimated useful lives of the respective assets (3 to 10 years).
Amortization of leasehold improvements is provided on the straight-
line method over the remaining minimum lease term.

(e) Intangible Assets

Intangible assets are amortized on a straight line basis over ten
years.

(f) Research and Development Costs

All research and development costs are expensed as incurred and
include salaries of research and development employees. For the three
months ended September 30, 1996 and 1995, salaries and benefits
totaled approximately $1,469,000 and $1,797,000, respectively, of
which approximately $1,179,000 and $1,396,000, respectively, was
charged to research and development. For the nine months ended
September 30, 1996 and 1995, salaries and benefits totaled
approximately $4,936,000 and $5,223,000, respectively, of which
approximately $3,872,000 and $4,005,000, respectively, was charged to
research and development. Payments related to the acquisition of in-
process research and development are expensed.

(g) Net Loss Per Share

Net loss per share is calculated using the weighted average shares of
common stock outstanding during the period. For the three months
ended September 30, 1996 and 1995, the weighted average common shares
used to compute net loss per share totaled 24,188,708 and 17,439,365
respectively. For the nine months ended September 30, 1996 and 1995,
and the period from August 2, 1989 (date of incorporation) through
September 30, 1996, the weighted average common shares used to
compute net loss per share totaled 23,053,607, 16,516,343 and
10,045,776 respectively. Stock options and stock warrants are
considered common stock equivalents, however are not included in the
loss per share computations as their effect is anti-dilutive. Shares
held in escrow through June 30, 1995, pending satisfaction of certain
future conditions, and shares related to contingent stock issue
rights related to the IPI acquisition have been excluded from the net
loss per share calculation until such shares were released or issued.

(h) Reclassifications

Certain reclassifications have been made to prior period financial
statements to conform with the September 30, 1996 presentation with
no effect on net loss reported.

(i) Revenue Recognition

Revenue from grants is recognized as earned under the terms of the
related grant agreements. Revenue from service contracts is
recognized as the services are performed and/or as milestones are
achieved. Revenue from products and services is recognized when the
products are shipped or the services are performed. Amounts received
in advance of services to be performed under contracts are recorded
as deferred revenue.

FORM 10-Q Page 5
<PAGE>

(j) Patent Application Costs

Costs incurred in filing for patents are expensed as incurred.

(k) Use of Estimates

Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.

(l) Interim Financial Information

The Consolidated Balance Sheet as of September 30, 1996, and the
related Consolidated Statements of Operations for the three and nine
month periods ended September 30, 1996 and 1995, and the period from
August 2, 1989 (date of incorporation) through September 30, 1996,
and Consolidated Statements of Cash Flows for the nine month periods
ended September 30, 1996 and 1995, and the period from August 2, 1989
(date of incorporation) through September 30, 1996, are unaudited. In
the opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included. Such
adjustments consisted of normal recurring items. Interim results are
not necessarily indicative of results for a full year. The
consolidated financial statements and notes are presented as
permitted by Form 10-Q and do not contain certain information
included in the Company's Annual Consolidated Financial Statements
and Notes which should be read in conjunction with these consolidated
financial statements and notes.

(m) Accounting Pronouncements

In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (Statement 121).
The Company has adopted the statement effective December 31, 1995.
Statement 121 requires that long-lived assets and certain
identifiable intangible assets to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
In addition, Statement 121 requires that certain long-lived assets
and certain identifiable intangible assets to be disposed of be
reported at the lower of carrying amount or fair value less costs to
sell. The Company believes the goodwill associated with IPI,
$643,750, is impaired due to the decision to cease operations at IPI
and the sale of the QED business unit and has recorded a charge to
expense during 1995. (See note 9)

In October 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation"
(Statement 123). Statement 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans using
a fair value based methodology as an alternative to intrinsic value
based methodology. In addition, Statement 123 establishes the fair
value as the measurement basis for transactions in which an entity
issues its equity instruments to acquire goods or services from non-
employees. The accounting and reporting requirements of Statement 123
are effective beginning January 1, 1996. The Company intends to
continue using the intrinsic value method.

(2) CAPITAL STOCK

In February, 1996, the Company completed a private placement of common
stock. The Company issued 6,550,990 shares of Common Stock at $2 1/8 per
share with proceeds of approximately $13.0 million, net of selling
commissions and expenses of approximately $900,000. In accordance with
the terms of the offering, the Company filed, pursuant to Rule 415 of the
Securities Act, a Shelf Registration Statement as to the shares of Common
Stock sold to the purchasers in the private placement which became
effective on June 4, 1996.

FORM 10-Q Page 6
<PAGE>

In connection with the private placement, the co-exclusive agent, Harris,
Webb & Garrison received a $634,630 selling commission, 49,775 warrants
with an exercise price of $3.05 per share and no registration rights, and
497,749 warrants with an exercise price of $3.66 per share with the
underlying common stock being registered, under certain circumstances, on
a "piggyback" basis in the event of a public offering of common stock by
the Company. The co-exclusive agent, Aurora Capital Corp., received a
$124,653 selling commission, 25,587 warrants with an exercise price of
$3.36 per share, and 149,002 warrants with an exercise price of $4.58 per
share. The common stock underlying Aurora's warrants will be registered
with the Common Stock issued in the private placement. The co-exclusive
agents assigned some of these warrants to others.

In May 1996, the Board of Directors proposed, and stockholders approved,
an amendment to the Company's Certificate of Incorporation to increase
the authorized number of shares of the Company's common stock from 40
million shares to 75 million shares.

On October 10, 1996 the Company signed a strategic alliance agreement
with LG Chemical, Ltd. ("LG Chem"), a Korean corporation. In conjunction
with the agreement, LG Chem purchased 1,250,000 shares of common stock
for $4.00 per share for a total of $5 million. In addition, LG Chem has
the option to purchase up to $5 million of common stock on one of four
exercise dates ending at December 31, 1997. The minimum purchase amount
is $1,000,000 and LG Chem and TBC must agree on the purchase price or the
option cannot be exercised on the given exercise date. These shares were
issued pursuant to "Regulation S" and may not be sold by LG Chem for a
period of one year per the agreement. The Company's agents in the
contract negotiations, Raymond James & Associates, Inc. and Mitani & Co.,
Inc. received $420,000 in commissions and 113,636 warrants exercisable at
$4.40 per share with the underlying common stock being subject to certain
piggyback registration rights.

(3) STOCK OPTIONS

The Company has in effect the following stock option plans:

The Amended and Restated 1990 Incentive Stock Option Plan ("1990 Plan")
allows for the issuance of incentive and non-qualified options to
employees, directors, officers, non-employee independent contractors and
non-employee directors, pursuant to which 230,590 shares of common stock
are reserved for issuance out of authorized but unissued shares of the
Company.

The Amended and Restated 1992 Incentive Stock Option Plan ("1992 Plan")
allows for the issuance of incentive and non-qualified options to
employees, directors, officers, non-employee independent contractors and
non-employee directors, pursuant to which 1,597,843 shares of common
stock are reserved for issuance out of authorized but unissued shares of
the Company.

The Stock Option Plan for Non-Employee Directors ("Director Plan") allows
for the issuance of non-qualified options to non-employee directors,
pursuant to which 71,429 shares of common stock are reserved for issuance
out of authorized but unissued shares of the Company to be issued to non-
employee members of the Board of Directors of the Company based on a
formula.

The 1995 Stock Option Plan ("1995 Plan") allows for the issuance of
incentive and non-qualified options, shares of restricted stock and stock
bonuses to employees, officers, and non-employee independent contractors,
pursuant to which 1,000,000 shares of common stock are reserved for
issuance out of authorized but unissued shares of the Company.

The 1995 Amended and Restated Non-Employee Director Stock Option Plan
("1995 Director Plan") allows for the issuance of non-qualified options
to non-employee directors, pursuant to which 200,000 shares of common
stock are reserved for issuance out of authorized but unissued shares of
the Company to be issued to non-employee members of the Board of
Directors of the Company based on a formula. In June 1996,

FORM 10-Q Page 7
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the 1995 Director Plan was amended with respect to the election date
requirement for a director to request stock in lieu of cash payment of
director fees.

A summary of stock options as of September 30, 1996, follows:

Exercise Price Available
Stock Option Plans Per Share Outstanding Exercised Exercisable for Grant
- ------------------- -------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>

1990 Plan $3.50 - $3.56 173,369 55,125 165,369 57,221
1992 Plan $1.41 - $5.36 1,422,977 102,157 710,391 174,866
Director Plan $2.40 - $4.54 42,576 --- 33,148 28,853
1995 Plan $1.31 - $4.53 564,500 --- 37,500 435,500
1995 Director Plan $1.38 - $5.19 82,806 --- 27,606 117,194
----------- -------- ---------- --------
TOTAL 2,286,228 157,282 974,014 813,634
=========== ======== ========== ========

</TABLE>

The Company has recorded deferred compensation for the difference between
the grant price and the deemed fair value for financial statement
presentation purposes related to certain options granted in the period
subsequent to May 27, 1993 and prior to the initial public offering. Such
amount totaled $287,158, of which $46,177 has been charged to expense in
1996.

(4) INCOME TAXES

The Company adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" effective January 1, 1993. As of September
30, 1996, the Company had a net deferred tax asset of approximately
$20,934,000, primarily composed of the tax benefit associated with net
operating loss carry forwards, start-up and other capitalized costs. A
valuation allowance for the full amount of the deferred tax asset has
been established as realization of the benefit is uncertain.

(5) COMMON STOCK RESERVED

The Company has reserved common stock for issuance as of September 30,
1996 as follows:

<S> <C>
Stock option plans 3,099,862
Agreement with Genentech, Inc. 285,715
Warrants issuable under the Genentech Agreement 142,858
Warrants outstanding 5,376,905
Underwriters purchase options and related warrants 710,000
IPI acquisition (contingent shares) 1,000,000
----------
Total shares reserved 10,615,340
==========
</TABLE>

LG Chem has the option to purchase up to $5 million of common stock on
one of four exercise dates ending at December 31, 1997. The minimum
purchase amount is $1,000,000 and LG Chem and TBC must agree on the
purchase price or the option cannot be exercised on the given exercise
date.

FORM 10-Q Page 8
<PAGE>

(6) CLINICAL RESEARCH AGREEMENTS

On February 10, 1995, the Company entered into an agreement with Coromed,
Inc., a contract research organization, to coordinate the clinical
evaluation of Novastan/R/ as an adjunct to Streptokinase in acute
myocardial infarction. Coromed is responsible for managing all aspects of
the clinical trial and making all financial remuneration to testing sites.
The term of the agreement is 19 months, subject to extension upon the
mutual written agreement of both parties. The parties have agreed to a
total budget of approximately $3,196,000. Of this amount, $106,000 was paid
upon execution of a letter of intent and approximately $450,000 was paid
upon execution of the agreement. Subsequent payments will be made monthly
on a per patient basis, to a maximum total of approximately $2,490,000.
Three additional payments of $50,000 each will be made upon completion of
specified tasks by Coromed. If the clinical trial is completed in less than
19 months, the Company will pay Coromed a bonus calculated as a percentage
of personnel costs as set forth in the budget, to a maximum bonus amount of
approximately $327,000. In addition, the Company has engaged Coromed to
provide various services related to other ongoing Novastan/R/ trials
being conducted by the Company.

On May 1, 1996, the Company amended the above agreement with Coromed, Inc.
The term of the contract was extended to 24 months with an additional cost
of $1,200,000. The bonus payment, if any, is now based on the completion in
less than 24 months.

(7) RESEARCH AGREEMENTS

On October 11, 1994, the Company signed a collaborative agreement with
Synthelabo, a French pharmaceutical group, to develop and market compounds
for vascular proliferation disease derived from the Company's FGF and
antisense programs. Upon consummation of the transaction, Synthelabo
purchased 1,428,571 shares of common stock for $3.50 per share for a total
of $5 million and paid a non-refundable licensing fee of $3 million. In
addition, Synthelabo has committed to pay $3 million annually in research
payments (payable in quarterly installments of $750,000) for three years.
Synthelabo has agreed, upon the achievement of certain milestones, to
further payments of up to $3 million per year for up to $18 million in
total. Synthelabo has the right to terminate the agreement any time on or
after October 15, 1996, for any reason and either party has the right to
terminate the contract for breach of any material obligation. If Synthelabo
exercises this termination right, the license granted to Synthelabo shall
terminate and TBC will pay Synthelabo a royalty on net sales of any
products sold in a certain territory for a period of time. In addition,
Synthelabo may, at its option, require that the technology be transferred
to and the development program be conducted by a joint venture owned by TBC
and Synthelabo should "net worth" as defined in the agreement be less than
$5 million as of the end of any calendar quarter during the term of the
agreement. The first quarterly research payment of $750,000 was received on
October 31, 1994, of which $500,000 was recognized in 1994. As of September
30, 1996, $250,000 is included in current deferred revenue. Synthelabo will
pay royalties to TBC, based on the net sales, in those geographic areas
covered in the agreement. In exchange for the above consideration,
Synthelabo will receive an exclusive license to manufacture, use, and sell
any products generated from the research in Europe, the Middle East, Africa
and the countries of the former Soviet Union. One of the programs, which
involves antisense, has been abandoned and may result in a redirection of
the research into another area.

During 1995, the Company and Synthelabo mutually agreed to exchange certain
clinical data. In January 1996, the Company signed two agreements with
Synthelabo with respect to the supply of information related to certain
clinical studies. Synthelabo paid TBC $500,000 upon execution of the
agreement. In addition, over the term of the agreements as certain
milestones are met, Synthelabo has committed to pay TBC additional payments
that total $2,400,000. These payments are dependent on rate of enrollment
in certain clinical studies, the completion of certain clinical studies and
date of completion of certain clinical studies. As of September 30, 1996,
TBC has received approximately $1.5 million related to these agreements.
Synthelabo is the licensee for Novastan/R/ in certain territories other
than those which were sublicensed to TBC.

FORM 10-Q Page 9
<PAGE>

On October 10, 1996, the Company signed a strategic alliance agreement with
LG Chem, a Korean corporation, to develop and market compounds derived from
the Company's Endothelin Receptor and Selectin Antagonist for certain
disease indications. Upon consummation of the transaction, LG Chem
purchased 1,250,000 shares of common stock for $4.00 per share for a total
of $5 million. In addition, LG Chem has committed to pay $10.7 million in
research payments. Of this amount, $100,000 will be paid on or before
December 31, 1996, $1.0 million on each of June 30 and December 31 of 1997,
1998, 1999 and 2000, and $1.3 million on June 30 and December 31, 2001. LG
Chem has the right to terminate future research payments if TBC fails to
meet certain Agreement milestones, which milestones will be established by
the parties in accordance with the agreement. LG Chem will pay royalties to
TBC, based on net sales, in those geographic areas covered by the
agreement, which include Korea, China, India and certain other Asian
countries, excluding Japan. The Company will pay its agents in the contract
negotiations, Raymond James & Associates, Inc. and Mitani & Co., Inc., a
commission on all future research payments as well as a royalty on net
sales.

(8) LICENSE AGREEMENT

In May 1993, TBC entered into an agreement with Genentech to sublicense
Genentech's rights and technology relating to Novastan/R/ (argatroban)
originally licensed to Genentech by Mitsubishi Chemical Corporation
("Mitsubishi"), and to license Genentech's own proprietary technology
developed with respect to Novastan/R/ (the "Genentech Agreement"). Under
the license and sublicense, the Company has an exclusive license to use and
sell Novastan/R/ in the United States and Canada for specified human
cardiovascular indications, not including cerebral thromboembolism
(stroke). The Company is required to pay Genentech and Mitsubishi specified
royalties on net sales of Novastan/R/ by the Company and its sublicensees
after its commercial introduction in the United States and Canada.
Genentech has the right to terminate the agreement or to cause the license
to become non-exclusive if the Company fails to exercise due diligence in
performing its obligations under the agreement for a period of 60 days
after receiving written notice from Genentech or fails to maintain a
minimum consolidated tangible net worth of $5.0 million. The Genentech
Agreement, as amended, provides that Mitsubishi may terminate Genentech's
license with Mitsubishi (which results in the termination of the Genentech
Agreement as well) if TBC does not file an NDA for Novastan/R/ with the FDA
no later than June 30, 1997, subject to certain additional goals being met
by TBC. As of December 31, 1995, TBC had not met certain of those goals.
However, Mitsubishi has agreed to withhold its rights to terminate the
license with Genentech if the NDA is filed by June 30, 1997, and if TBC
accomplishes the following milestones: (i) on or before December 31, 1996,
TBC shall have met certain enrollment guidelines for certain Novastan/R/
clinical trials; (ii) on or before March 31, 1997, TBC shall complete,
report and analyze certain other Novastan/R/ clinical trials; (iii) on or
before September 30, 1997, TBC shall have agreed to proceed with the Phase
III trial in AMI, and (iv) TBC shall comply with certain reporting and
information meeting requirements. If these milestones are not met,
Mitsubishi will retain the rights to terminate the Genentech license;
provided, that if such termination results from TBC's violation of the
milestone described in (iii) above, TBC will receive a license from
Mitsubishi in the field of HIT/HITTS on the same terms, as presently
included in the Genentech Agreement. Either party may terminate the
Genentech Agreement on 60 days notice if the other party defaults in its
material obligations under the agreement, declares bankruptcy or is
insolvent, or if a substantial portion of its property is subject to
attachment. The Genentech Agreement is also subject to the continuation of
Genentech's license agreement with Mitsubishi, which is only terminable if
Genentech defaults in its material obligations under the agreement,
declares bankruptcy or is insolvent, or if a substantial portion of its
property is subject to attachment. Unless terminated sooner pursuant to the
above described termination provisions, the Genentech Agreement is expected
to expire in June 2007. Under the Genentech Agreement, TBC has access to an
improved formulation patent granted in 1993 which expires in 2010 and a use
patent which expires in 2009.

Mitsubishi further agreed to supply the Company with its requirements of
Novastan/R/ throughout the term of the Genentech Agreement for TBC's
clinical testing and commercial sales of Novastan/R/ in the United States
and Canada. In the event Mitsubishi should discontinue the manufacture of
Novastan/R/, Mitsubishi,

FORM 10-Q Page 10
<PAGE>

Genentech and TBC have agreed to discuss in good faith the means by which,
and the party to whom, Novastan/R/ production technology will be
transferred. The transferee may be a person or entity other than Genentech
or TBC. At present, Mitsubishi is the only manufacturer of Novastan/R/.
Should Mitsubishi terminate or default in its supply commitment, there can
be no assurance that alternate sources of bulk Novastan/R/ will be
available to the Company at reasonable cost, if at all. If such alternate
sources of supply are unavailable or uneconomic, the Company's results of
operations would be materially and adversely affected.

In exchange for the license to Genentech's Novastan/R/ technology, TBC
issued Genentech 285,714 shares of Common Stock and agreed to issue (i) an
additional 214,286 shares of Common Stock to Genentech within 10 days after
the filing of the first New Drug Application ("NDA") with the FDA for
Novastan/R/, and (ii) an additional 71,429 shares of Common Stock to
Genentech within 10 days after the FDA's first approval of an NDA for
Novastan/R/. The Company has also agreed to grant Genentech a warrant to
purchase an additional 142,858 shares of Common Stock at an exercise price
of $14.00 per share, subject to adjustment, within ten days of the filing
of the first NDA for Novastan/R/ with the FDA. If the Company is unable
to issue any of the additional shares of Common Stock or the warrant to
Genentech due to circumstances beyond the Company's control, the Company
has agreed to pay Genentech, in lieu thereof, an amount equal to the value
of the securities plus interest from May 27, 1993 at the prime rate plus
one percent, compounded annually. The value of the Common Stock is deemed
to be $7.00 per share, which represents the cash consideration the Company
will be obligated to pay to Genentech as liquidated damages, and the value
of the warrants is to be determined by appraisal, based on the warrants'
market value. The Company will not be required to make any cash payment if
both of the filing and approval of the NDA do not occur. TBC has also
granted Genentech demand and piggyback registration rights with regard to
shares of Common Stock issued to Genentech.

Due to the additional research and development required to commercialize
the technologies associated with the Sublicense and License Agreement, the
Company expensed the value associated with the 285,714 shares issued to
Genentech, charging $1,000,000 to purchase of in-process research and
development expense in the year ended December 31, 1993.

In connection with the Genentech Agreement, a consultant involved in
negotiations related to the Agreement will receive a royalty on net sales
of licensed products.

(9) CONSOLIDATION OF IMMUNOPHARMACEUTICS, INC.

The Company decided to consolidate the IPI operation into TBC's in the
first half of 1996. The overall financial impact on the Company's
performance will be positive in 1996 due to expected reduction in general
and administrative expenses and the elimination of some research and
development positions associated with IPI. The Company believes the
goodwill associated with IPI, $643,750, is impaired due to the decision to
cease operations at IPI and the sale of the QED business unit and has
charged it to expense in the year ended December 31, 1995. The
restructuring costs associated with the consolidation of the IPI operation
were approximately $421,000 and have been expensed in the three months
ended March 31, 1996. This cost included waste disposal, future lease
commitments, severance pay and related taxes.

(10) COMMITMENTS AND CONTINGENCIES

a) Employment Agreements

Since inception, the Company has entered into employment agreements
with certain officers and key employees. As of September 30, 1996,
remaining commitments total approximately $120,000 in 1996 and $232,000
in 1997. These amounts include payments due to one former employee
pursuant to his severance agreement. The employment agreements of
various officers and key employees provide for salary continuation for
up to twelve months from date of termination upon dismissal by the
Company, which would approximate $465,000 currently. In addition to
salary, the Company has

FORM 10-Q Page 11
<PAGE>

agreed to reimburse certain officers and other employees for costs of
relocation and temporary travel and living expenses.

In addition, the Company has signed agreements with five of its
officers to provide certain benefits in the event of a "change of
control" as defined in the agreement and the occurrence of certain
other events. The agreements provide for a lump-sum payment in cash
equal to eighteen (18) months to three (3) years of annual base salary
and annual bonus if any. The base salary portion of the agreements
would aggregate approximately $1.9 million at current rate of
compensation. In addition, the agreements provide for gross-up for
certain taxes on the lump-sum payment, continuation of certain
insurance and other benefits for periods of eighteen (18) months to
three (3) years and reimbursement of certain legal expenses in
conjunction with the agreements. These provisions are intended to
replace compensation continuation provisions of any other agreement in
effect for an officer if the specified event occurs.

b) Legal Proceedings

On November 21, 1994, a class action shareholders' suit was filed in
the United States District Court for the Southern District of Texas,
Houston Division seeking damages in the amount of $16 million.
Plaintiffs are two individuals who purchased shares of the Company on
December 16, 1993 following the Company's initial public offering. In
their complaint, plaintiffs have sued the Company, and certain members
of the board of directors and certain officers alleging violations of
Sections 11, 12 and 15 of the Securities Act of 1933, as amended (the
"Act"). Plaintiffs have also named David Blech, D. Blech & Co.,
Incorporated and Isaac Blech as defendants. On January 23, 1995, the
Company and the members of the board of directors filed a motion to
dismiss the plaintiffs' complaint pursuant to Rule 9(b) and Rule 12b(6)
of the Federal Rules of Civil Procedure. In addition, defendant John
Pietruski, Chairman of the Board of Directors, filed a motion to
dismiss the plaintiffs' complaint pursuant to Rule 12(b)(2) of the
Federal Rules of Civil Procedure. On February 7, 1995, the plaintiffs
filed a motion for class certification. The Court denied the motion by
the Company and by John Pietruski.

On March 28, 1995, a second class action shareholders' suit was filed
in the United States District Court for the Southern District of New
York seeking unspecified damages. Plaintiffs are eight individuals who
purchased shares in various companies for which D. Blech & Co. acted as
an underwriter (or co-underwriter) or marketmaker. In their complaint,
the plaintiffs have sued the Company alleging violations of Section
10(b) of the Securities Exchange Act of 1934, as Amended (the "Exchange
Act") and Rule 10b-5 promulgated thereunder by the Securities and
Exchange Commission (the "Commission"). Plaintiffs have named a number
of defendants, including David Blech and D. Blech & Co., four
individuals, two brokerage firms, one investment management company and
ten other companies for which D. Blech & Co. acted as underwriter or
marketmaker.

FORM 10-Q Page 12
<PAGE>

reconsideration, but together with all other similar pending motions,
denied the requested relief. Pursuant to the court's order, the Company
therefore filed an answer in that case. The Company also filed a Motion
seeking leave of court to prosecute an immediate appeal of the Court's
denial of the Company's Motion to Dismiss. The Court heard argument on
that Motion on October 10, 1996, and the Company awaits the Court's
ruling. Given the early stage of that case, which is the only remaining
litigation against the Company, the Company is unable to evaluate its
potential outcome at this time. The Company disputes these claims and
intends to contest them vigorously.

FORM 10-Q Page 13
<PAGE>

ITEM 2.
- -------

TEXAS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE ENTERPRISE)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

SEPTEMBER 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995

OVERVIEW
--------

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks
and uncertainties.

Since its formation in 1989, the Company has primarily devoted its resources
to fund research, drug discovery and development. The Company has been
unprofitable to date and expects to incur substantial losses for the next
several years as the Company invests in product research and development,
preclinical and clinical testing and regulatory compliance. The Company has
sustained net losses of approximately $59.8 million from inception to
September 30, 1996. The Company has primarily financed its operations to date
through private placements of Common Stock and debt, which have raised an
aggregate of $34.3 million in net proceeds, an initial public offering ("IPO")
in December 1993, which raised an aggregate of $24.2 million in net proceeds
including the over-allotment, and a collaborative agreement with Synthelabo,
which has raised an aggregate of approximately $15.5 million from research
payments, license fees and sale of stock.

On July 25, 1994, the Company acquired all of the outstanding stock of
ImmunoPharmaceutics, Inc. ("IPI") in exchange for Common Stock of the Company.
IPI's results of operations have been included in the consolidated results of
operations beginning August 1, 1994. During September 1993, IPI entered into
an agreement to provide research and development services, over a period of 30
months, to EISAI Co., LTD ("EISAI"). The agreement, which expired in March
1996, guaranteed contract research funding and allowed for additional amounts
to be received upon the attainment of certain milestones. On August 10, 1995,
IPI received a $2.0 million milestone payment from EISAI. The Company decided
to consolidate the IPI operation into TBC's in the first half of 1996. The
overall financial impact on the Company's performance will be positive in 1996
due to expected reduction in general and administrative expenses and the
elimination of some research and development positions associated with IPI.
The Company believes the goodwill associated with IPI of $643,750 was impaired
due to the decision to cease operations at IPI and the sale of IPI's QED
business unit and charged it to expense in the year ended December 1995.
Restructuring costs of $421,165 associated with the consolidation of the IPI
operation were recorded in the quarter ended March 31, 1996.

The Company signed a collaborative agreement with Synthelabo, the
pharmaceutical division of L'Oreal, on October 11, 1994 (the "Synthelabo
Agreement"). Upon consummation of the transaction, Synthelabo purchased
1,428,571 shares of Common Stock for a total of $5 million and paid the
Company a nonrefundable licensing fee of $3 million. In addition, Synthelabo
has committed to pay $3 million annually in research payments (payable in
quarterly installments) through July 31, 1997. In 1996, TBC has signed two
agreements with Synthelabo to provide to them copies of certain clinical data
for Novastan/R/. Through September 30, 1996, TBC has received approximately
$1.5 million pursuant to these two clinical data agreements. Over the life of
the agreements, TBC may receive as much as $2.9 million, including the $1.5
million received, from Synthelabo.

FORM 10-Q Page 14
<PAGE>

On October 10, 1996 the Company signed a strategic alliance agreement with LG
Chemical, LTD. ("LG Chem"), a Korean corporation. In conjunction with the
agreement, LG Chem purchased 1,250,000 shares of common stock for $4.00 per
share for a total of $5 million. In addition, LG Chem has the option to
purchase up to $5 million of common stock on one of four exercise dates ending
at December 31, 1997. The minimum purchase amount is $1,000,000 and LG Chem
and TBC must agree on the exercise price or the stock option cannot be
exercised on the given exercise date.

The Company's operating results have fluctuated significantly during each
quarter, and the Company anticipates that such fluctuations, largely
attributable to varying research and development commitments and expenditures,
will continue for the next several years.

RESULTS OF OPERATIONS
---------------------

THREE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995

Revenues decreased from $3,404,018 in the three month period ended September
30, 1995 to $1,102,500 in the same period of 1996, a decrease of 68%.
Revenues were composed of earned revenues under research agreements, sales of
products and services, and grant income. The period ended September 30, 1995,
included a $2 million milestone payment from EISAI (which agreement terminated
in March 1996).

Total operating expenses increased 38% from $4,976,778 in the three month
period ended September 30, 1995 to $6,932,395 in the same period of 1996.
Research and development expenses increased 59% from $3,753,107 in the three
month period ended September 30, 1995 to $5,980,096 in the same period of
1996. This increase was primarily attributable to continued increases in
research and development activity related to the clinical trials on the
compound Novastan/R/ (argatroban) and development work associated with the
Selectin and Endothelin programs. General and administrative expenses
decreased 26% from $1,223,671 in the three month period ended September 30,
1995 to $952,299 in the same period of 1996. The decrease was primarily
attributable to the consolidation of the IPI operation in March 1996. The
Company had 99 employees at September 30, 1995, including 25 employees at IPI,
and 80 employees at September 30, 1996, including 1 employee at IPI.

Other income and expenses was composed entirely of investment income on
invested funds and interest expense. Investment income decreased from
$285,333 in the three month period ended September 30, 1995 to $199,811 in the
same period of 1996, a decrease of 30%. The decrease is due to lower interest
rates from 1995 to 1996 and a lower investment balance throughout 1996.

The Company incurred a net loss of $1,287,427 for the three month period ended
September 30, 1995, compared with a net loss of $5,587,670 for the same period
of 1996. The increase was due to a $2.0 million milestone payment from EISAI
received in 1995 and increased research and development expenses related to
clinical trials on the compound Novastan/R/ in 1996.

NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995

Revenues decreased from $6,052,987 in the nine month period ended September
30, 1995 to $4,303,276 in the same period of 1996, a decrease of 29%.
Revenues were composed of earned revenues under research agreements, sales of
products and services, and grant income. The period ended September 30, 1995,
included a $2 million milestone payment from EISAI (which agreement terminated
in March 1996). The period ended September 30, 1996, included $1,645,000 from
Synthelabo related to the agreement to supply certain clinical data.

Total operating expenses increased 27% from $16,463,259 in the nine month
period ended September 30, 1995 to $20,982,742 in the same period of 1996.
Included in the 1995 operating expenses was a non-cash

FORM 10-Q Page 15
<PAGE>

charge for in-process research and development for $1,973,883. Exclusive of
this charge, operating expenses increased 45% from $14,489,376 in the nine
month period ended September 30, 1995, to $20,982,742 in the same period of
1996. Research and development expenses increased 66% from $10,560,959 in the
nine month period ended September 30, 1995 to $17,484,641 in the same period
of 1996. General and administrative expenses decreased 22% from $3,928,417 in
the nine month period ended September 30, 1995 to $3,076,936 in the same
period of 1996. See comments under the preceding three month period comparison
for explanation of the changes.

Other income and expenses was composed entirely of investment income on
invested funds and interest expense. Investment income decreased from
$959,571 in the nine month period ended September 30, 1995 to $697,089 in the
same period of 1996, a decrease of 27%. See comments under the preceding three
month period comparison for explanation of the decrease.

The Company incurred a net loss of $9,450,701 for the nine month period ended
September 30, 1995, compared with a net loss of $15,982,377 for the same
period of 1996. See comments under the preceding three month period
comparison for explanation of the changes.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Company has financed its research and development activities to date
principally through (i) private sales of common stock and an initial public
offering of a unit security, (ii) issuance of common stock in conjunction with
assumption of liabilities and assets to acquire IPI and the Novastan/R/
license, (iii) revenues and proceeds from sales of common stock in connection
with corporate partner collaboration and research agreements and (iv)
investment income, net of interest expense. During the first nine months of
1996, the Company utilized $14,933,119 net cash in operating activities and
$13,642,447 was provided by financing activities. The use of cash in
operations was caused by the Company's net loss of $15,982,377. Financing
activities produced approximately $13,640,000 in net proceeds for the Company
resulting from the 1996 private placement and the remaining was from exercise
of stock options and warrants.

The Company expects to incur substantial research and development expenditures
as it designs and develops biopharmaceutical products for the prevention and
treatment of cardiovascular diseases. The Company anticipates that operating
expenses will continue to increase during 1996 and subsequent years. These
costs to develop Novastan/R/ have increased and will continue to increase
during 1996 due to the continuation of clinical trials and will continue to be
significant through the FDA approval process. These costs include, among
other things, hiring personnel to direct and carry out all operations related
to the clinical trials, paying for hospital and procedural costs, services of
a contract research organization, and purchasing and manufacturing large
quantities of the compound to be used in such trials. In addition, the
Company anticipates that the administrative costs associated with this effort
will continue to be significant. The amounts and timing of expenditures will
depend on the progress of ongoing research and clinical development and
product launch costs.

At September 30, 1996, the Company had cash, cash equivalents and short-term
investments of approximately $12.5 million. Subsequent to September 30, 1996
the Company received $5 million from LG Chem, a Korean corporation, related to
a strategic alliance agreement. The Company anticipates that its existing
capital resources and its other revenue sources should be sufficient to fund
its cash requirements into the third quarter of 1997. The Company's existing
capital resources may not be sufficient to fund the Company's operations
through commercialization of its first product. Moreover, the Genentech
Agreement and Synthelabo Agreement require the Company to maintain a tangible
net worth of at least $5.0 million during the term of these agreements. For
failure to maintain at least $5.0 million of net worth, Synthelabo may require
that the technology be transferred to, and the development program be
conducted by, a joint venture owned by TBC and Synthelabo. As of September
30, 1996, the Company's tangible net worth significantly exceeded $5.0
million. The Genentech Agreement and Synthelabo Agreement are also terminable
for other reasons. Termination of either of these agreements will have a
material adverse effect on the Company.

FORM 10-Q Page 16
<PAGE>

The Company will need to raise substantial funds for future operations and is
actively seeking such funding through collaborative arrangements, public or
private financing, including equity financing, and other arrangements. The
Company expects that significant additional expenditures will be required to
complete the clinical trials related to Novastan/R/ and to it other product
candidates which are not yet in clinical trials. If the Company's current (or
any additional) product candidates enter clinical trials, further significant
expenditures will be necessary for laboratory space, scientific and
administrative personnel, and services of contract research organizations.
There can be no assurance that the Company will be able to obtain additional
financing on acceptable terms or in time to fund any necessary or desirable
expenditures. In the event such financing is not obtained, the Company's drug
discovery or development and programs regarding Novastan/R/ and its other
product candidates may be delayed, scaled back or eliminated; or it may be
required to obtain funds through arrangements with collaborative partners or
others that may require the Company to relinquish rights to certain of its
technologies, product candidates or products that the Company would not
otherwise relinquish.

PENDING LITIGATION

As of September 30, 1996, one class action shareholder lawsuit remains pending
against the Company and includes certain directors and officers as defendants.
The Company disputes all claims set forth in this lawsuit and intends to
contest it vigorously. However, the Company is unable to evaluate the
potential outcome at this time.

HAZARDOUS MATERIALS AND ENVIRONMENTAL MATTERS

The Company's research and development activities involve the controlled use
of hazardous and radioactive materials. The Company is subject to federal,
state, and local laws and regulations governing the use, manufacture, storage,
handling and disposal of such materials and certain waste products.
Management believes that the Company is in compliance with all such laws,
regulations and standards currently in effect and that the cost of compliance
with such laws, regulation, and standards will not have a material adverse
effect on the Company. The Company does not expect to incur any capital
expenditures for environmental control in the foreseeable future.

IMPACT OF INFLATION AND CHANGING PRICES

The pharmaceutical research industry is labor intensive, and wages and related
expenses increase in inflationary periods. The lease of space and related
building services for the Houston facility contains a clause that escalates
rent and related services each year based on the increase in building
operating costs and the increase in the Houston Consumer Price Index,
respectively. To date, inflation has not had a significant impact on
operations.

ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" (Statement 121). The Company has adopted the
statement effective December 31, 1995. Statement 121 requires that long-
lived assets and certain identifiable intangible assets to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In addition, Statement 121 requires that certain long-lived
assets and certain identifiable intangible assets to be disposed of be
reported at the lower of carrying amount or fair value less costs to sell.
The Company believes the goodwill associated with IPI, $643,750, was impaired
due to the decision to cease operations at IPI and the sale of the QED
business unit and has recorded a charge to expense.

FORM 10-Q Page 17
<PAGE>

standards for stock-based employee compensation plans using a fair value
based methodology as an alternative to intrinsic value based methodology. In
addition, Statement 123 established the fair value as the measurement basis
for transactions in which an entity issues its equity instruments to acquire
goods or services from non-employees. The accounting and reporting
requirements of Statement 123 were effective beginning January 1, 1996. The
adaptation of Statement 123 is not expected to have a material impact on
TBC's 1996 financial position or results of operations as the Company intends
to continue using the intrinsic value method.

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

This Report includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact included in this Report are forward looking
statements. Such forward looking statements include, without limitation,
statements under (a) "Organization and Significant Accounting Policies --
Organization" regarding TBC's expectations for future drug discovery and
development and related expenditures and (b) "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" - regarding TBC's estimate of sufficiency of existing
capital resources and ability to raise additional capital to fund cash
requirements for future operations. Although TBC believes that the
expectations reflected in such forward looking statements are reasonable, it
can give no assurance that such expectations reflected in such forward
looking statements will prove to have been correct. The ability to achieve
TBC's expectations is contingent upon a number of factors which include (i)
ongoing cost of research and development activities, (ii) cost of clinical
development of product candidates, (iii) attainment of research and clinical
goals of product candidates, (iv) timely approval of TBC's product
candidates by appropriate governmental and regulatory agencies, (v) effect
of any current or future competitive products, (vi) ability to manufacture
and market products commercially, (vii) retention of key personnel and
(viii) obtaining and timing of sufficient financing through capital raising
or collaborative agreements to fund operations.

FORM 10-Q Page 18
<PAGE>

PART II OTHER INFORMATION
- -------------------------

ITEM 1. LEGAL PROCEEDINGS
- --------------------------

On November 21, 1994, a class action shareholders' suit was filed in the
United States District Court for the Southern District of Texas, Houston
Division seeking damages in the amount of $16 million. Plaintiffs are two
individuals who purchased shares of the Company on December 16, 1993
following the Company's initial public offering. In their complaint,
plaintiffs have sued the Company, and certain members of the board of
directors and certain officers alleging violations of Sections 11, 12 and 15
of the Securities Act of 1933, as amended (the "Act"). Plaintiffs have also
named David Blech, D. Blech & Co., Incorporated and Isaac Blech as
defendants. On January 23, 1995, the Company and the members of the board of
directors filed a motion to dismiss the plaintiffs' complaint pursuant to
Rule 9(b) and Rule 12b(6) of the Federal Rules of Civil Procedure. In
addition, defendant John Pietruski, Chairman of the Board of Directors, filed
a motion to dismiss the plaintiffs' complaint pursuant to Rule 12(b)(2) of
the Federal Rules of Civil Procedure. On February 7, 1995, the plaintiffs
filed a motion for class certification. The Court denied the motion by the
Company and by John Pietruski.

On March 28, 1995, a second class action shareholders' suit was filed in the
United States District Court for the Southern District of New York seeking
unspecified damages. Plaintiffs are eight individuals who purchased shares
in various companies for which D. Blech & Co. acted as an underwriter (or co-
underwriter) or marketmaker. In their complaint, the plaintiffs have sued the
Company alleging violations of Section 10(b) of the Securities Exchange Act
of 1934, as Amended (the "Exchange Act") and Rule 10b-5 promulgated
thereunder by the Securities and Exchange Commission (the "Commission").
Plaintiffs have named a number of defendants, including David Blech and D.
Blech & Co., four individuals, two brokerage firms, one investment management
company and ten other companies for which D. Blech & Co. acted as underwriter
or marketmaker.

On August 14, 1995, the Judicial Panel on The Multi-District Litigation
ordered that the action filed in the United States District Court for the
Southern District of Texas, Houston Division be transferred to the United
States District Court for the Southern District of New York for coordinated
or consolidated pretrial proceedings with the action pending there. In
light of the transfer and consolidation of the Texas case with similar cases
against other companies for which Blech acted as underwriter, the Company
requested that the Court in New York reconsider the Texas Court's denial of
its motion to dismiss as a part of the Court's consideration of similar
motions to dismiss filed by those companies. All of these motions were
presented to the Court on February 6, 1996. On June 6, 1996, the New York
District Court entered two memorandum opinions in the consolidated cases. In
one of its opinions, the Court dismissed all of the Exchange Act and common
law fraud claims filed against the Company and its officers and directors,
but afforded those plaintiffs the right to attempt to preserve those claims
by repleading them. The Court ordered that those claims be repleaded no
later than July 26, 1996. Plaintiffs did not replead those claims by the
deadline, resulting in the dismissal of all claims against the Company in
that litigation. In its opinion in the second case, i.e., the case filed on
November 21, 1994, the Court granted the Company and its officers and
directors' motion for reconsideration, but together with all other similar
pending motions, denied the requested relief. Pursuant to the court's order,
the Company therefore filed an answer in that case. The Company also filed a
Motion seeking leave of court to prosecute an immediate appeal of the Court's
denial of the Company's Motion to Dismiss. The Court heard argument on that
Motion on October 10, 1996, and the Company awaits the Court's ruling. Given
the early stage of that case, which is the only remaining litigation against
the Company, the Company is unable to evaluate its potential outcome at this
time. The Company disputes these claims and intends to contest them
vigorously.

ITEM 2. CHANGES IN SECURITIES
- ------------------------------
None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
None

FORM 10-Q Page 19
<PAGE>

ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ----------------------------------------------------
None

ITEM 5. OTHER INFORMATION
- --------------------------
None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
<TABLE>
<CAPTION>

EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>

3.6(2) Certificate of Amendment of Certificate of Incorporation

3.7 Amended and Restated Bylaws of Texas Biotechnology Corporation

10.51(1)* Letter Agreement regarding Argatroban Studies Information
dated December 14, 1995, between the Company and Synthelabo
Recherche

10.52(1) Amendment B to Clinical Trial Research Agreement dated
February 10, 1995 between Texas Biotechnology Corporation
and Coromed Inc.

10.53(2) Letter of Understanding between Texas Biotechnology Corporation and
Mitsubishi Chemical Corporation dated July 10, 1996

10.54(2) Form of Indemnification Agreement between Texas Biotechnology
Corporation and its officers and directors dated May 3, 1996

10.55(2) Amended and Restated 1995 Non-Employee Director Stock Option Plan
(as amended by the Board of Directors on June 30, 1996)

10.56* Strategic Alliance Agreement between Texas Biotechnology
Corporation and LG Chemical, Ltd. dated October 10, 1996

10.57 Common Stock Purchase Agreement between Texas Biotechnology
Corporation and LG Chemical, Ltd. dated October 10, 1996

27.1 Financial Data Schedule

</TABLE>

* The Company has omitted certain portions of this agreement in reliance on
Rule 24b-2 under the Securities and Exchange Act of 1934, as amended.

(1) Filed as an exhibit to the Company's Form 10-Q (File No. 1-12574) for the
quarter ended March 31, 1996 and incorporated herein by reference.

(2) Filed as an exhibit to the Company's Form 10-Q (File No. 1-12574) for the
quarter ended June 30, 1996 and incorporated herein by reference.

REPORTS ON FORM 8-K
- --------------------
None

FORM 10-Q Page 20
<PAGE>

TEXAS BIOTECHNOLOGY CORPORATION

SEPTEMBER 30, 1996

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on the 13th day of November, 1996.

TEXAS BIOTECHNOLOGY CORPORATION

By: /s/ David B. McWilliams
------------------------
David B. McWilliams
President and Chief Executive Officer

By: /s/ Stephen L. Mueller
-----------------------
Stephen L. Mueller
Vice President of Administration
Secretary and Treasurer
(Principal Financial and Accounting Officer)

FORM 10-Q Page 21
<PAGE>

INDEX TO EXHIBITS

Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
<S> <C> <C>

3.6 (2) Certificate of Amendment of Certificate of Incorporation

3.7 Amended and Restated Bylaws of Texas Biotechnology Corporation

10.51 (1)* Letter Agreement regarding Argatroban Studies Information
dated December 14, 1995, between the Company and Synthelabo
Recherche

10.52 (1) Amendment B to Clinical Trial Research Agreement dated
February 10, 1995 between Texas Biotechnology Corporation
and Coromed Inc.

10.53 (2) Letter of Understanding between Texas Biotechnology Corporation and
Mitsubishi Chemical Corporation dated July 10, 1996

10.54 (2) Form of Indemnification Agreement between Texas Biotechnology
Corporation and its officers and directors dated May 3, 1996

10.55 (2) Amended and Restated 1995 Non-Employee Director Stock Option Plan
(as amended by the Board of Directors on June 30, 1996)

10.56* Strategic Alliance Agreement between Texas Biotechnology Corporation and LG
Chemical, Ltd. dated October 10, 1996

10.57 Common Stock Purchase Agreement between Texas Biotechnology Corporation and
LG Chemical, Ltd. dated October 10, 1996

27.1 Financial Data Schedule

- --------------
</TABLE>

* The Company has omitted certain portions of this agreement in reliance
on Rule 24b-2 under the Securities and Exchange Act of 1934, as amended.

(1) Filed as an exhibit to the Company's Form 10-Q (File No. 1-12574) for
the quarter ended March 31, 1996 and incorporated herein by reference.

(2) Filed as an exhibit to the Company's Form 10-Q (File No. 1-12574) for
the quarter ended June 30, 1996 and incorporated herein by reference.

FORM 10-Q Page 22

<PAGE>

EXHIBIT 3.7

AMENDED AND RESTATED
BY-LAWS
OF
TEXAS BIOTECHNOLOGY CORPORATION
(a Delaware corporation)

ARTICLE I
Office
------

Section 1.1. Registered Office. The registered office of Texas
Biotechnology Corporation ("Corporation") in the State of Delaware shall be
located at 229 South State Street in the City of Dover, County of Kent, or at
such other place as the Board of Directors may at any time or from time to time
designate.

Section 1.2. Registered Agent. The registered agent of the Corporation in
the State of Delaware at its registered office is The Prentice-Hall Corporation
System, Inc., or such other person, firm or corporation as the Board of
Directors may at any time or from time to time designate.

Section 1.3. Principal Office. The principal office of the Corporation
shall be located at such place as the Board of Directors may at any time or from
time to time designate.

Section 1.4. Other Offices. The Corporation may establish or discontinue,
from time to time, such other offices and places of business within or without
the State of Delaware as may be deemed proper for the conduct of the business of
the Corporation.

-1-
<PAGE>

ARTICLE II
Meeting of Stockholders
-----------------------

Section 2.1. Annual Meeting. An annual meeting of such holders of capital
stock ("Stock") as are entitled to vote thereat ("Annual Meeting of
Stockholders") shall be held for the election of directors and the transaction
of such other business on a date and time to be determined by the Board of
Directors. If the Annual Meeting of Stockholders is not held on the date
designated therefor, the Board of Directors shall cause the meeting to be held
as soon thereafter as convenient.

Section 2.2. Special Meetings. In addition to such special meetings as
are provided for by law or by the Certificate of Incorporation, special meetings
of the stockholders of the Corporation may be called at any time by the Board of
Directors, and by the Secretary upon the written request stating the purposes of
any such meeting of the holders of record collectively of at least fifty-one
(51%) percent of the outstanding shares of Stock of the Corporation. Special
meetings shall be called by means of a notice as provided in Section 2.4 hereof.

Section 2.3. Place of Meetings. All meetings of the stockholders shall be
held at such place within or without the State of Delaware as shall be
designated by the Board of Directors.

Section 2.4. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting and, in case
of a special meeting, the purpose or purposes for which the meeting is called.
The notice of each Annual Meeting of Stockholders shall identify each matter
intended to be acted upon at such meeting. If mailed, the notice shall be
addressed to each stockholder in a postage-prepaid envelope at his address as it
appears on the records of the Corporation unless, prior to the

-2-
<PAGE>

time of mailing, the Secretary shall have received from any such stockholder a
written request that notices intended for him be mailed to some other address.
In such case, the notice intended for such stockholder shall be mailed to the
address designated in such request. Notice of each meeting of stockholders shall
be delivered personally or mailed not less than ten (10) nor more than sixty
(60) days before the date fixed for the meeting to each stockholder entitled to
vote at such meeting.

Section 2.5. Waiver of Notice. Whenever notice is required to be given, a
written waiver thereof signed by the person entitled to notice whether before or
after the time stated therein for such meeting shall be deemed equivalent to
notice. Attendance of a person at a meeting of stockholders shall constitute a
waiver of notice of such meeting, except as otherwise provided by law. Neither
the business to be transacted at nor the purpose of any regular or special
meeting of the stockholders need be specified in any written waiver of notice.

Section 2.6. Organization of Meetings. The Chairman of the Board, if any,
shall act as chairman at all meetings of stockholders at which he is present
and, as such chairman, shall call such meetings of stockholders to order and
shall preside thereat. If the Chairman of the Board shall be absent from any
meeting of stockholders, the duties otherwise provided in this Section to be
performed by him at such meeting shall be performed at such meeting by the
President. If both the Chairman of the Board and the President shall be absent,
such duties shall be performed by a Vice President designated by the President
to preside at such meeting. If no such officer is present at such meeting, any
stockholder or the proxy of any stockholder entitled to vote at the meeting may
call the meeting to order and a chairman to preside thereat shall be elected by
a majority of those present and entitled to vote. The Secretary of the
Corporation shall act as secretary at all meetings of the stockholders but, in
his absence, the chairman of the meeting may appoint any person present to act
as secretary of the meeting.

-3-
<PAGE>

Section 2.7. Stockholders Entitled to Vote. In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty nor less than ten days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

Section 2.8. List of Stockholders Entitled to Vote. The Secretary shall
prepare and make or cause to be prepared and made, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at such meeting, arranged in alphabetical order and showing the address of
each such stockholder as it appears on the records of the Corporation and the
number of shares registered in the name of each such stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place specified in the notice of meeting
within the city where the meeting is to be held or, if not so specified, at the
place where the meeting is to be held, and a duplicate list shall be similarly
open to examination at the principal place of business of the Corporation. Such
list shall be produced and kept at the time and place of the meeting during the
whole time thereof and may be inspected by any stockholder who is present.

-4-
<PAGE>

Section 2.9. Quorum and Adjournment. Except as otherwise provided by law
and in the Certificate of Incorporation, the holders of a majority of the shares
of Stock entitled to vote at the meeting shall constitute a quorum at each
meeting of the stockholders. Where more than one class or series of Stock is
entitled to vote at such a meeting, a majority of the shares of each such class
or series of Stock entitled to vote at such meeting shall constitute a quorum at
such meeting. In the absence of a quorum, the holders of a majority of all such
shares of Stock present in person or by proxy may adjourn any meeting from time
to time until a quorum shall attend. At any such adjourned meeting at which a
quorum may be present, any business may be transacted which might have been
transacted at the meeting as originally called. Notice of an adjourned meeting
need not be given if the time and place thereof are announced at the meeting at
which the adjournment is taken; provided, however, that if the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.

Section 2.10. Order of Business. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting.

Section 2.11. Vote of Stockholders. Except as otherwise permitted by law,
by the Certificate of Incorporation or by Section 2.13 hereof, all action by
stockholders shall be taken at a meeting of the stockholders. Except as
otherwise provided in the Certificate of Incorporation, every stockholder of
record, as determined pursuant to Section 2.7 hereof, who is entitled to vote
shall at every meeting of the stockholders be entitled to one vote for each
share of Stock entitled to participate in such vote held by such stockholder on
the record date. Every stockholder entitled to vote shall have the right to
vote in person or by proxy. Except as otherwise provided by law, no vote on any
question upon which a vote of the stockholders may be taken need be by ballot
unless the chairman of the meeting shall determine that it shall be by ballot or
the holders of a majority of the shares of Stock

-5-
<PAGE>

present in person or by proxy and entitled to participate in such vote shall so
demand. In a vote by ballot each ballot shall state the number of shares voted
and the name of the stockholder or proxy voting. Unless otherwise provided by
law or by the Certificate of Incorporation, each director shall be elected by a
plurality of the votes of the shares of Stock present in person or represented
by proxy at the meeting and entitled to vote on the election of directors and
all other questions shall be decided by a vote of the holders of a majority of
the shares of Stock present in person or represented by proxy at the meeting and
entitled to vote on the question.

Section 2.12. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent to corporate action in writing without a
meeting may authorize another person or persons to act for him by proxy. A
proxy acting for any stockholder shall be duly appointed by an instrument in
writing subscribed by such stockholder, but no such proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period. A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary of the Corporation.

Section 2.13. Consent of Stockholders in Lieu of Meeting. Whenever the
vote of stockholders at a meeting thereof is required or permitted to be taken
for or in connection with any corporate action by any provision of the General
Corporation Law of the State of Delaware, the meeting, prior notice of such
meeting and the vote of the stockholders may be dispensed with and such
corporate action may be taken with the written consent of the stockholders of
Stock having not less than the minimum percentage of the total vote required by
statute for the proposed corporate action, unless the Certificate of
Incorporation or the By-Laws require a greater percentage for such action, in
which case

-6-
<PAGE>

the consent shall be that of the holders of such greater percentage; provided,
however, that prompt notice is given to all the stockholders who have not
consented of the taking of such corporate action without a meeting by less than
unanimous written consent. Whenever it is intended that action is to be taken by
stockholders without a meeting, a form for expressing consent in writing to such
action shall be sent to all holders of Stock entitled to vote on such action.
Every written consent shall bear the date of signature of each stockholder who
signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of the earliest
dated written consent received in accordance with these By-Laws, a written
consent or consents signed by a sufficient number of holders to take such action
are delivered to the Corporation in the manner prescribed in these By-Laws.

Section 2.14. Record Date for Actions by Written Consent. (a) In order
that the Corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. Any
stockholder of record seeking to have the stockholders authorize or take
corporate action by written consent shall, by written notice to the Secretary,
request the Board of Directors to fix a record date. The Board of Directors
shall promptly, but in all events within ten days after the date on which such a
request is received, adopt a resolution fixing the record date (unless a record
date has previously been fixed by the Board of Directors pursuant to the first
sentence of this Section 2.14(a)). If no record date has been fixed by the
Board of Directors pursuant to the first sentence of this Section 2.14(a) or
otherwise within ten days of the date on which such a request is received, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by applicable law, shall be the first date on which a signed written
consent setting forth the action taken or

-7-
<PAGE>

proposed to be taken is delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business, or to any
officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by applicable law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the date on which the Board of
Directors adopts the resolution taking such prior action.

(b) In the event of the delivery, in the manner provided by Section
2.14(a), to the Corporation of the requisite written consent or consents to take
corporate action and/or any related revocation or revocations, the Corporation
may engage independent inspectors of elections for the purpose of performing
promptly a ministerial review of the validity of the consents and revocations.
For the purpose of permitting the inspectors to perform such review, no action
by written consent without a meeting shall be effective until such date as the
independent inspectors certify to the Corporation that the consents delivered to
the Corporation in accordance with Section 2.14(a) represent at least the
minimum number of votes that would be necessary to take the corporate action.
Nothing contained in this Section 2.14(b) shall in any way be construed to
suggest or imply that the Board of Directors or any stockholder shall not be
entitled to contest the validity of any consent or revocation thereof, whether
before or after such certification by the independent inspectors, or to take any
other action (including, without limitation, the commencement, prosecution, or
defense of any litigation with respect thereto, and the seeking of injunctive
relief in such litigation).

Section 2.15. Attendance at Meetings of Stockholders. Any stockholder of
the Corporation not entitled to notice of the meeting or to vote at such meeting
shall nevertheless be entitled to attend any meeting of stockholders of the
Corporation.

-8-
<PAGE>

Section 2.16. Notice of Stockholder Nominees. Only persons who are
nominated in accordance with the procedures set forth in this Section 2.16 shall
be eligible for election as directors of the Corporation. Nominations of
persons for election to the Board of Directors may be made at a meeting of the
Corporation's Stockholders (a) by or at the direction of the Board of Directors
or (b) by any Stockholder of the Corporation entitled to vote for the election
of directors at such meeting who complies with the procedures set forth in this
Section 2.16. All nominations by Stockholders shall be made pursuant to timely
notice in proper written form to the Secretary of the Corporation. To be
timely, a Stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 50 days nor
more than 75 days prior to the meeting; provided, however, that if less than 65
days notice or prior public disclosure of the date of the meeting is given or
made to the Stockholders, notice by Stockholder must be received at the
principal executive offices of the Corporation not later than the close of
business on the 15/th /day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such Stockholder's
notice to the Secretary shall set forth in writing (a) as to each person whom
such Stockholder proposes to nominate for election or re-election as a director,
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, including, without limitation, such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected; and (b) as to such Stockholder, (i) the name and address, as they
appear on the Corporation's books, of such Stockholder and (ii) the class and
number of shares of the Corporation's capital stock that are beneficially owned
by such Stockholder. At the request of the Board of Directors, any person
nominated by the Board of Directors for election as a director shall furnish to
the Secretary of the Corporation that information required to be set forth in a
Stockholders notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director unless nominated in

-9-
<PAGE>

accordance with the procedures set forth in these By-Laws of the Company. The
chairman of the Stockholders' meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by these By-Laws, and if he shall so determine, he shall
announce such determination to the meeting and the defective nomination shall be
disregarded.

Section 2.17. Stockholder Proposals. At any special meeting of the
Corporation's Stockholders, only such business brought before the meeting by or
at the direction of the Board of Directors shall be conducted. At any Annual
Meeting of Stockholders, only such business shall be conducted as shall have
been brought before the meeting (a) by or at the direction of the Board of
Directors or (b) by any Stockholder who complies with the procedures set forth
in this Section 2.17. For business to be properly brought before an Annual
Meeting of Stockholders by a Stockholder, the Stockholder must give timely
notice thereof in proper written form to the Secretary of the Corporation. To
be timely, a Stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 50 days nor
more than 75 days prior to the meeting; provided, however, that if less than 65
days notice or prior public disclosure of the date of the meeting is given or
made to the Corporation's Stockholders, notice by the Stockholder must be
received at the principal executive offices of the Corporation not later than
the close of business on the 15th day following the day on which such notice of
the date of the Corporation's Annual Meeting of Stockholders was mailed or such
public disclosure was made. Such Stockholder's notice to the Secretary shall
set forth in writing as to each matter such Stockholder proposes to bring before
the Annual Meeting of Stockholders: (a) a brief description of the business
desired to be brought before the Annual Meeting of Stockholders and the reason
for conducting such business at the Annual Meeting of Stockholders, (b) the name
and address, as they appear on the Corporation's books, of such Stockholder, (c)
the class and number of shares of the Corporation's stock which are beneficially
owned by such Stockholder and (d) any material interest of such Stockholder in
such business. Notwithstanding anything in these

-10-
<PAGE>

By-Laws to the contrary, no business shall be conducted at an Annual Meeting of
Stockholders except in accordance with the procedures set forth in this Section
2.17. The chairman of an Annual Meeting of Stockholders shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section
2.17, and, if he should so determine, he shall so announce such determination to
the meeting and any such business not properly brought before the meeting shall
not be transacted.

ARTICLE III
Board of Directors
------------------

Section 3.1. Election and Term. Except as otherwise provided by law or by
this Article III, directors shall be elected at the Annual Meeting of
Stockholders and shall hold office until the next Annual Meeting of Stockholders
and until their successors are elected and qualify, or until they sooner die,
resign, or are removed. Acceptance of the office of director need not be
expressed in writing.

Section 3.2. Number. The number of directors of the Corporation shall be
fixed from time to time by the vote of a majority of the entire Board then in
office and the number thereof may thereafter by like vote be increased or
decreased to such greater or lesser number.

Section 3.3. General Powers. The business, properties and affairs of the
Corporation shall be managed by or under the direction of the Board of Directors
which, without limiting the generality of the foregoing, shall have the power to
appoint the officers and agents of the Corporation, to fix and alter the
salaries of officers, employees and agents of the Corporation, to grant general
or limited authority (including authority to delegate and sub-delegate) to
officers, employees and agents of the Corporation, to make, execute, affix the
corporate seal to and deliver contracts and other instruments and

-11-
<PAGE>

documents including bills, notes, checks or other instruments for the payment of
money, in the name and on behalf of the Corporation without specific authority
in each case and to appoint committees in addition to those provided for in
Articles IV hereof with such powers and duties as the Board of Directors may
determine and as provided by law. The membership of such committees shall
consist of such persons as are designated by the Board of Directors. In
addition, the Board of Directors may exercise all the powers of the Corporation
and do all lawful acts and things which are not reserved to the stockholders by
law, by the Certificate of Incorporation or by the By-Laws.

Section 3.4. Place of Meetings. Meetings of the Board of Directors may be
held at the principal office of the Corporation or at any other place, within or
without the State of Delaware, from time to time as designated by the Board of
Directors. Meetings of the Board of Directors may be held, and one or more
members may attend any meeting of the Board of Directors, by telephonic
conference or similar communications equipment, by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this by-law shall constitute presence in person at such meeting.

Section 3.5. First Meeting of New Board. A newly elected Board of
Directors shall meet without notice as soon as practicable after each Annual
Meeting of Stockholders at the place at which such meeting of stockholders took
place. If a quorum is not present, such organization meeting may be held at any
other time or place which may be specified for special meetings of the Board of
Directors in a notice given in the manner provided in Section 3.7 hereof or in a
waiver of notice thereof.

Section 3.6. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times as may be determined by resolution of the Board of
Directors. No notice shall be required for any regular meeting. Except as
otherwise provided by law, any business may be transacted at any regular meeting
of the Board of Directors.

-12-
<PAGE>

Section 3.7. Special Meetings; Notice; and Waiver of Notice. Special
meetings of the Board of Directors shall be called by the Secretary or an
Assistant Secretary at the request of the Chairman of the board, if any, the
President, a Vice President, or at the request in writing of one or more of the
whole Board of Directors stating the purpose or purposes of such meeting.
Notices of special meetings shall be mailed to each director addressed to him at
his residence or usual place of business not later than three (3) days before
the day on which the meeting is to be held or shall be sent to him at either of
such places by telegraph or shall be communicated to him personally or by
telephone, not later than the day before the date fixed for the meeting. Notice
of any meeting of the Board of Directors shall not be required to be given to
any director if he shall sign a written waiver thereof either before or after
the time stated therein for such meeting or if he shall be present at the
meeting and participate in the business transacted thereat. Any and all
business transacted at any meeting of the Board of Directors shall be fully
effective without any notice thereof having been given if all the members shall
be present thereat. Unless limited by law, the Certificate of Incorporation,
the By-Laws, or by the terms of the notice thereof, any and all business may be
transacted at any special meeting without the notice thereof having so
specifically enumerated the matters to be acted upon.

Section 3.8. Organization. The Chairman of the Board, if any, shall
preside at all meetings of the Board of Directors at which he is present. If
the Chairman of the Board shall be absent from any meeting of the Board of
Directors, the duties otherwise provided in this Section 3.8 to be performed by
him at such meeting shall be performed by the President. If both the Chairman
of the Board and the President shall be absent, such duties shall be performed
by a director designated by the President to preside at such meeting. If no
such officer or director is present at such meeting, one of the directors
present shall be chosen to preside by a majority vote of the members of the
Board of Directors present at such meeting. The Secretary of the Corporation
shall act as the

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secretary at all meetings of the Board of Directors and, in his absence, a
temporary secretary shall be appointed by the chairman of the meeting.

Section 3.9. Quorum and Adjournment. Except as otherwise provided by
Section 3.14 hereof and in the Certificate of Incorporation, at every meeting of
the Board of Directors a majority of the total number of directors shall
constitute a quorum. Except when the total number of directors is one, in no
event shall a quorum consist of less than two directors. Except as otherwise
provided by law, by the Certificate of Incorporation, by Sections 3.14, 4.1,
4.8, 4.9, 5.3, or 9.1 hereof, the vote of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum, any meeting may be adjourned from time
to time until a quorum is present. Notice of an adjourned meeting shall be
required to be given if notice was required to be given of the meeting as
originally called.

Section 3.10. Voting. On any question on which the Board of Directors
shall vote, the names of those voting and their votes shall be entered in the
minutes of the meeting when any member of the Board of Directors present at the
meeting so requests.

Section 3.11. Acting without a Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board of Directors or of
such committee, as the case may be, consent thereto in writing and such written
consents are filed with the minutes of such proceeding.

Section 3.12. Resignations. Any director may resign at any time by
written notice thereof to the Corporation. Any resignation shall be effective
immediately unless some other time is specified for it to take effect.
Acceptance of any resignation shall not be necessary to make it effective unless
such resignation is tendered subject to such acceptance.

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Section 3.13. Removal of Directors. Subject to any agreement in writing
between the stockholders of the Corporation, any director may be removed either
with or without cause at any time by action of the holders of record of a
majority of the outstanding shares of Stock of the Corporation then entitled to
vote at an election of directors at a meeting of holders of such shares. The
vacancy in the Board of Directors caused by any such removal may be filled by
action of such stockholders at such meeting or at any subsequent meeting.

Section 3.14. Filling of Newly Created Directorships or Vacancies. In
case of any increase in the number of directors or of any vacancy created by
death, resignation, or disqualification, the additional director or directors
may be elected or the vacancy or vacancies may be filled, as the case may be, by
the Board of Directors at any meeting by affirmative vote of a majority of the
remaining directors or by a sole remaining director though the remaining
director or directors be less than the quorum provided for in Section 3.9
hereof. Each director so chosen shall hold office until the next Annual Meeting
of Stockholders and until his successor is elected and qualifies or until such
director sooner dies, resigns, or is removed.

Section 3.15. Compensation of Directors. Directors may receive such sums
as compensation for their services and expenses as may be directed by resolution
of the Board of Directors; provided that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity, and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for their service and expenses.

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ARTICLE IV
Committees of the Board
-----------------------

A. Executive Committee
-------------------

Section 4.1. Appointment and Powers. The Board of Directors, by
resolution adopted by affirmative vote of a majority of the whole Board of
Directors, may appoint an Executive Committee and the members thereof consisting
of one or more members which shall have and may exercise, during the intervals
between the meetings of the Board of Directors, all of the powers of the Board
of Directors in the management of the business, properties and affairs of the
Corporation; provided, however, that the foregoing is subject to the applicable
provisions of law and the Certificate of Incorporation and shall not be
construed as authorizing action by the Executive Committee with respect to any
action which is required to be taken by vote of a specified proportion of the
whole Board of Directors. So far as practicable, the members of the Executive
Committee shall be appointed at the organization meeting of the Board of
Directors in each year and, unless sooner discharged by affirmative vote of a
majority of the whole Board of Directors, shall hold office until the next
annual organization meeting of the Board of Directors and until their respective
successors are appointed or until they sooner die, resign, or are removed. All
acts done and powers conferred by the Executive Committee shall be deemed to be,
and may be certified as being, done or conferred under authority of the Board of
Directors.

Section 4.2. Place of Meetings. Meetings of the Executive Committee may
be held at the principal place of business of the Corporation or at any other
place from time to time designated by the Board of Directors or the Executive
Committee. Meetings of the Executive Committee may be held, and one or more
members may attend any meeting of the Executive Committee, by telephonic
conference.

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<PAGE>

Section 4.3. Meetings; Notice; and Waiver of Notice. Regular meetings of
the Executive Committee shall be held at such times as may be determined by
resolution either of the Board of Directors or the Executive Committee and no
notice shall be required for any regular meeting. Special meetings of the
Executive Committee shall be called by the Secretary or an Assistant Secretary
upon the request of any member of the Executive Committee. Notices of special
meetings shall be delivered personally to each member or shall be mailed to each
member either by over night courier service or first-class mail addressed to him
at his residence or usual place of business or other address provided to the
Corporation, or shall be sent to him at any of such places by telegraph,
telecopy, or shall be communicated to him personally or by telephone, such that
such notice is received by each member not later than the business day before
the date fixed for the meeting. Notice of any such meeting shall not be
required to be given to any member of the Executive Committee if he shall sign a
written waiver thereof either before or after the time stated therein for such
meeting or if he shall be present at the meeting and participate in the business
transacted thereat, and all business transacted at any meeting of the Executive
Committee shall be fully effective without any notice thereof having been given
if all the members shall be present thereat. Unless limited by law, the
Certificate of Incorporation, the By-Laws, or the terms of the notice thereof,
any and all business may be transacted at any special meeting without the notice
thereof having specifically enumerated the matters to be acted upon.

Section 4.4. Organization. The Chairman of the Executive Committee shall
preside at all meetings of the Executive Committee at which he is present. In
the absence of the Chairman of the Executive Committee, the Chairman of the
Board, if he is a member of the Executive Committee, shall preside at meetings
of the Executive Committee at which he is present. In the absence of the
Chairman of the Executive

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Committee and the Chairman of the Board, the Vice Chairman of the Board, if he
is a member of the Executive Committee, shall preside at meetings of the
Executive Committee at which he is present. In the absence of the Chairman of
the Executive Committee, the Chairman of the Board and the Vice Chairman of the
Board, the President, if he is a member of the Executive Committee, shall
preside at meetings of the Executive Committee at which he is present. In the
absence of the Chairman of the Executive Committee, the Chairman of the Board,
the Vice Chairman of the Board and the President, one of the members present
shall be chosen by the members of the Executive Committee present to preside at
such meeting. The Secretary of the Corporation shall act as secretary at all
meetings of the Executive Committee, if he is a member thereof, and, in his
absence, or if he is not a member thereof, a temporary secretary shall be
appointed by the chairman of the meeting.

Section 4.5. Quorum and Adjournment. A majority of the members of the
Executive Committee shall constitute a quorum for the transaction of business.
The vote of a majority of those present at any meeting at which a quorum is
present shall be the act of the Executive Committee. In the absence of a
quorum, any meeting may be adjourned from time to time until a quorum is
present. No notice of any adjourned meeting shall be required to be given other
than by announcement at the meeting that is being adjourned.

Section 4.6. Voting. On any question on which the Executive Committee
shall vote, the names of those voting and their votes shall be entered in the
minutes of the meeting when any member of the Executive Committee present at the
meeting so requests.

Section 4.7. Records. The Executive Committee shall keep minutes of its
acts and proceedings which shall be submitted at the next regular meeting of the
Board of Directors. Any action taken by the Board of Directors with respect
thereto shall be entered in the minutes of the Board of Directors. Each
director shall be entitled to receive a copy of the minutes of the Executive
Committee at his request.

Section 4.8. Vacancies; Alternate Members; and Absences. In case of any
increase in the number of members of the Executive Committee or of any vacancy
created

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by death, resignation, disqualification or otherwise, the additional member or
members may be elected or the vacancy or vacancies filled, as the case may be,
by affirmative vote of a majority of the remaining Board of Directors or by a
sole remaining director, though the remaining director or directors be less than
the quorum provided for herein. By similar vote, the Board of Directors may
designate one or more directors as alternate members of the Executive Committee
who may replace any absent or disqualified member at any meeting of the
Executive Committee.

B. Other Committees of the Board
-----------------------------

Section 4.9. Appointing Other Committees of the Board. The Board of
Directors from time to time by resolution adopted by affirmative vote of a
majority of the whole Board of Directors may appoint other committees of the
Board of Directors and the members thereof which shall have such powers of the
Board of Directors and such duties as the Board of Directors may properly
determine and as provided by law. Such other committee of the Board of
Directors shall consist of one or more directors. By similar vote, the Board of
Directors may designate one or more directors as alternate members of any such
committee who may replace any absent or disqualified member at any meeting of
any such committee. In the absence or disqualification of any member of any
such committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.

Section 4.10. Place and Time of Meetings; Notice; Waiver of Notice; and
Records. Meetings of such other committees of the Board of Directors may be
held at any place from time to time designated by the Board of Directors or the
committee. Regular meetings of any such committee shall be held at such times
as may be determined by resolution of the Board of Directors or the committee
and no notice shall be required for

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any regular meeting. A special meeting of any such committee shall be called by
resolution of the Board of Directors or by the Secretary or an Assistant
Secretary upon the request of any member of the committee. The provisions of
Section 4.3 hereof with respect to notice and waiver of notice of special
meetings of the Executive Committee shall also apply to all special meetings of
other committees of the Board of Directors. Any such committee may make rules
for holding and conducting its meetings and shall keep minutes of all meetings.
Meetings of any such committee may be held, and one or more members of such
committee may attend any meeting of such committee, by telephonic conference.

ARTICLE V
The Officers
------------

Section 5.1. Officers. The officers of the Corporation shall be a
President, Vice President, Secretary and a Treasurer. The officers shall be
elected by the Board of Directors. The Board of Directors may also elect a
Chairman of the Board, an Executive Vice President, one or more Vice Presidents,
a Chairman of the Executive Committee, a Controller, one or more Second Vice
Presidents, Assistant Secretaries, Assistant Treasurers, Assistant Controllers
and such other officers and agents as in their judgment may be necessary or
desirable. The Chairman of the Board, the Chairman of the Executive Committee,
the President, and the Executive Vice President shall be selected from the
directors.

Section 5.2. Terms of Office and Vacancies. So far as is practicable, all
officers shall be appointed at the organization meeting of the Board of
Directors in each year and, except as otherwise provided in Sections 5.1, 5.3,
and 5.4 hereof, shall hold office until the organization meeting of the Board of
Directors in the next subsequent year and until their respective successors are
elected and qualify or until they sooner die, retire, resign or

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are removed. If any vacancy shall occur in any office, the Board of Directors
may elect a successor to fill such vacancy for the remainder of the term.

Section 5.3. Removal of Officers. Any officer may be removed at any time,
either with or without cause, by affirmative vote of a majority of the whole
Board of Directors at any regular meeting or at any special meeting called for
that purpose.

Section 5.4. Resignations. Any officer may resign at any time by giving
written notice thereof to the Corporation. Any resignation shall be effective
immediately unless some other date is specified for it to take effect.
Acceptance of any resignation shall not be necessary to make it effective
unless such resignation is tendered subject to such acceptance.

Section 5.5. Officers Holding More Than One Office. Any officer may hold
two or more offices so long as the duties of such offices can be consistently
performed by the same person.

Section 5.6. The Chairman of the Board. The Chairman of the Board, if
any, shall be a member of the Board of Directors. As provided in Section 2.6
hereof, he shall act as chairman at all meetings of the stockholders at which he
is present; as provided in Section 3.8 hereof, he shall preside at all meetings
of the Board of Directors at which he is present. He shall also perform such
other duties and shall have such other powers as may from time to time be
assigned to him by the Board of Directors. In the absence or disability of the
Chairman of the Board, the duties of the Chairman of the Board shall be
performed and his powers may be exercised by the President of the Board. In the
absence or disability of the Chairman of the Board and the President, the powers
of the Chairman of the Board may be exercised by such member of the Board of
Directors as may be designated by the Chairman of the Board and, failing such
designation or in the absence of

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<PAGE>

the person so designated, by such member of the Board of Directors as may be
designated by the President.

Section 5.7. The President. The President shall be the chief executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall have general and active charge, control, and supervision of the
business, property and affairs of the Corporation, shall approve all operating
expense and capital expenditure budgets and shall formulate recommendations to
the Board of Directors for its action and decision. In the absence or
disability of the President, the duties of the President shall be performed and
his powers may be exercised by the Chairman of the Board. If neither the
President nor the Chairman of the Board is available, the duties of the
President shall be performed and his powers may be exercised by such member of
the Board of Directors as may be designated by the President and, failing such
designation or in the absence of the person so designated, by such member of the
Board of Directors as may be designated by the Chairman of the Board. In the
absence of such designation by the Chairman of the Board, the duties of the
President shall be performed and his powers may be exercised by such member of
the Board of Directors, or such officer of the Corporation, as may be designated
by the Board of Directors.

Section 5.8. The Vice Presidents. The Vice Presidents, if any, including
the Executive Vice President, shall perform such duties and have such powers as
may from time to time be assigned to them by the Board of Directors, the
Chairman of the Board or the President.

Section 5.9. The Secretary. The Secretary shall attend to the giving of
notice of each meeting of stockholders, the Board of Directors and committees
thereof and, as provided in Sections 2.6 and 3.8 hereof, shall act as secretary
at each meeting of stockholders and directors. He shall keep minutes of all
proceedings at such meetings as well as of all proceedings at all meetings of
such other committees of the Board of

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<PAGE>

Directors as any such committee shall direct him to so keep. The Secretary shall
have charge of the corporate seal and he or any officer of the Corporation shall
have authority to attest to any and all instruments or writings to which the
same may be affixed. He shall keep and account for all books, documents, papers
and records of the Corporation except those for which some other officer or
agent is properly accountable. He shall generally perform all the duties usually
appertaining to the office of secretary of a corporation. In the absence of the
Secretary, such person as shall be designated by the chairman of any meeting
shall perform his duties.

Section 5.10. The Treasurer. The Treasurer shall have the care and
custody of all the funds of the Corporation and shall deposit such funds in such
banks or other depositories as the Board of Directors or any officer or officers
thereunto duly authorized by the Board of Directors shall from time to time
direct or approve. In the absence of a Controller, he shall perform all duties
appertaining to the office of Controller of the Corporation. He shall generally
perform all the duties usually appertaining to the office of treasurer of a
corporation. When required by the Board of Directors, he shall give bonds for
the faithful discharge of his duties in such sums and with such sureties as the
Board of Directors shall approve. In the absence of the Treasurer, such person
as shall be designated by the Chairman of the Board or President shall perform
his duties.

Section 5.11. The Controller. The Controller shall prepare and have the
care and custody of the books of account of the Corporation. He shall keep a
full and accurate account of all moneys received and paid on account of the
Corporation. He shall render a statement of his accounts whenever the Board of
Directors shall require. He shall generally perform all the duties usually
appertaining to the office of controller of a corporation. When required by the
Board of Directors, he shall give bonds for the faithful discharge of his duties
in such sums and with such sureties as the Board of Directors shall approve.

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<PAGE>

Section 5.12. Additional Powers and Duties. In addition to the foregoing
specifically enumerated duties and powers, the several officers of the
Corporation shall perform such other duties and exercise such further powers as
the Board of Directors may from time to time determine or as may be assigned to
them by any superior officer. The salaries of all officers shall be fixed by
the Board of Directors except as otherwise directed by the Board of Directors.

ARTICLE VI
Transactions With Directors and Officers
----------------------------------------

Section 6.1. Transactions with Directors and Officers. No contract or
transaction between the Corporation and one or more of its directors or officers
or between the Corporation and any other corporation, partnership, association
or other organization, in which one or more of its directors or officers are
directors or officers or have a financial interest, shall be void or voidable
solely for such reason or solely because the director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction or solely because his or their
votes are counted for such purpose if: (a) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee and the Board of Directors
or the committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors even though the
disinterested directors may be less than a quorum; or (b) the material facts as
to his relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (c) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting

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<PAGE>

of the stockholders or the Board of Directors or of a committee which authorizes
the contract or transaction.

ARTICLE VII
Stock and Transfers of Stock
----------------------------

Section 7.1. Stock Certificates. The Stock of the Corporation shall be
represented by certificates signed by two officers of the Corporation, one the
Chairman of the Board, the President or a Vice President and the other the
Secretary or an Assistant Secretary. Any or all of the signatures may be a
facsimile. Such certificates shall be sealed with the seal of the Corporation.
Such seal may be a facsimile, engraved or printed. In case any officer who has
signed any such certificate shall have ceased to be such officer before such
certificate is issued, it may nevertheless be issued by the Corporation with the
same effect as if he were such officer at the date of issue. Certificates
representing the Stock of the Corporation shall be in such form as shall be
approved by the Board of Directors.

Section 7.2. Restrictive Legend on Certificates. Every certificate
representing shares of Stock of the Corporation shall bear a legend
substantially in the following form:

"The shares of stock represented hereby have been acquired for investment
and not with a view to distribution or resale, have not been registered
under the Securities Act of 1933, as amended, and are transferable only in
accordance with and upon proof of compliance with the Securities Act of
1933, as amended, and the Rules promulgated thereunder."

Section 7.3. Registration of Transfers of Stock. Registration of a
transfer of Stock shall be made on the books of the Corporation only upon
presentation by the person

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<PAGE>

named in the certificate evidencing such stock, or by an attorney lawfully
authorized in writing, upon surrender and cancellation of such certificate, with
duly executed assignment and power of transfer endorsed thereon or attached
thereto, and with such proof of the authenticity of the signature thereon as the
Corporation or its agents may reasonably require.

Section 7.4. Lost Certificates. In case any certificate representing
Stock shall be lost, stolen or destroyed, the Board of Directors in its
discretion or any officer or officers thereunto duly authorized by the Board of
Directors may authorize the issuance of a substitute certificate in the place of
the certificate so lost, stolen or destroyed; provided, however, in each such
case the Corporation may require the owner of the lost, stolen or destroyed
certificate or his legal representative to give the Corporation evidence which
the Corporation determines in its discretion satisfactory of the loss, theft or
destruction of such certificate and of the ownership thereof and may also
require a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.

Section 7.5. Determination of Stockholders of Record for Certain Purposes.
In order that the Corporation may determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix in advance a record date which shall not be more than sixty (60) days
prior to any such action.

ARTICLE VIII
Miscellaneous
-------------

Section 8.1. Seal. The seal of the Corporation shall have inscribed
thereon the name of the Corporation, the year of its organization and the state
of its incorporation.

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<PAGE>

Section 8.2. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.

Section 8.3. Signatures on Negotiable Instruments. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officers or agents of Corporation and in such manner as
from time to time may be prescribed by resolution (whether general or special)
of the Board of Directors or as may be prescribed by any officer or officers or
any officer and agent jointly thereunto duly authorized by the Board of
Directors.

Section 8.4. Indemnification.

(a) Subject to Subsection (c) of this Section 8.4, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.

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<PAGE>

(b) Subject to Subsection (c) of this Section 8.4, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation; except that no
indemnification shall be made with respect to any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.

(c) Any indemnification under this Section 8.4 (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Subsection (a) or Subsection (b), as the case may be. Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders. To the extent, however, that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of

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<PAGE>

any claim, issue or matter herein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.

(d) Notwithstanding any contrary determination in the specific case under
Subsection (c) of this Section 8.4, and notwithstanding the absence of any
determination thereunder, any director, officer, employee or agent may apply to
any court of competent jurisdiction in the State of Delaware for indemnification
to the extent otherwise permissible under Subsections (a) and (b) of this
Section 8.4. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standards of conduct set forth in Subsections (a) and (b) of this
Section 8.4, as the case may be. Notice of any application for indemnification
pursuant to this Section 8.4 shall be given to the Corporation promptly upon the
filing of such application.

(e) Expenses incurred in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Section 8.4.

(f) The indemnification and advancement of expenses provided by or granted
pursuant to this Section 8.4 shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any By-law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office. It is
the policy of the Corporation that indemnification of the persons specified in

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Subsections (a) and (b) of this Section 8.4 shall be made to the fullest extent
permitted by law. The provisions of this Section 8.4 shall not be deemed to
preclude the indemnification of any person who is not specified in Subsections
(a) and (b) of this Section 8.4 but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.

(g) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power or the obligation to indemnify him against such liability
under the provisions of this Section 8.4.

(h) For purposes of this Section 8.4, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents so that
any person who is or was a director, officer, employee or agent of such
constiuent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Section 8.4 with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.

(i) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section 8.4 shall, unless otherwise provided when authorized
or ratified,

-30-
<PAGE>

continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.

Section 8.5. Books of the Corporation. Except as otherwise provided by
law, the books of the Corporation shall be kept at the principal place of
business of the Corporation and at such other locations as the Board of
Directors may from time to time determine.

Section 8.6. References to Gender. Whenever in the By-Laws reference is
made to the masculine gender, such reference shall where the context so requires
be deemed to include the feminine gender, and the By-Laws shall be read
accordingly.

Section 8.7. References to Article and Section Numbers and to the By-Laws
and the Certificate of Incorporation. Whenever in the By-Laws reference is made
to an Article or Section number, such reference is to the number of an Article
or Section of the By-Laws. Whenever in the By-Laws reference is made to the By-
Laws, such reference is to these By-Laws of the Corporation as the same may from
time to time be amended. Whenever reference is made to the Certificate of
Incorporation, such reference is to the Certificate of Incorporation of the
Corporation as the same may from time to time be amended.

ARTICLE IX
Amendments
----------

Section 9.1. Amendments. Except as otherwise provided in the Certificate
of Incorporation, the By-Laws may be altered, amended or repealed from time to
time by the Board of Directors by affirmative vote of a majority of the whole
Board of Directors except such of the By-Laws as shall have been made from time
to time by holders of shares of Stock entitled to vote thereon. The By-Laws may
be altered, amended or

-31-
<PAGE>

repealed at any annual or special meeting of stockholders. Notice of such
proposed alteration, amendment or repeal setting forth the substance or text
thereof shall be included in the notice of any meeting of the Board of Directors
or stockholders called to consider any such alteration, amendment or repeal.

* * * * * * * * *

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<PAGE>

EXHIBIT 10.56

STRATEGIC ALLIANCE AGREEMENT

BETWEEN

TEXAS BIOTECHNOLOOGY CORPORATION

AND

LG CHEMICAL, LTD.

DATED

OCTOBER 10, 1996
<PAGE>

TABLE OF CONTENTS

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

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

i
<PAGE>

TABLE OF CONTENTS
(Continued)

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

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

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

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

7. TBC REPRESENTATIONS AND WARRANTIES................................ 21
7.1 NO THIRD PARTY AGREEMENTS............................... 21
7.2 NO THIRD PARTY RIGHTS................................... 21

8. PROPRIETARY RIGHTS................................................ 21
8.1 IMPROVEMENTS............................................ 21
8.2 PATENT PROSECUTION AND MAINTENANCE...................... 22
8.3 THIRD PARTY CLAIM OF INFRINGEMENT....................... 23
8.4 INFRINGEMENT BY THIRD PARTIES........................... 24

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

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

ii
<PAGE>

TABLE OF CONTENTS
(Continued)

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

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

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

iii

<PAGE>

STRATEGIC ALLIANCE AGREEMENT

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

RECITALS

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

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

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

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

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

<PAGE>

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

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

1.2 "CLOSING DATE" means October 15, 1996.

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

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

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

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

2
<PAGE>

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

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

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

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

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

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

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

3
<PAGE>

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

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

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

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

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

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

4
<PAGE>

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

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

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

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

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

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

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

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

5
<PAGE>

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

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

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

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

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

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

6
<PAGE>

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

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

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

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

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

2. LICENSE TO LG CHEM.

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

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

7
<PAGE>

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

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

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

<PAGE>

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

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

3. DEVELOPMENT PROGRAM.

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

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

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

<PAGE>

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

3.2 PROGRAM ADMINISTRATION.

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

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

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

10
<PAGE>

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

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

11
<PAGE>

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

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

3.4 REGISTRATION.

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

12
<PAGE>

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

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

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

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

13
<PAGE>

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

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

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

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

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

4. OTHER RESEARCH/DEVELOPMENT COLLABORATION

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

5. PAYMENTS AND REPORTS.

5.1 ANNUAL RESEARCH PAYMENTS

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

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

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1997 $2,000,000
1998 $2,000,000
1999 $2,000,000
2000 $2,000,000
2001 $2,600,000
------ ------------
Total $10,700,000

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

5.2 ROYALTIES.

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

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

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

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

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

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

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

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

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<PAGE>

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

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

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

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<PAGE>

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

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

6. COMMERCIALIZATION.

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

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<PAGE>

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

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

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

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

<PAGE>

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

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

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

8. PROPRIETARY RIGHTS.

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

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<PAGE>

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

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

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<PAGE>

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

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

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

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<PAGE>

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

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

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

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<PAGE>

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

9. CONFIDENTIALITY.

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

25
<PAGE>

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

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

10. INDEMNIFICATION.

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

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

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

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

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<PAGE>

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

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

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<PAGE>

11. TERM AND TERMINATION.

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

11.2 TERMINATION FOR BREACH.

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

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

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<PAGE>

and for the entire Territory. Upon approval of the sale of such Product for the
Indication in a Major Country in the Territory, LG Chem shall maintain the
agreed-upon sales levels for that Product for the Indication in such country. In
the event LG Chem fails to maintain such sales levels, TBC shall have the right
to terminate this Agreement as to such country and such Product per indication.
Prior to exercising the right to such termination, TBC shall grant to LG Chem an
opportunity to cure such failure or to propose an alternative solution mutually
acceptable to both parties for a sixty day period after receipt of LG Chem of
notice from TBC of its intent to exercise such right.

(c) FAILURE OF LG CHEM TO REGISTER PRODUCTS. In the event LG Chem
fails to register the Products for the Indications in a country in the Territory
in accordance with Section 3.4, TBC shall have the right to terminate this
Agreement as to such country and such Product per indication. Prior to
exercising the right to such termination, TBC shall grant to LG Chem an
opportunity to cure such failure or to propose an alternative solution mutually
acceptable to both parties for a sixty day period after receipt of LG Chem of
notice from TBC of its intent to exercise such right.

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

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

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

12. MISCELLANEOUS

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

33
<PAGE>

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

The ADR shall be conducted in the following manner:

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

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

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

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

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

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

34
<PAGE>

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

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

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

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

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

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

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

35
<PAGE>

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

TEXAS BIOTECHNOLOGY CORPORATION

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

LG CHEMICAL, LTD.

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

36
<PAGE>

SCHEDULE I

DESCRIPTION OF TBC11251 AND RELEVANT PATENTS

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

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

2. Patents covering TBC11251 in the Territories

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

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

<PAGE>

SCHEDULE 2

DESCRIPTION OF TBC1269 AND RELEVANT PATENTS

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

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

Application 1: PCT/US96/11032 *

Application 2: 08/650,653 *

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

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

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

<PAGE>

SCHEDULE 3

TERRITORY
- ---------

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

<PAGE>

EXHIBIT 10.57

COMMON STOCK PURCHASE AGREEMENT

BETWEEN

TEXAS BIOTECHNOLOGY CORPORATION

AND

LG CHEMICAL, LTD.

DATED

OCTOBER 10, 1996

<PAGE>

COMMON STOCK PURCHASE AGREEMENT

THIS AGREEMENT, dated as of October 10, 1996, is between Texas Biotechnology
Corporation, a Delaware corporation (the "Company"), and LG Chemical, Ltd., a
Korean corporation (the "Purchaser").

In consideration of the mutual promises and covenants contained in this Stock
Purchase Agreement (the "Agreement") and in the Strategic Alliance between the
Company and the Purchaser entered into as of the date hereof (the "Strategic
Alliance") relating to the Company's development of small molecule endothelin
receptor antagonist compounds and selectin antagonist compounds, the parties
hereto hereby agree as follows:

1. Purchase of Common Stock
------------------------

Section 1.1 Purchase. Subject to the terms and conditions of this Agreement,
the Purchaser hereby purchases 1,250,000 shares (the "Shares") of the Company's
common stock, par value $.005 per share (the "Common Stock"), for and in
consideration of the purchase amount of $5,000,000.

Section 1.2 Option to Purchase Additional Shares. The Company hereby grants
to the Purchaser an Option (the "Option") entitling it to purchase additional
shares of Common Stock determined as set forth below (the "Option Shares") on
one and only one of the following four exercise dates (the "Exercise Dates"):
March 31, 1997; June 30, 1997; September 30, 1997; or December 31, 1997. The
Purchaser shall notify the Company of its intent to exercise the Option 30
calendar days prior to the Exercise Date. The aggregate purchase amount of the
Option Shares shall be equal to the difference between $10,000,000 and the sum
of $5,000,000 plus the Consortium Investment; provided in no event will the
purchase amount be less than $1,000,000. The "Consortium Investment" means the
aggregate dollar value of shares of Common Stock purchased by a consortium of
Korean accredited Investors (the "Investor Consortium") pursuant to an
investment agreement which may be entered into by and between the Company and
the Investor Consortium. The per share price of the Option shall be negotiated
in good faith between the parties no later than 5 calendar days prior to the
Exercise Date. In the event that the parties fail to negotiate such price prior
to such deadline, the stock option shall not be exercisable on such Exercise
Date. Payment of the exercise price for the Option Shares purchased under the
Option shall be delivered in accordance with Section 2.2(b) herein. The purchase
and sale of the Shares and Option Shares hereunder is referred to as the
"Offering."

2. Closing Regarding Shares and Option Shares; Deliveries
------------------------------------------------------

Section 2.1 Closing Date. The closing date for the purchase and sale of the
Shares shall be a date, not later than October 15, 1996, when all of the
applicable conditions set forth in Sections 5 and 6 hereto have been met (the
"Closing Date"). The closing date for the purchase and sale of the Option Shares
shall be the date upon which all of the applicable conditions set forth in
Sections 5 and 6 hereto have been met (the "Second Closing Date").

<PAGE>

Section 2.2 Deliveries.

(a) In accordance with the escrow agreement attached hereto as Exhibit A (the
"Escrow Agreement"), on the Closing Date the Company shall deliver to the
designated escrow agent (the "Escrow Agent") for the benefit of the Purchaser a
certificate representing the Shares, registered in the name of the Purchaser, in
consideration of the receipt of payment of the purchase price of the Shares in
U.S. currency by wire transfer, certified or cashier's check, or other method
acceptable to the Company, in the Company's United States account designated by
the Company.

(b) On the Second Closing Date the Company shall deliver to an escrow agent
mutually acceptable to the parties hereto, a certificate or certificates
representing the Option Shares, registered in the name of the Purchaser, in
consideration of the receipt of payment of the purchase price of the Option
Shares in U.S. currency by wire transfer, certified or cashier's check, or
other method acceptable to the Company, in the United States account designated
by the Company.

Section 2.3 Conclusion of Offering. The Closing Date and Second Closing Date
shall be deemed to be the conclusion of the purchase and sale of the Shares and
Option Shares, respectively. For purposes of clarifying the applicable
restricted period (as such term is defined in Rule 902(m) of Regulation S
("Regulation S") of the Securities Act of 1933 (the "1933 Act")) for the Shares,
the period commencing on the Closing Date and ending 40 days thereafter shall be
deemed the "Restricted Period." For purposes of clarifying the restricted period
for the Option Shares, the period commencing on the Second Closing Date and
ending 40 days thereafter shall be deemed the "Second Restricted Period."

Section 2.4 Release of Shares by Escrow Agent. The parties agree that the
Escrow Agent shall hold the Shares and Option Shares for the benefit of the
Purchaser for the duration of the Restricted Period and Second Restricted
Period, as applicable; provided, that the Purchaser may retain the right to vote
with respect to the Shares and/or Option Shares and the right to receive
dividends while the Shares and/or the Option Shares are held by the Escrow
Agent. Subject to the terms hereof, including Section 2.5 below, following the
expiration of the Restricted Period and Second Restricted Period the Escrow
Agent, at the direction of the Purchaser, shall deliver certificates
representing the Shares and Option Shares, respectively, to the Purchaser,
registered in the name of the Purchaser and free of any restrictive legend.

Section 2.5 Transfer Restrictions. The Purchaser agrees that the Shares may
not be transferred, sold, hypothecated, assigned, or otherwise disposed of for a
period of one year following the Closing Date (the "Holding Period") and the
Option Shares may not be transferred, sold, hypothecated, assigned, or otherwise
disposed of for a period of one year following the Second Closing Date (the
"Second Holding Period"). After the Holding Period and Second Holding Period, as
applicable, the Shares and Option Shares will only be resold by it (a) in
compliance with Regulation S, under which LG Chem has a right to freely transfer
or dispose of any of the Shares or Option Shares after the Holding Period and
Second Holding Period, as applicable, subject to the restrictions of this
Agreement, (b) pursuant to an exemption from registration under the 1933 Act
other than Regulation S, or (c) pursuant to an effective and current
registration statement under the 1933 Act; provided, however, that the purchaser
may retain the right to vote with respect to the Shares and/or Option Shares and
the right to receive dividends during the Holding Period and Second Holding
Period, as applicable. Moreover, in the event the Company files a registration
statement with the Commission for a public

2
<PAGE>

offering of securities, upon notice from the Company the Purchaser agrees not to
transfer, offer, sell, hypothecate or otherwise dispose of any Common Stock for
the period of time beginning with the date of the filing of the registration
statement and ending 90 days after the closing of the public offering (such
restriction referred to as the "Public Offering Restriction").

3. Representations and Warranties of the Company
---------------------------------------------

The Company hereby represents and warrants to the Purchaser as follows:

Section 3.1 Organization and Standing. The Company is a corporation duly
organized, and is validly existing and in good standing under the laws of the
State of Delaware. The Company has all requisite corporate power to own and
operate its properties and assets, to carry on its business as presently
conducted, to execute and deliver this Agreement, to sell and issue the Shares
and Option Shares hereunder and to carry out and perform its obligations under
the terms of this Agreement.

Section 3.2 Authorization. All corporate action on the part of the Company,
its directors and stockholders necessary to authorize the execution and delivery
of this Agreement, the performance of the Company's obligations hereunder and
the sale and issuance of the Shares and the Option Shares has been duly taken or
will be taken before the Closing. This Agreement has been duly executed and
delivered by the Company and is a valid and legally binding obligation of the
Company, which is enforceable against the Company in accordance with its terms.
The execution and delivery of this Agreement by the Company, the performance of
its obligations hereunder and the sale and issuance of the Shares and Option
Shares will not violate any law applicable to the Company or its Certificate of
Incorporation or Bylaws or breach or be a default under (with or without the
giving of notice or the lapse of time) any material contract, agreement or
instrument to which the Company is a party. The Shares and Option Shares have
been duly authorized and, when issued and paid for in accordance with the terms
of this Agreement, will be validly issued, fully paid and nonassessable and free
and clear of all liens, encumbrances and adverse claims other than restrictions
on transfer under this Agreement and applicable federal and state securities
laws or those that are imposed by or through the Purchaser.

Section 3.3 Registration Not Required. Subject to the truth and accuracy of
the representations of the Purchaser set forth in Section 4 of this Agreement,
the sale to the Purchaser of the Shares and Option Shares provided for in this
Agreement and the issuance of the Shares and Option shares hereunder, are made
pursuant to "Regulation S" of the 1933 Act and therefore are exempt from
registration under the Securities Act and the registration requirements imposed
by the securities laws of the State of Delaware, and neither the Company nor any
person acting on its behalf will take any action hereafter that would cause the
loss of such exemption.

Section 3.4 Disclosure. The Company has delivered, and the Purchaser
acknowledges receipt of, the Company's annual report on Form 10-K for the fiscal
year ending December 31, 1995, the Company's quarterly report on Form 10-Q for
the fiscal quarters ending March 31, 1996 and June 30, 1996 (collectively, the
"Reporting Documents") and the Company's most recent

3
<PAGE>

Registration Statement, dated May 30, 1996, Registration No. 333-3433, as filed
with the Commission (the "Registration Statement"), which Reporting Documents
and Registration Statement are true and correct in all respects. There has been
no material adverse change in the Company's financial position or results,
business or prospects since June 30, 1996.

Section 3.5 Environmental Compliance. To the knowledge of the Company, the
Company's operations and use of its assets do not violate in any material
respect any applicable federal, state or local law, statute, ordinance, rule,
regulation, order or notice requirement pertaining to (a) the condition or
protection of air, groundwater, surface water, soil, or other environmental
media, (b) the environment, including natural resources or any activity which
affects the environment, or (c) the regulation of any pollutants, contaminants,
waste, substances (whether or not hazardous or toxic), including, without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. (S) 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. (S) 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
(S) 1609 et seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the Clean Air
Act (42 U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (17 U.S.C.
(S) 2601 et seq.) and analogous federal, interstate, state and local
requirements, as any of the foregoing may have been amended or supplemented from
time to time.

Section 3.6 Compliance with Other Laws. The Company is currently in
compliance in all material respects with the terms of all licenses, permits and
authorizations necessary for the lawful conduct of the business of the Company.
The Company is not in violation of or in default with respect to, or in alleged
violation of or alleged default with respect to, any applicable law or any
applicable rule, regulation, or any writ or decree of any court or any
governmental commission, board, bureau, agency, or instrumentality, or
delinquent with respect to any report required to be filed with any governmental
commission, board, bureau, agency or instrumentality, except for violations
which, either singly or in the aggregate, do not and are not expected to result
in a material adverse effect on the Company's assets or its financial condition.

Section 3.7 Subsidiaries. Other than ImmunoPhamaceutics, Inc., a California
based company, and wholly-owned subsidiary of the Company, there is no
corporation, partnership, joint venture, business trust or other legal entity in
which the Company, either directly or indirectly through one or more
intermediaries, owns or holds beneficial or record ownership.

Section 3.8 Litigation. Except as set forth in the Reporting Documents,
there is no lawsuit, action, arbitration, mediation, administrative proceeding,
investigation by a governmental authority, or other legal proceeding pending or,
to the knowledge of the Company, threatened against the Company, which would
have a material adverse effect on the Company's assets or its financial
condition. In addition, the Company is not subject to any court order, writ,
injunction, court decree, settlement agreement, or judgment that contains or
orders any ongoing obligations (whether prohibitory or mandatory in nature).

Section 3.9 Liabilities. The Company does not have any liabilities or
obligations, either accrued, absolute, contingent, or otherwise, or have any
knowledge of any potential liabilities or obligations, which would materially
adversely affect the Company's assets or its financial condition, other than
those reflected in the Reporting Documents.

Section 3.10 Compliance with Securities Laws. All securities of the Company
have been issued in compliance, in all material respects, with applicable
federal or state securities laws.

4. Representations and Warranties of the Purchaser.
-----------------------------------------------

The Purchaser hereby represents and warrants to the Company as follows:

Section 4.1 Exempt Offering. The Purchaser understands that the Shares and
Option Shares have not been registered under the Securities Act on the ground
that the sale provided for in this Agreement and the issuance of the Shares and
Option Shares hereunder are exempt from registration under the Securities Act
pursuant to Rule 903 of Regulation S, that the Company's reliance on such
exemption is predicated on the Purchaser's representations set forth herein, and
that in order to obtain such exemption, the transfer of such Shares and Option
Shares is restricted by Section 2.5(a), (b) and (c) of this Agreement.

Section 4.2 Compliance with Transfer Restrictions. The Purchaser hereby
covenants and agrees to comply with the transfer restrictions provided in
Section 2.5.

Section 4.3 Notification Requirement. Subject to the restrictions in this
Agreement, LG Chem has a right to freely transfer or dispose of any of the
Shares or Option Shares after the one year Holding Period and Second Holding
Period, as applicable. LG Chem will, however, first consult with TBC before
disposing of any of the Shares or Option Shares and will attempt to coordinate
the sales of the Shares and Option Shares with TBC in the best interests of both
parties. However, LG Chem may transfer the Shares and Option Shares in its sole
discretion if the effort at coodination fails.

Section 4.4 Investment Intent. The Purchaser is purchasing the Shares and
Option Shares for the Purchaser's own account for purposes of investment and not
for other persons and not with a view to the distribution of any of the Shares
or Option Shares.

Section 4.5 Information. The Purchaser has received a copy of the
Registration Statement and the Reporting Documents and has carefully read the
Registration Statement and the Reporting Documents. Other than those
representations contained in this Agreement, the Registration Statement, or the
Reporting Documents, in entering this Agreement the Purchaser has not relied on
any other oral or written representations regarding the Company or its
prospects. The Purchaser has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the Offering and
the business, properties, financial condition and prospects of the Company and
to obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to the Purchaser
in the Registration Statement and the Reporting Documents or otherwise.

4
<PAGE>

Section 4.6 Non-U.S. Person. The Purchaser is a non-U.S. person (as defined
below) and is not purchasing the Shares or the Option Shares for the account or
benefit of a U.S. Person. The statements made in this Agreement concerning the
Purchaser are true and correct. A non-U.S. person is a person who is not:

(a) a natural person resident in the United States;

(b) a partnership or corporation organized or incorporated under the
laws of the United States;

(d) a trust of which any trustee is a U.S. person;

(e) an agency or branch of a foreign entity located in the
United States;

(f) a non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the
benefit or account of a U.S. person;

(g) a discretionary account or similar account (other than an estate
or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States;
and

(h) a partnership or corporation if:

(i) organized or incorporated under the laws of any foreign
jurisdiction; and

(ii) formed by a U.S. person principally for the purpose of
investing in securities not registered under the Securities
Act, unless it is organized or incorporated, and owned, by
"accredited Purchasers" (as defined in Regulation D under the
Securities Act) who are not natural persons, estates, or
trusts.

(i) Notwithstanding the foregoing, any discretionary account or
similar account (other than an estate or trust) held for the
benefit or account of a non-U.S. person by a dealer or other
professional fiduciary organized, incorporated, or (if an
individual) resident in the United States shall not be deemed a
"U.S. person."

5
<PAGE>

(j) Notwithstanding the foregoing, any estate of which any
professional fiduciary acting as executor or administrator is a
U.S. person shall not be deemed a "U.S. person" if:

(i) an executor or administrator of the estate who is not a U.S.
person has sole or shared investment discretion with respect
to the assets of the estate; and

(ii) the estate is governed by foreign law.

(k) Notwithstanding the foregoing, any trust of which any professional
fiduciary acting as trustee is a U.S. person shall not be deemed a
"U.S. person" if a trustee who is not a U.S. person has sole or
shared investment discretion with respect to the trust assets, and
no beneficiary of the trust (and no settlor if the trust is
revocable) is a "U.S. person."

(l) Notwithstanding the foregoing, an employee benefit plan
established and administered in accordance with the law of a
country other than the United States and customary practices and
documentation of such country shall not be deemed a "U.S. person."

(m) Notwithstanding the foregoing, any agency or branch of a U.S.
person located outside the United States shall not be deemed a
"U.S. person" if:

(i) the agency or branch operates for valid business reasons; and

(ii) the agency or branch is engaged in the business of insurance
or banking and is subject to substantive insurance or banking
regulation, respectively, in the jurisdiction where located.

(n) The International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development
Bank, the Asian Development Bank, the African Development Bank,
the United Nations, and their agencies, affiliates, and pension
plans shall not be deemed "U.S. persons." Regulation S under the
Securities Act defines "United States" to mean the United States
of America, its territories and possessions, any State of the
United States, and the District of Columbia.

Section 4.7 Purchaser Sophistication; Suitability. The Purchaser is an
"accredited purchaser" as that term is defined in Regulation D under the
Securities Act and has such knowledge and experience in financial and business
matters that the Purchaser is capable of evaluating the merits and risks of
investment in the Shares and Option Shares. The Purchaser has determined that

6
<PAGE>

the Shares and Option Shares are a suitable investment for the Purchaser and
that the Purchaser could bear the complete loss of the Purchaser's investment in
the Shares and Option Shares.

Section 4.8 Capacity: Enforceability. The Purchaser represents and warrants
that this Agreement constitutes a valid and legally binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms.

Section 4.9 Lawful Transaction. Neither the Purchaser nor the Company is
violating the law of the Purchaser's domicile or of its principal place of
business by conducting or participating in the Offering or the transactions
contemplated by this Agreement.

Section 4.10 Offering Structure. The Purchaser represents and warrants that
the Purchaser is not acquiring the Shares or Option Shares in reliance on any
other party acquiring shares of the Common Stock under the same or similar
terms.

Section 4.11 Indemnification. The Purchaser shall indemnify the Company,
each of its directors and officers, each agent, each legal counsel and
independent accountant of the Company and each person who controls the Company
(within the meaning of the Securities Act), against any and all claims, losses
and liabilities (and actions and proceedings in respect thereof) arising out of
or related to any breach of any warranty or agreement made by the Purchaser in
this Section 4 or any misrepresentation of the Purchaser contained herein and
will reimburse the Company, such directors, officers, agents, persons or control
persons for any legal or any other expense reasonably incurred in connection
with investigating or defending any such claim, loss, liability, action or
proceeding.

Section 4.12 No Short Sales. The Purchaser agrees to refrain from "short"
sales of the Common Stock prior to the Closing and for a period of one year
following the Closing Date, and for so long as the Public Offering Restrictions
apply. As to the Option Shares, the Purchaser agrees to refrain from "short"
sales of the Common Stock prior to the Second Closing and for a period of one
year following the Second Closing Date, and for so long as the Public Offering
Restriction applies. The term "short sale" is defined by Rule 3b-3 of the
Securities and Exchange Act of 1934 as "any sale of a security which the seller
does not own or any sale which is consummated by the delivery of a security
borrowed by, or for the account of, the seller."

5. Conditions to Purchaser's Obligations at Closing.
------------------------------------------------

The Purchaser's obligations to purchase the Shares and Option Shares are
subject to the fulfillment on or before the Closing Date and Second Closing
Date, as applicable, of the following conditions to the extent not waived by the
Purchaser.

Section 5.1 Government Approval. Any Korean governmental clearance
necessary for consummating the sale of the Shares or Option Shares, as the case
may be, shall have been obtained.

7
<PAGE>

Section 5.2 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct
when made, and shall be true and correct in all material respects on the Closing
Date and Second Closing Date, as applicable.

Section 5.3 Covenants. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Closing Date
and Second Closing Date, as applicable, shall have been performed or complied
with in all respects.

Section 5.4 Closing Date. The Closing Date shall be on or before October
15, 1996.

Section 5.5 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated on the Closing Date and Second
Closing Date, as applicable, and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
special counsel to the Purchaser, and such special counsel shall have received
all such counterpart originals or certified or other copies of such documents as
they may reasonably request.

Section 5.6 Strategic Alliance. The Company and the Purchaser shall have
entered into the Strategic Alliance.

Section 5.7 Legal Opinion. The company will cause its legal counsel to
issue a legal opinion on the Closing Date.

6. Conditions to Company's Obligations at Closing.
-----------------------------------------------
The Company's obligation to sell the Shares and Option Shares is subject to
the fulfillment on or before the Closing Date and Second Closing Date, as
applicable, of the following conditions to the extent not waived by the Company:

Section 6.1 Governmental Approval. Any Korean governmental clearance
necessary for consummating the sale of the Shares or Option Shares, as the case
may be, shall have been obtained.

Section 6.2 Closing Date; Receipt of Payment. The Closing Date shall be on
or before October 15, 1996, and the Company shall have received payment in U.S.
currency in its designated bank account located in the United States for the
Shares and Option Shares, as applicable.

Section 6.3 Representations Correct. The representations and warranties
made in Section 4 hereof shall be true and correct when made, and shall be true
and correct on the Closing Date and Second Closing Date, as applicable.

Section 6.4 Qualifications, Legal Investment. No stop order or other order
enjoining the sale of the Shares or Option Shares, as applicable, shall have
been issued and no proceedings for such purpose shall be pending or, to the
knowledge of the Company, threatened by the Commission or any other person or
governmental authority. On the Closing Date and Second Closing Date, the sale
and issuance of the Shares and Option Shares, respectively, shall be legally
permitted by all laws and regulations to which the Purchaser and the Company are
subject.

8
<PAGE>
7. Dispute Resolutions. All disputes under this Agreement shall be settled, if
possible, through good faith negotiations between the parties. In the event such
good faith negotiations are unsuccessful, either party will, after 30 days'
written notice to the other, submit the matter in dispute to the American
Arbitration Association ("AAA") to be settled by arbitration by a panel of three
arbitrators in New York, New York in accordance with the commercial arbitration
rules of the AAA. Each party shall appoint one arbitrator and the two
arbitrators so named will select the third, who shall act as chair of the
arbitration panel. If one party fails to appoint its arbitrator or if the
parties' arbitrators cannot agree on the selecting of the third, the AAA shall
make the necessary appointments. The arbitrators shall have the authority to
grant specific performance and to allocate between the parties the costs of
arbitration in such equitable manner as they may determine. Upon reasonable
notice and prior to any hearing, the parties will allow document discovery and
will disclose all materials relevant to the subject matter of the dispute within
60 days following selection of the arbitrators. The arbitrators shall make
final determinations as to any discovery disputes. A hearing on the matter in
dispute shall commence within 90 days following selection of the arbitrators and
the decision of the arbitrators shall be rendered no later than 60 days after
commencement of such hearing. The determination of the arbitrators shall be
conclusive and binding upon the parties and judgment may be entered thereon and
enforced by any court of competent jurisdiction, including the courts of the
State of New York or the United States District Court for the Southern District
of New York, and each party hereby irrevocably consents to the jurisdiction of
such courts for such purpose.

8. Miscellaneous
-------------

Section 8.1 Survival. The representations, warranties, covenants and
agreements made by the parties herein shall survive any investigation made by
the Purchaser or the Company and shall survive the Closing Date and Second
Closing Date.

Section 8.2 Expenses. The Company, the Escrow Agent and the Purchaser
shal each bear their own expenses and legal fees incurred on their behalf with
respect to this Agreement and the transactions contemplated hereby.

Section 8.3 Notices. Any notice, request or other communication
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered in person or transmitted
by telecopier (with receipt confirmed) to a party at the address or telecopy
number, as applicable, set forth below (as any such address or telecopier number
may be changed from time to time by notice similarly given):

If to the Company:

Texas Biotechnology Corporation
7000 Fannin, Suite 1920
Houston, Texas 77030

<PAGE>

Attention: David B. McWilliams
Telephone: (713) 796-8822
Facsimile: (713) 796-8232

If to the Purchaser:

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

Section 8.4 Successors and Assigns. Except as otherwise provided
herein, the terms of this Agreement shall inure to the benefit of and be
binding upon the respective heirs, legal representatives and corporate or
partnership successors of the parties. The Purchaser may not assign its rights
to purchase Common Stock hereunder without the prior written consent of the
Company.

Section 8.5 This Agreement. This Agreement sets forth the entire
agreement of the parties with respect to the subject matter hereof and it
supersedes and discharges all prior agreements (written or oral) and
negotiations and all contemporaneous oral agreements concerning such subject
matter. There are no oral conditions precedent to the effectiveness of this
Agreement.

Section 8.6 Non-Waiver. Neither the failure of nor any delay by any
party to this Agreement to enforce any right hereunder or to demand compliance
with its terms is a waiver of any right hereunder. No action taken pursuant to
this Agreement on one or more occasions is a waiver of any right hereunder or
constitutes a course of dealing that modifies this Agreement.

Section 8.7 Waivers. No waiver of any right or remedy under this
Agreement shall be binding on any party unless it is in writing and is signed by
the party to be charged. No such waiver of any right or remedy under any term of
this Agreement shall in any event be deemed to apply to any subsequent default
under the same or any other term contained herein.

Section 8.8 Amendments. No amendments, modification or termination of
this Agreement shall be binding on any party hereto unless it is in writing and
is signed by the party to be charged.

Section 8.9 Severability. The terms of this Agreement are severable and
the invalidity of all or any part of any term of this Agreement shall not render
invalid the remainder of this Agreement or the remainder of such term. If any
term of this Agreement is so broad as to be unenforceable, such term shall be
interpreted to be only so broad as is enforceable.

10
<PAGE>

Section 8.10 Third Parties. Nothing herein expressed or implied is
intended or shall be construed to give any person other than the parties hereto
any rights or remedies under this Agreement.

Section 8.11 Saturdays, Sundays and Holidays. Where this Agreement
authorizes or requires a payment or performance on a Saturday, Sunday or public
holiday, such payment or performance shall be deemed to be timely if made on the
next succeeding business day.

Section 8.12 Rules of Construction. In this Agreement, unless the
context otherwise requires, words of the masculine gender include the feminine
and the neuter, and when the sense so indicates, words of the neuter gender may
refer to any gender. The captions and section numbers appearing in this
Agreement are inserted only as a matter of convenience. They do not define,
limit or describe the scope or intent of the provisions of this Agreement.

Section 8.13 Counterparts. This Agreement may be executed in any
number of counterparts, all of which shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing one or
more counterparts.

Section 8.14 Governing Law. The validity, terms, performance and
enforcement of this Agreement shall be governed by laws of the State of New York
that are applicable to agreements negotiated, executed, delivered and performed
solely in the State of New York.

11
<PAGE>

IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be duly executed by its duly authorized officer on this 10th day of
October 1996.

TEXAS BIOTECHNOLOGY CORPORATION

By: /s/ D. B. MCWILLIAMS
----------------------------
Name:
--------------------------
Title:
-------------------------

LG CHEMICAL, LTD.

By: /s/ YUNG JAE CHOI
----------------------------
Name:
--------------------------
Title:
-------------------------

12
<PAGE>

EXHIBIT A

ESCROW AGREEMENT

<PAGE>

ESCROW AGREEMENT
----------------

THIS ESCROW AGREEMENT is entered into as of this 10th day of October
1996, by and among Texas Biotechnology Corporation, a Delaware corporation
("TBC"), LG Chemical, Ltd., a Korean corporation ("LG Chem"), and LG Securities
("LG Securities"), with its principal offices in Seoul, Korea (the "Escrow
Agent").

WITNESSETH:
----------

WHEREAS, TBC AND LG Chem have agreed to enter into the Common Stock
Purchase Agreement (the "Stock Purchase Agreement");

WHEREAS, LG Chem has agreed that the shares of TBC's common stock, par
value $.005 per share (the "Common Stock"), issued to LG Chem pursuant to
Section 2.2(a) of the Stock Purchase Agreement shall be held in escrow in
accordance with this Escrow Agreement; and

WHEREAS, LG Securities is designated to act as Escrow Agent for the
parties hereto under the terms of this Escrow Agreement and pursuant to the
terms of the Stock Purchase Agreement, the pertinent provisions of which are
incorporated herein by reference.

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

1. Appointment of Escrow Agent. TBC and LG Chem hereby appoint LG
Securities as Escrow Agent and it hereby agrees to serve as Escrow Agent
pursuant to the terms of this Escrow Agreement and the Stock Purchase Agreement.

2. Deposit of Escrowed Stock. Pursuant to the terms of the Stock
Purchase Agreement, TBC shall tender a certificate or certificates representing
a total of 1,250,000 shares of Common Stock (the "Shares"), registered in the
name of LG Chem, to the Escrow Agent on the Closing Date (as such term is
defined in Section 2.1 of the Stock Purchase Agreement). The Shares are
referred to herein as the "Escrowed Stock." The Escrow Agent shall hold the
Escrowed Stock pursuant to the terms of this Escrow Agreement and the Stock
Purchase Agreement.

3. Administration and Investment of Escrowed Stock. The Escrow
Agent agrees to receive and hold in escrow the Escrowed Stock pursuant to the
terms of this Escrow Agreement and to perform the acts and duties imposed upon
it under the terms and conditions of this Escrow Agreement. It is expressly
agreed and understood by the parties hereto that the Escrow Agent shall not in
any way be liable for losses on any investments, including, but not limited to,
losses from market risks due to premature liquidation, or resulting from other
actions taken pursuant to this Escrow Agreement.

<PAGE>

4. Disbursement of Escrowed Stock. Upon written notification from
TBC and LG Chem that the Restricted Period (as such term is used in Section 2.3
of the Stock Purchase Agreement) has elapsed, the Escrow Agent shall, at LG
Chem's direction, disburse the Escrowed Stock to LG Chem.

5. Termination of Escrow Agreement. Upon delivery of all the
Escrowed Stock, this Escrow Agreement shall terminate.

6. Dividends and Voting Rights, etc. Any cash dividends which may
be declared and paid by TBC in respect of the Escrowed Stock shall be paid by
TBC to LG Chem in proportion to LG Chem's ownership of Escrowed Stock. LG Chem
shall have the right to vote the Escrowed Stock during the time such shares are
held in escrow pursuant to the terms hereof. All shares of Common Stock payable
in respect of Escrowed Stock as a result of any stock split or other non-cash
distributions (including a stock dividend) shall be deposited with the Escrow
Agent by TBC.

7. Deposit Records. The Escrow Agent shall forward all account
records or statements related to the Escrowed Stock to TBC and LG Chem as soon
as practicable upon receipt of the same. The Escrow Agent shall deliver to TBC
and LG Chem, upon final disbursement of the Escrowed Stock, a complete
accounting of all transactions relating to this Escrow Agreement. LG Chem shall
be responsible for any taxes arising from dividends declared on the Escrowed
Stock. Any payments of income shall be subject to applicable withholding
regulations then in force in the United States or any other jurisdiction, as the
case may be.

8. Scope of Undertaking. The Escrow Agent's duties and
responsibilities in connection with this Escrow Agreement shall be purely
ministerial and shall be limited to those expressly set forth in this Escrow
Agreement. The Escrow Agent is not a principal, participant or beneficiary in
any transaction underlying the Escrow Agreement and shall have no duty to
inquire beyond the terms and provisions hereof. The Escrow Agent shall have no
responsibility or obligation of any kind in connection with this Escrow
Agreement or the Escrowed Stock and shall not be required to deliver the
Escrowed Stock or any part thereof or take any action with respect to any
matters that might arise in connection therewith, other than to receive, hold
and deliver the Escrowed Stock as herein provided. Without limiting the
generality of the foregoing, it is hereby expressly agreed and stipulated by the
parties hereto that the Escrow Agent shall not be required to exercise any
discretion hereunder and shall have no investment or management responsibility
and, accordingly, shall have no duty to, or liability for its failure to,
provide investment recommendations or investment advice to LG Chem. The Escrow
Agent shall not be liable for any error in judgment, any act or omission, any
mistake of law or fact, or for anything it may do or refrain from doing in
connection herewith, except for, subject to Section 9 below, its own willful
misconduct or gross negligence. It is the intention of the parties hereto that
the Escrow Agent shall never be required to use, advance or risk its own funds
or otherwise incur financial liability in the performance of any of its duties
or the exercise of any of its rights and powers hereunder.

<PAGE>

9. Reliance; Liability. The Escrow Agent may rely on, and shall
not be liable for, following the instructions contained in any written notice,
instruction or request or other paper furnished to it hereunder or pursuant
hereto and believed by it to have been signed or presented by the proper party
or parties. The Escrow Agent shall be responsible for holding and disbursing
the Escrowed Stock pursuant to this Escrow Agreement; provided, however, that in
no event shall the Escrow Agent be liable for any lost profits, lost savings or
other special, exemplary, consequential or incidental damages (except those lost
profits, savings or damages arising out of the Escrow Agent's willful
misconduct) in excess of the Escrow Agent's fee hereunder and provided, further,
that the Escrow Agent shall have no liability for any loss arising from any
cause beyond its control, including, but not limited to, the following: (a) acts
of God, force majeure, including, without limitation, war (whether or not
declared or existing), revolution, insurrection, riot, civil commotion,
accident, fire, explosion, stoppage of labor, strikes and other differences with
employees; (b) the act, failure or negligence of TBC, LG Chem, or any agent or
correspondent or any other person selected by the Escrow Agent; (c) any delay,
error, omission or default of any mail, courier, telegraph, cable or wireless
agency or operator; or (d) the acts or edicts of any government or governmental
agency or other group or entity exercising governmental powers. The Escrow
Agent is not responsible or liable in any manner whatsoever for the sufficiency,
correctness, genuineness or validity of the subject matter of this Escrow
Agreement or any part hereof or for the transaction or transactions requiring or
underlying the execution of this Escrow Agreement, the form or execution
hereof, for the identity or authority of any person executing this Escrow
Agreement or any part hereof, or for depositing the Escrowed Stock.

10. Right of Interpleader. Should any controversy arise involving the
parties hereto or any of them or any other person, firm or entity with respect
to this Escrow Agreement or the Escrowed Stock, or should a substitute escrow
agent fail to be designated as provided in Section 17 hereof, or if the Escrow
Agent shall be in doubt as to what action to take, the Escrow Agent shall have
the right, but not the obligation, either to (a) withhold delivery of the
Escrowed Stock until the controversy is resolved, the conflicting demands are
withdrawn or its doubt is resolved or (b) institute a petition for interpleader
in any court of competent jurisdiction to determine the rights of the parties
hereto. In the event the Escrow Agent is a party to any dispute, the Escrow
Agent shall have the additional right to refer such controversy to binding
arbitration. Should a petition for interpleader be instituted, or should the
Escrow Agent be threatened with litigation or become involved in litigation or
binding arbitration in any manner whatsoever in connection with this Escrow
Agreement or the Escrowed Stock, then, as between (a) TBC and LG Chem on the one
hand and (b) the Escrow Agent on the other, TBC and LG Chem hereby jointly and
severally agree to reimburse the Escrow Agent for its attorneys' fees and any
and all other expenses, losses, costs and damages incurred by the Escrow Agent
in connection with or resulting from such threatened or actual litigation or
arbitration.

11. Indemnification. TBC and LG Chem hereby jointly and severally
indemnify the Escrow Agent, its officers, directors, partners, employees and
agents (each herein called an "Indemnified Party") against, and hold each
Indemnified Party harmless from, any and all expenses, including, without
limitation attorneys' fees and court costs, losses, costs, damages and claims,

3
<PAGE>

including, but not limited to, costs of investigation, litigation and
arbitration, tax liability and loss on investments suffered or incurred by any
Indemnified Party in connection with or arising from or out of this Escrow
Agreement, except such acts or omissions as may result from the willful
misconduct or gross negligence of such Indemnified Party. IT IS THE EXPRESS
INTENT OF EACH OF TBC AND LG CHEM TO INDEMNIFY AND HOLD HARMLESS THE INDEMNIFIED
PARTY'S OWN NEGLIGENT ACTS OR OMISSIONS.

12. Compensation and Reimbursement of Expenses. LG Chem hereby
agrees to pay the Escrow Agent for its services hereunder the fee of one million
(1,000,000) won. The Escrow Agent shall bear all out-of-pocket expenses
incurred by it in connection with the performance of its duties and enforcement
of its rights hereunder and otherwise in connection with the preparation,
operation, administration and enforcement of this Escrow Agreement, including,
without limitation, attorneys' fees, brokerage costs and related expenses
incurred by the Escrow Agent. LG Chem shall be liable to the Escrow Agent for
the payment of the Escrow Agent's fee of one million won. In the event LG Chem
for any reason fails to pay such fee when due, such unpaid fee and shall be
charged to and set off and paid from the Escrowed Stock by the Escrow Agent
without any further notice.

13. Lien. The Escrow Agent is hereby granted a lien upon, and
security interest in, the right, title and interest in and to all of the
Escrowed Stock, as security for the payment and performance of the parties'
obligations owing to the Escrow Agent hereunder, including, without limitation,
the parties' obligations of payment, indemnity and reimbursement provided for
hereunder, which lien and security interest may be enforced by the Escrow Agent
without notice by charging, and setting off and paying from, the Escrowed Stock,
as applicable, any and all amounts then owing to it pursuant to this Escrow
Agreement or by appropriate foreclosure proceedings.

14. Notices. Any notice, request or other communication required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered in person or transmitted by
telecopier (with receipt confirmed) to a party at the address or telecopy
number, as applicable, set forth below (as any such address or telecopier number
may be changed from time to time by notice similarly given):

If to the Escrow Agent:

LG Securities

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

4
<PAGE>
If to TBC:

Texas Biotechnology Corporation
7000 Fannin, Suite 1920
Houston, Texas 77030
Attn: President
Telefax No.: (713) 796-8232
Telephone No.: (713) 796-8822

If to LG Chem:

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

15. Consultation with Legal Counsel. The Escrow Agent may consult
with its counsel or other counsel satisfactory to it concerning any question,
relating to its duties or responsibilities hereunder or otherwise in connection
herewith and shall not be liable for any action taken, suffered or omitted by it
in good faith upon the advice of such counsel.

16. Governing Law. The validity, terms, performance and enforcement
of this Agreement shall be governed by laws of the State of New York that are
applicable to agreements negotiated, executed, delivered and performed solely in
the State of New York.

17. Resignation. The Escrow Agent may resign hereunder upon ten
(10) days' prior written notice to TBC and LG Chem. Upon the effective date of
such resignation, the Escrow Agent shall deliver the Escrowed Stock to any
substitute escrow agent designated by TBC and LG Chem in writing. If TBC and LG
Chem fail to designate a substitute escrow agent within ten (10) days after the
giving of such notice, the Escrow Agent may institute a petition for
interpleader. The Escrow Agent's sole responsibility after such 10-day notice
period expires shall be to hold the Escrowed Stock (without any obligation to
reinvest the same) and to deliver the same to a designated substitute escrow
agent, if any, or in accordance with the directions of a final order or judgment
of a court of competent jurisdiction, at which time of delivery the Escrow
Agent's obligations hereunder shall cease and terminate.

18. Assignment. This Escrow Agreement shall not be assigned by
either TBC or LG Chem without the prior written consent of the Escrow Agent
(such assigns of TBC or LG Chem to which the Escrow Agent consents, if any, and
the Escrow Agent's assigns being hereafter referred to collectively as
"Permitted Assigns").

<PAGE>

19. Severability. If one or more of the provisions hereof shall for
any reason be held to be invalid, illegal or unenforceable in any respect under
applicable law, such invalidity, illegality or unenforceability shall not affect
any other provisions hereof, and this Escrow Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein, and the remaining provisions hereof shall be given full force and
effect.

20. Termination. This Escrow Agreement shall terminate upon
disbursement of all the Escrowed Stock in accordance with Section 4 hereof;
provided, however, that in the event any fees, expenses, costs or otherwise,
required to be paid to the Escrow Agent hereunder are not fully and finally paid
prior to termination, the provisions of Section 12 hereof shall survive the
termination hereof and, provided further, that the last two sentences of Section
10 hereof and the provisions of Section 11 hereof shall, in any event, survive
the termination hereof.

21. General. The section headings contained in this Escrow
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Escrow Agreement. This Escrow Agreement and
any affidavit, certificate, instrument, agreement or other document required to
be provided hereunder may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
but one and the same instrument. Unless the context shall otherwise require,
the singular shall include the plural and vice-versa, and each pronoun in any
gender shall include all other genders. The terms and provisions of this Escrow
Agreement constitute the entire agreement among the parties hereto in respect of
the subject matter hereof. THIS ESCROW AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR OR
CONTEMPORANEOUS ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. This Escrow Agreement or any provision hereof
may be amended, modified, waived or terminated only by written instrument duly
signed by the parties hereto. This Escrow Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their respective heirs,
devisees, executors, administrators, personal representatives, successors,
trustees, receivers and Permitted Assigns. This Escrow Agreement is for the
sole and exclusive benefit of TBC, LG Chem and the Escrow Agent, and nothing in
this Escrow Agreement, express or implied, is intended to confer or shall be
construed as conferring upon any other person any rights, remedies or any other
type or types of benefits. All capitalized terms used in this Escrow Agreement
which are not otherwise defined herein shall have the meaning assigned to them
in the Stock Purchase Agreement unless the context hereof otherwise requires.

6
<PAGE>

IN WITNESS WHEREOF, the parties have signed this Escrow Agreement as of
the date first above written.

LG SECURITIES

By: /s/ K. S. JUNG
--------------------------------------
Its: K. S. Jung, Executive Vice President
-------------------------------------

TEXAS BIOTECHNOLOGY CORPORATION

By: /s/ D. B. MCWILLIAMS
--------------------------------------
David B. McWilliams, President

LG CHEMICAL, LTD.

BY: /s/ YUNG JAE CHOI
--------------------------------------
Print Name: Yung Jae Choi
------------------------------
Title: President & C.E.O.
-----------------------------------

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 808,126
<SECURITIES> 11,738,650
<RECEIVABLES> 122,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,332,615
<PP&E> 7,611,538
<DEPRECIATION> 4,294,237
<TOTAL-ASSETS> 16,649,916
<CURRENT-LIABILITIES> 3,233,544
<BONDS> 0
0
0
<COMMON> 121,017
<OTHER-SE> 13,295,355
<TOTAL-LIABILITY-AND-EQUITY> 16,649,916
<SALES> 0
<TOTAL-REVENUES> 1,102,500
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,630,084)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,630,084)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,630,084)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> .00

</TABLE>