<PAGE>

                                                                     EXHIBIT 4.1


                           Medical Research Council



                                      and



                     Cambridge Antibody Technology Limited



                                      and



                    Cambridge Antibody Technology Group plc




                                  Agreement/1/

---------------------
/1/ [***] indicates that text has been deleted, which is subject to a
confidential treatment request. This text has been filed with the SEC on a
supplemental basis.
<PAGE>

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

Clause                                               Page
------                                               ----

DEFINITIONS AND INTERPRETATION                        2

RIGHTS GRANTED                                        9

DURATION                                             21

RESEARCH PROGRAMMES                                  21

PATENTS                                              21

SUBLICENSING AND SUBCONTRACTING                      24

FEES AND ROYALTIES                                   24

TERMINATION                                          28

INDEMNITY                                            32

ASSIGNMENT                                           32

FORCE MAJEURE                                        33

SEVERABILITY                                         33

DELAY                                                33

CONFIDENTIALITY                                      34

NO PARTNERSHIP                                       36

ENTIRE AGREEMENT                                     37

GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS   37

COMPLIANCE WITH LAWS AND REGULATIONS                 38

VARIATION AND WAIVER                                 38

APPROVALS AND COMPLIANCE                             39

ANNOUNCEMENTS                                        39
<PAGE>

RTPA SUSPENSION OR RESTRICTIONS                      40

SCHEDULE 1 Patent Rights                             42

SCHEDULE 2 Draft Formal Licence                      46

SCHEDULE 3 Third Party Rights                        52

SCHEDULE 4 The Libraries                             53

SCHEDULE 5 Diabodies Combinations                    54
<PAGE>

THIS AGREEMENT is made the 7/th/ day of January   1997
BETWEEN:
(1)  MEDICAL RESEARCH COUNCIL a public body incorporated under Royal Charter
     whose principal office is at 20 Park Crescent, London W1N 4AL ("MRC"); and
(2)  CAMBRIDGE ANTIBODY TECHNOLOGY LIMITED a company incorporated in England
     with registered number 2451177 whose registered office is at The Science
     Park, Melbourn, Nr Royston, Cambridgeshire SG8 6JJ, UK ("CAT")
(3)  CAMBRIDGE ANTIBODY TECHNOLOGY GROUP PLC a company incorporated in England
     with registered number 3234033 whose registered office is at The Science
     Park, Melbourn, Nr Royston, Cambridgeshire SG8 6JJ, UK ("CAT Group")
WHEREAS:
(A)  Prior to the formation of CAT MRC made certain inventions comprised in the
     Technology (as defined herein) and owned certain of the Patent Rights (as
     defined herein) relating thereto
(B)  Following the formation of CAT both CAT and MRC collaborated to develop the
     Technology
(C)  MRC is now the owner or co-owner of the Patent Rights in relation to the
     Technology.
(D)  CAT is a biotech company whose principal objective is to develop, make,
     market and sell either itself or in collaboration with pharmaceutical
     partners therapeutic antibodies which includes using antibodies to validate
     therapeutic targets.
(E)  MRC wishes to license and CAT wishes to accept a license to exploit
     commercially the Patent Rights and Technology.
(F)  MRC and CAT intend that this Agreement shall replace and supersede the
     Heads of Agreement (as defined herein) and the Diabodies Agreement (as
     defined herein).
(G)  CAT is an Affiliate of CAT Group in that CAT Group Controls CAT within the
     meaning of clause 1.1 hereafter.
IT IS AGREED as follows:
1.   DEFINITIONS AND INTERPRETATION
1.1  In this Agreement the following expressions shall, unless the context
     otherwise requires, have the following meanings:
     "Affiliate" means any corporation, company, partnership or other entity
     (whether or not incorporated) which is established by or which directly or
     indirectly Controls, is controlled by or is under common Control of either
     party to this Agreement;
     "Antibody Isolation Services" means a commercial service for the isolation
     of antibodies on behalf of customers, which service is of general
     availability and which, for the avoidance of doubt, shall not include
     collaborative research and/or development;
     "CAT Group" means Cambridge Antibody Technology Group plc.
     "CAT libraries" means all those libraries (collections of bacteriophages,
     each of which displays an antibody or fragment thereof) produced prior to
     the date of execution of this Agreement by CAT details of which are set out
     in Schedule 4.
     "CAT Licence Conditions" means a licence under the Patent Rights and
     Technology including the right to sub-licence on the terms of Clause 6.
     "CAT Therapeutic Antibody Licence" means a licence for CAT under any and
     all intellectual property and know how claiming or relating to an antibody
     target or Product identified or validated by an MRC licensee pursuant to
     Clause 2.1.9 or 2.1.10 of this
<PAGE>

     Agreement as follows:
     1)   in relation to such a target, an exclusive licence to develop, make,
          have made, market and sell only therapeutic antibodies to any such
          target; and
     2)   in relation to such a Product which is an actual or potential
          therapeutic antibody an exclusive licence to develop, make, have made,
          market and sell only such therapeutic antibody
     in both cases, the licence to include the right to sublicence the same and
     to be on terms equivalent to Clauses 7.1.2, 7.1.3, 7.2, 7.3 and 7.6 to 7.12
     inclusive.
     "Catalytic Antibodies" means antibodies which bind to and catalyze the
     chemical transformation of a substrate and in which an antibody binding
     region is involved in said catalysis.
     "Collaborative Centre" means the entity known as MRC Collaborative Centre
     company number 2698321 whose principal place of business is currently at 1-
     3 Burtonhole Lane, Mill Hill, London NW7 1AD;
     "Collaborative Centre Conditions" means the right and licence to utilise
     the Patent Rights, Technology or MRC Libraries as necessary in connection
     with the development, manufacture, use, importation, marketing or sale of
     Products and/or the identification and validation of targets, which
     Products or targets have been identified using the Patent Rights,
     Technology or MRC Libraries. The licence shall include the right to
     sublicence only as provided in this Agreement, provided that in no
     circumstances shall the Collaborative Centre sub-licence the Patent Rights,
     Technology or MRC Libraries as such (as opposed to targets or Products
     identified using the same). If applicable, because Products so identified
     within the scope of the particular licence are developed, made, used,
     imported or sold, either by the Collaborative Centre or by one of its sub-
     licensees where so permitted, the Collaborative Centre shall pay to MRC who
     in turn shall pay CAT sums calculated by reference to an in accordance with
     financial conditions equivalent to those set out in Clauses 7.1.2, 7.1.3,
     7.2, 7.3 and 7.6 to 7.12 inclusive.
     "Control" means the ownership of more than 50% of the issued share capital
     or legal power to direct or cause the direction of the general management
     and policies of the Party in question;

     "Diabodies Agreement" means the heads of agreement covering the Diabodies
     patents signed by MRC and CAT on 19th July 1993;
     "Effective Date" means 20th July 1992;
     "E Merck" means the company known by that name as at the date of this
     Agreement but for the avoidance of doubt should Control of the company be
     acquired by a third party or parties acting in concert after the date of
     this Agreement then the company shall no longer be treated as E Merck for
     the purposes of this Agreement;
     "Force Majeure" means in relation to either Party, any circumstances beyond
     the reasonable control of that Party including, without prejudice to the
     generality of the foregoing, any act of God, war, riot, civil commotion,
     fire, explosion, flood, adverse weather, epidemic, or other natural
     physical disaster, strike, lockout or other form of industrial action or
     any form of Government or supranational authority intervention;
     "Heads of Agreement" means the heads of agreement signed by MRC and CAT on
     11th December 1992 and the heads of agreement signed by MRC and CAT on 20th
     July 1992;
     "MRC Libraries" means all those libraries (collections of bacteriophages,
     each of which
<PAGE>

     displays an antibody or fragment thereof) produced prior to the date of
     execution of this Agreement by the Cambridge Centre for Protein Engineering
     using the Technology details of which are set out in Schedule 4;
     "Net Invoice Price" or "NIP" means in relation to a Product sold by a party
     or sub-licensee of that Party, the price invoiced by that Party (or sub-
     licensee as appropriate) to the relevant purchaser (or in the case of a
     sale or other disposal otherwise than at arm's length, the price which
     would have been invoiced in a bona fide arm's length contract or sale), but
     deducting the costs of packing, transport and insurance, customs duties,
     any credits actually given for returned or defective Products, normal trade
     discounts actually given, and sales taxes, VAT or other similar tax charged
     on and included in the invoice price to the purchaser;
     "Offer Mechanics" means that MRC shall offer to CAT in writing a CAT
     Therapeutic Antibody Licence promptly following:-
          (A)  12 months following completion of any significant inventive step
               and reduction to practice in relation to identification or
               validation of any target the subject of any such licence or
               following invention and reduction to practice of products which
               actually or potentially include a therapeutic antibody and in
               either case where no patent application is made; or
          (B)  where a patent filing is made in relation to the same 12 months
               after filing a PCT or EPO patent application relating to the
               same.
     CAT shall have 90 days to consider such offer or any such longer period as
     may be agreed between MRC and CAT and if it wishes to be granted a licence
     shall give written notice to MRC thereof following which CAT shall be
     deemed automatically to have been granted such a licence;
     "Patent Agreement" means the agreement dated 1st August 1991 between MRC
     and CAT relating to the prosecution of patents as defined therein;
     "Parties" means the parties to this Agreement;
     "Patent Rights" means:-
          (A)  the patent applications filed prior to the date of execution of
               this Agreement short particulars of which are set out in Schedule
               1;
          (B)  all patents which may be granted pursuant to any of the foregoing
               patent applications;
          (C)  any necessary patents which derive from the patent applications
               or any of them and any divisions, renewals, continuations,
               continuations-in-part, extensions or reissues or any
               supplementary protection certificates granted.
     "Products" means any product or formulation whose development, manufacture,
     use or sale would, absent a licence, infringe the Patent Rights or utilise
     the Technology;
     "Rare Cell Population" means a set of cells identified by a specific marker
     antigen(s) that is present at less than 1% of a population of cells
     extracted from the body;
     "Research Products" means solutions, materials or other products ("Kits")
     intended for research use in which the work being performed with such Kits
     does not involve the development of any product offered or intended for
     offer for commercial sale where such commercial product contains antibodies
     or antibody derived molecules or involves the use of antibodies at any
     stage in its production;
<PAGE>

     "Royalties" means the payments specified in Clause 7;
     "Technology" means the library cloning technology and phage screening
     technology as described in the Patent Rights the know how (which know how
     CAT shall identify to MRC within 90 days of the date of this Agreement)
     relating thereto and the MRC Libraries;
     "Termination Date" means the date upon which this Agreement expires or is
     terminated; and
     "Third Party Rights" means the rights in the Fields already committed by
     MRC to third parties as listed in Schedule 3;
     "Valid Claim" means a claim of an issued and unexpired patent included
     within the Patent Rights which has not been held permanently revoked,
     unenforceable or invalid by decision of a court or other governmental
     agency of competent jurisdiction, unappealed within the time allowed for
     appeal, and which has not been admitted to be invalid or unenforceable
     through reissue or disclaimer or otherwise;
1.2  In this Agreement, save where the context otherwise requires;
     1.2.1  a reference to a statute or statutory provision shall include a
     reference:

            (A)    to that statute or provision as from time to time
                   consolidated, modified, re- enacted or replaced by any
                   statute or statutory provision;
            (B)    to any repealed statute or statutory provision which it re-
                   enacts (with or without modification); and
            (C)    to any subordinate legislation made under the relevant
                   statute;

            1.2.2  words in the singular shall include the plural, and vice
                   versa;

            1.2.3  a reference to a person shall include a reference to a
                       firm, a body corporate, an unincorporated association or
                       to a person's executors or administrators;

            1.2.4  a reference to a clause, sub-clause or Schedule (other than
                       to a schedule to a statutory provision) shall be a
                       reference to a clause, sub-clause or Schedule (as the
                       case may be) of or to this Agreement;

            1.2.5  if a period of time is specified and dates from a given day
                       or the day of an act or event, it shall be calculated
                       exclusive of that day;

            1.2.6  references to any English legal term for any action,
                       remedy, method or judicial proceeding, legal document,
                       legal status, court, official or any legal concept or
                       thing shall in respect of any jurisdiction other than
                       England be deemed to include what most nearly
                       approximates in that jurisdiction to the English legal
                       term;

            1.2.7  the headings in this Agreement are for convenience only and
                       shall not affect the interpretation of any provision of
                       this Agreement.
<PAGE>

1.3       The designations adopted in the recitals and introductory statements
          preceding this clause apply throughout this Agreement and the
          Schedules.
2.   RIGHTS GRANTED
2.1  Subject to the Third Party Rights MRC hereby grants to CAT during the
     continuance of this Agreement the following rights and licences under the
     Patent Rights and the Technology on the following conditions:
     Exclusive Rights
     ----------------

     2.1.1  the exclusive right and licence under CAT License Conditions to
                 identify, develop, make, have made, import, market and sell
                 antibodies for human in vivo use which are not antibodies the
                 subject of Clause 2.1.7 and for the avoidance of doubt it is
                 declared and agreed that such exclusive right and licence
                 includes using an antibody gene as a therapeutic entity in gene
                 therapy provided always that CAT will subject to the conditions
                 below grant up to [***] exclusive sub-licences to develop,
                 make, have made, use, import, market and sell a specific
                 antibody product directed at a particular antigen (for the
                 avoidance of doubt it is declared antibodies derived from [***]
                 would count within this total) to the Collaborative Centre (but
                 excluding any right of access or licence to use CAT Libraries)
                 with the right for the Collaborative Centre to sub-sub licence
                 for royalties payable by the Collaborative Centre to CAT and on
                 financial terms [***]. The Collaborative Centre may from time
                 to time submit to CAT a written request asking CAT to state
                 whether a sub-licence to a specific antigen is available.
                 Within 30 days of such written request CAT shall respond in
                 writing in either the affirmative or the negative. CAT shall
                 respond in the affirmative to the Collaborative Centre provided
                 that the antigen is not at the time of the Collaborative Centre
                 request:

                 [***]

          In the event of an affirmative response CAT shall grant no licence or
          other interest under its intellectual property which would prevent the
          grant of such a sub-licence for a period of [***] from the date of the
          Collaborative Centre's original request to CAT. An antigen reserved in
          this way shall be called a "Reserved Antigen." The Collaborative
          Centre shall be entitled to reserve a maximum of [***] Reserved
          Antigens in this way i.e. may replace up to [***] reservations with a
          new reservation. The Collaborative Centre shall inform CAT in writing
          when it wishes to obtain a sub-licence to a Reserved Antigen (the
          "Collaborative Centre Sub-Licence Notice"). CAT shall grant such a
          sub-licence to the Collaborative Centre provided that the
          Collaborative Centre Sub-Licence Notice is given within [***] of the
          Collaborative Centre request or if later than [***] provided that the
          antigen is not at the time of the Collaborative Centre Sub-Licence
          Notice

                 [***]
<PAGE>

     2.1.2 the exclusive right and licence under CAT Licence Conditions to use
               antibodies as part of a medical (but not a research) procedure
               [***] provided always that to maintain exclusivity in this area
               CAT must send to MRC not less than annually on the anniversary of
               the execution hereof a written report describing CAT's progress
               in this field which shall show that CAT has exercised reasonable
               diligence in the exploitation of this field failing which CAT
               shall lose such exclusivity on receipt of not less than 6 months
               written notice by MRC to CAT.

     2.1.3 the exclusive right and licence under CAT Licence Conditions to
               provide Antibody Isolation Services for third parties.

     2.1.4 the exclusive right and licence under CAT Licence Conditions to use
               and exploit commercially in any way whatsoever the inventions the
               subject of the patent and its corresponding patents listed in
               Schedule 1 as [***] except that nothing in this Agreement shall
               confer any right upon CAT and CAT shall not exercise or use the
               [***] patent rights in the following fields of use:

           (a) biosensors;

           (b) therapeutic products which include mammalian retroviruses
               encoding [***] as a fusion with viral coat proteins; and

           (c) [***] generated from combinations of four specific antibodies set
               out in Schedule 5 hereto.

     2.1.5 the exclusive right and licence under CAT Licence Conditions to use
               molecules isolated by the Technology for use in the manufacturing
               process of pharmaceutical products or intermediates

     2.1.6 the exclusive right and licence under CAT Licence Conditions to
               develop, make, have made, use, import, market and sell Catalytic
               Antibodies or Research Products

Co-exclusive rights
-------------------

     In this Agreement "co-exclusive" means an exclusive licence for both CAT
     and the Collaborative Centre under a licence from MRC on the specific terms
     and on a case by case basis as set out below in sub-clauses 2.1.7 and
     2.1.8. For the avoidance of doubt it is agreed that the MRC shall not grant
     any other licences to any parties other than CAT or the Collaborative
     Centre in the fields covered by Clauses 2.1.7 and 2.1.8;

     2.1.7 the co-exclusive right and licence for CAT under CAT Licence
               Conditions to improve, develop, make, have made, import, market
               and sell antibodies
<PAGE>

               originally isolated by hybridoma derived methods from non-primate
               sources (including non- primate antibody genes) which have been
               humanised using CDR grafting techniques the subject of the patent
               known as [***] derived from the UK Patent application [***]
               (which for the avoidance of doubt is not being licensed pursuant
               to this Agreement) provided always that MRC shall have the right
               to grant a co-exclusive licence to Collaborative Centre on the
               same terms but subject to the Collaborative Centre Conditions
               with the right for the collaborative Centre to collaborate with
               academic or commercial third parties in relation thereto and to
               sub-licence such third parties to use and exploit improved
               antibodies including any Products and libraries derived from
               mutagenesis of the original antibody and specifically created
               subject to any such collaboration with the Collaborative Centre
               provided that in these circumstances the term of the
               Collaborative Centre Conditions equivalent to Clause 7.1.3(a)
               hereto shall be varied so that the 3 stated percentages read
               [***] respectively and the term of the Collaborative Centre
               Conditions equivalent to Clause 7.1.3(b) hereof shall be varied
               so that the second stated percentage reads [***] instead of
               [***].

     2.1.8 the co-exclusive right and licence for CAT under CAT Licence
               Conditions to use antibody structural information to design non-
               antibody drug candidates provided always that MRC shall have the
               right to grant a co-exclusive licence to Collaborative Centre on
               the same terms subject to the Collaborative Centre Conditions
               with the right for the Collaborative Centre to collaborate with
               academic or commercial third parties in relation thereto and to
               sub-licence such third parties to use and exploit Products
               identified subject to any such collaboration with Collaborative
               Centre.

Gene-sequencing and analysis rights
-----------------------------------

     2.1.9 the exclusive right and license under CAT License Conditions to use
               antibody repertoires and libraries and antibodies isolated from
               them in the identification, analysis and validation of targets
               for therapeutic, diagnostic or prophylactic entities arising from
               gene sequencing data and analysis provided always that MRC shall
               have the right (which for the avoidance of doubt it is declared
               and agreed does not include any right of access to or licence to
               use the CAT Libraries) to grant the following licences provided
               always that) (save in the case of Collaborative Centre
               collaborations with [***] but only for so long as Collaborative
               Centre and [***] have ongoing collaborative work together) if it
               does so MRC shall if required grant CAT a CAT Therapeutic
               Antibody Licence which licence shall be offered by MRC to CAT on
               the terms of the Offer Mechanics:-

           Collaborative Centre License
<PAGE>

     2.1.9.1 a non-exclusive licence to the Collaborative Centre to work under
                    and use the Patent Rights and Technology for the same
                    purpose subject to the Collaborative Centre Conditions and
                    which shall include the following terms (save in relation to
                    Collaborative Centre collaborations with [***] in which case
                    the licence shall not include that part of condition (b)
                    below which requires MRC to place itself in a position where
                    it can grant CAT a CAT Therapeutic Antibody Licence, for the
                    avoidance of doubt however the remainder of condition (b)
                    below shall apply in respect of [***]):

             (a)    the Collaborative Centre shall be permitted to collaborate
                    with academic and commercial third parties for this purpose
                    including sending to them clones isolated and/or
                    characterised during such process.

             (b)    if it is appropriate and it is decided to make patent
                    applications for any targets or products identified or
                    validated by the Collaborative Centre or its third party
                    collaborators pursuant to the licence these shall be made
                    promptly and MRC shall ensure that it secures all rights
                    necessary under any such intellectual property to place it
                    in a position where it can grant CAT a CAT Therapeutic
                    Antibody Licence provided always that in this case the Offer
                    Mechanics may be varied so that when making the offer to CAT
                    MRC shall be entitled to indicate on behalf of the
                    Collaborative Centre that it is the subject of an "antigen
                    override" which means that no licence is available to CAT
                    and Collaborative Centre is deemed to have exercised one of
                    its antigen specific licences under Clause 2.1.1. For the
                    avoidance of doubt it is agreed that the exercise of the
                    antigen override is subject to the same mechanism for
                    selecting and reserving antigens as described in Clause
                    2.1.1 and the conditions covered by the Collaborative Centre
                    Sub-Licence Notice.

             (c)    subject to the CAT Therapeutic Antibody Licence (save in the
                    case of E Merck, Collaborative Centre Collaborations with
                    which are not subject to the CAT Therapeutic Antibody
                    Licence provisions), the Collaborative Centre or its third
                    party collaborators may exploit such targets and develop,
                    make, have made, use, import, market and sell products
                    directed at such targets subject always to the Collaborative
                    Centre Conditions. For the avoidance of doubt it is declared
                    and agreed that royalties shall only be payable to CAT via
                    MRC under terms equivalent to those set out in clauses
                    7.1.2, 7.1.3, 7.2, 7.3 and 7.6 to 7.12 inclusive on sales of
                    Products.

             Third Party Licence

     2.1.9.2 a non-exclusive licence to third party companies who are licensed
                    by MRC to use and exploit other MRC pending or granted
                    patent rights or technology which third parties' focus and
                    which other MRC rights are not principally in the field of
                    therapeutic antibodies, as follows:
<PAGE>

          (i)  in relation to those companies in which at any time since the
               Effective Date MRC has had or will have a founder shareholding or
               has played or will play a significant part in their
               establishment, from the date of this Agreement; and

          (ii) in relation to other companies not before [***] years from the
               date of this Agreement unless the prior written consent of CAT is
               obtained, such consent not to be unreasonably withheld and CAT's
               decision to be provided within 90 days of the formal request
               being made of CAT

          such licence to permit such third party companies to work under and
          use the Patent Rights and Technology for the same purpose as in 2.1.9
          on conditions the same as the Collaborative Centre Conditions and
          including the following terms:

          (a)  such third party shall pay MRC an up front fee and MRC shall pay
               CAT [***] of such up front fee such payment to CAT to be not less
               than [***] MRC and CAT shall agree the size of this payment to
               apply in each calendar year of this agreement no later than 15
               days prior to expiry of the previous calendar year. For the
               calendar year 1997 this shall be [***] and it shall not be less
               than this fee in future years. For the avoidance of doubt it is
               agreed that if MRC does not grant any licences to any third party
               no fee or any percentage of any fee shall be payable to CAT by
               MRC.

          (b)  if it is appropriate and it is decided to make patent
               applications for any targets or products identified or validated
               by the third party pursuant to the licence these shall be made
               promptly and MRC shall ensure that it secures all rights
               necessary under any such intellectual property to place it in a
               position where it can grant CAT a CAT Therapeutic Antibody
               Licence.

          (c)  subject to the aforesaid CAT Therapeutic Antibody Licence and to
               terms the same as Collaborative Centre Conditions the third party
               may freely develop, make, have made, use, import, market and sell
               products directed at such targets. For the avoidance of doubt it
               is declared and agreed that royalties shall only be payable to
               CAT via MRC under terms equivalent to those set out in Clauses
               7.1.2, 7.1.3, 7.2, 7.3. and 7.6 to 7.12 inclusive on sales of
               Products.

               N.B. The parties hereby agree that after signature of this
               Agreement (if necessary) they will meet and negotiate in good
               faith in order to seek to secure CAT consent for MRC to licence a
               third party company or companies to work under and use the Patent
               Rights and the Technology in conjunction with [***].

         Non-exclusive  rights
         ---------------------
<PAGE>

     2.1. 10 the non exclusive right and licence under CAT Licence Conditions
               for all purposes other than those set out in sub-clause 2.1.1 to
               2.1.9 inclusive. Subject always to the provisions of Clause 2.2
               in the event that MRC grants any other non-exclusive licences to
               third parties (which for the avoidance of doubt it is declared
               and agreed shall not include any right of access to or licence to
               use the CAT Libraries) MRC shall do so only on the condition that
               it shall if required grant CAT a CAT Therapeutic Antibody Licence
               which shall be offered by MRC to CAT on the terms of the Offer
               Mechanics and further MRC shall ensure that in any such non-
               exclusive licence to a third party there shall be set out in
               detail all the areas in which CAT has been granted exclusive or
               co-exclusive rights and from which the licensee is excluded and
               it shall be subject to terms equivalent to the Collaborative
               Centre Conditions and to the following terms:-

          (a)  such third party shall pay MRC an up front fee and MRC shall pay
               CAT [***] of such up front fee.

          (b)  if it is appropriate and it is decided to make patent
               applications for any targets or products identified or validated
               by the third party pursuant to the licence these shall be made
               promptly and MRC shall ensure that it secures all rights
               necessary under any such intellectual property to place it in a
               position where it can grant CAT a Therapeutic Antibody Licence.

          (c)  subject to the aforesaid CAT Therapeutic Antibody Licence and
               terms same as Collaborative Centre Conditions the third party may
               freely develop, make, have made, use, import, market and sell
               Products directed as such targets or products identified pursuant
               to the non-exclusive licence.

               For the avoidance of doubt it is declared and agreed that
               royalties shall only be payable to CAT via MRC under terms
               equivalent to those set out in Clauses 7.1.2, 7.1.3, 7.2, 7.3 and
               7.6 to 7.12 inclusive on sales of Products.

2.2  When MRC receives an application for or is negotiating with a third party
     for a licence under Clause 2.1 and MRC is aware that such third party owns
     or is able to licence intellectual property or technology which is
     competitive with the Patent Rights and Technology MRC shall hand over the
     negotiations and drafting of such a licence to CAT who shall deal with the
     matter as in its sole discretion considers fit.
2.3  Nothing in this Agreement shall confer any right upon CAT and CAT shall not
     exercise or use the Technology or Patent Rights in the commercial sale or
     sublicence of [***].
2.4  All MRC rights not specifically and expressly granted to CAT in this
     Agreement are reserved to MRC. For the avoidance of doubt MRC retains the
     right to work under the Patent Rights and the Technology for research
     purposes. Research purposes include
<PAGE>

     situations where part of the funding for the research is provided by a
     commercial third party but the commercial third party shall not itself
     acquire any licence under the Patent Rights and the Technology under the
     provisions of this sub-clause. Research purposes does not include contract
     research undertaken by MRC for commercial third parties.
2.5  Without prejudice to Clause 7 hereof, in consideration of the rights
     guaranteed hereunder and in the Diabodies Agreement, CAT Group shall within
     21 days of the date hereof, pay to MRC the sum of $US 4,950,000 (the "Cash
     Consideration") and, provided the MRC Option or CAT Option has been
     exercised under Clause 2.6 below, MRC shall be entitled to nominate a
     Director to the board of Directors of CAT Group whose identity shall be
     subject to the approval of the CAT Group board (and if any nominated
     director is not so approved MRC shall be entitled to nominate a different
     person), provided that MRC shall lose the right to nominate a Director if:-
     2.5.1 MRC's shareholding in CAT Group at any time falls below 200,000
            shares; or

     2.5.2 after a period of 2 years from the date of this Agreement MRC's
            shareholding in CAT Group falls below 5% of the issued share capital
            of CAT Group;

     and in such circumstances if requested by CAT MRC shall use its reasonable
     endeavours to ensure that its nominated director resigns. The board and
     shareholders of CAT Group shall be entitled to dismiss or remove MRC
     nominated director on the normal grounds for dismissal or removal of
     directors provided always that in such circumstances MRC shall be entitled
     to nominate a replacement.

2.6  At any time prior to the payment of Cash Consideration:-
     2.6.1 MRC may, by notice in writing to CAT Group, require CAT Group to
            allot to MRC 150,000 ordinary shares of 50 pence each in CAT Group
            in consideration of the release by MRC of CAT Group's liability to
            pay the Cash Consideration ("MRC Option"); or

     2.6.2 CAT Group may, by notice in writing serve on MRC a notice requiring
            MRC to subscribe (and MRC shall so subscribe) for 150,000 ordinary
            shares of 50 pence each in CAT Group, the consideration for the
            allotment of such shares being the release by MRC of CAT Group's
            liability to pay the Cash Consideration, and such release shall be
            deemed to take effect on such allotment (the "CAT Option").

2.7  Where CAT Group elects or is required to use ordinary shares pursuant to
     the exercise of the CAT Option or the MRC Option, such issue will take
     effect within 21 days of the date hereof and such share shall be issued
     credited as fully paid and shall be deemed to have been issued at a price
     of US$ 33 per share.
2.8  On execution of this Agreement MRC and CAT may execute a formal licence
     agreement or agreements (as advised) based on the form set out in Schedule
     2 and CAT shall at its own expense register or procure the registration of
     such a licence agreement with the UK Patent Office.

3.   DURATION
<PAGE>

3.1  This Agreement shall be deemed to have commenced on the Effective Date and
     shall continue unless terminated pursuant to clause 8 until the expiry of
     CAT's obligations to make payments to MRC pursuant to clause 7.3 and MRC's
     obligations to make payments to CAT pursuant to clause 2.1.

4.   RESEARCH PROGRAMMES

     CAT shall undertake research programmes (involving third party
     collaboration where appropriate) relating to the exploitation of the
     Technology and shall use reasonable endeavours to exploit the Technology
                              ----------
     commercially.

5.   PATENTS

5.1  All and any expenses, outgoings, fees and other payments made or incurred
     by MRC and/or CAT as at the date hereof in relation to the filing and
     prosecution of the Patent Rights shall be borne by the Party which has made
     or incurred them without right of recovery from the other Party.

5.2  The Parties acknowledge that the Patent Agreement has terminated and agree
     that this Agreement supersedes the Patent Agreement.

5.3  CAT shall at its own cost and expense but in the name of MRC (or in the
     case of jointly owned Patent Rights in the joint names of MRC and CAT) use
     its reasonable endeavours to prosecute to grant with the broadest possible
     claims all subsisting patent applications within the Patent Rights and
     shall use its reasonable endeavours to maintain (including taking or
     participating in any necessary or desirable interference, opposition or
     similar proceedings) such Patent Rights in force for the full term thereof.
     MRC shall provide to CAT at CAT's cost and expense all reasonable
     assistance as CAT may require from time to time in connection with its
     obligations under this clause 5.3. CAT shall keep MRC fully informed of all
     material developments in relation to CAT's obligations under this clause.

5.4  If at any time CAT decides to abandon the prosecution or maintenance of any
     Patent Rights, it shall first notify MRC and give MRC the opportunity to
     take over the prosecution and maintenance at its own expense of such Patent
     Rights and CAT shall assign to MRC all its interest in such Patent Rights
     as are jointly owned by CAT and MRC. CAT shall provide to MRC at MRC's cost
     and expense all reasonable assistance as MRC may require from time to time
     in connection with any Patent Rights, the prosecution and maintenance of
     which MRC has taken over.

5.5  MRC gives no warranty and does not make any representation that the Patent
     Rights are or will be valid or that the exercise of the rights granted or
     to be granted to CAT hereunder will not result in the infringement of valid
     patents of third parties.

5.6  Each of the Parties shall notify the other promptly of any proceedings or
     application for revocation of any of the Patent Rights emanating from a
     third party that comes to its notice or if a third party takes or threatens
     to take any proceedings for infringement of any patents of that third party
     by reason of CAT's use or operation of the Technology, Patent Rights (or
     manufacture, use or sale of the Products). Each Party shall notify the
     other promptly of any infringement of the Patent Rights and Technology by a
     third party which may come to its attention during the term of this
     Agreement.

5.7  Upon the occurrence of any event described in clause 5.6 CAT shall:
     5.7.1 at its own cost defend or bring such proceedings if and to the extent
           that CAT

<PAGE>

           considers it reasonable so to do and in such manner as it shall
           consider necessary in order to protect the Patent Rights and
           interests of MRC and CAT under this agreement;

     5.7.2 keep MRC reasonably informed of the progress of such defences or
           proceedings;

     5.7.3 be entitled if such defense or proceedings are successful whether at
           trial or by way of settlement to retain the whole of any award of
           costs and damages made in such proceedings or settlement.

5.8  MRC shall:
     5.8.1 at CAT's expense, render such assistance to CAT as CAT may reasonably
           require in respect of such defence or proceedings;

     5.8.2 not be prevented in circumstance where CAT fails to do so under
           Clause 5.7 from defending any action for an injunction, damages or
           other relief or remedy brought by a third party against MRC for
           patent infringement provided that MRC has first notified CAT that it
           regards CAT's defense of MRC's position as inadequate and CAT has
           failed to remedy the same within 30 days of MRC's notice.

5.9  If at any time during this Agreement CAT directly or indirectly opposes or
     assists any third party to oppose the grant of letters patent or any patent
     application within the Patent Rights, or disputes or directly or indirectly
     assists any third party to dispute the validity of any patent within the
     Patent Rights or any of the claim thereof then and in such event MRC may at
     any time thereafter give notice under clause 8 to terminate this Agreement.
     CAT shall use its reasonable endeavours to include a clause similar to this
     clause 5.9 in its agreements with sub-licensees of the Patent Rights.

6.   SUB-LICENSING AND SUB-CONTRACTING

6.1  CAT may sub-license its rights under clause 2 for any purpose whatsoever
     provided always that CAT shall not have the right to sub-license the rights
     granted hereunder in their entirety to any third party and CAT shall remain
     responsible for all acts and omissions of such sub- licensees or
     sub-contractors as though they were CAT.

6.2  CAT shall forthwith notify MRC of any sub-licence granted pursuant to this
     clause and of the identity of any sub-licensee.

6.3  CAT undertakes with MRC:

     6.3.1 such sub-licence shall be granted on and shall contain substantially
           similar terms and conditions as the clauses hereof save that it shall
           provide for automatic termination upon the termination of this
           Agreement;

     6.3.2 CAT shall procure and be responsible to MRC for the performance and
           observance by the sub-licensee of the terms and undertakings
           contained in such sub-licence and on its part to be observed and
           performed.

7.   FEES AND ROYALTIES

<PAGE>

7.1  CAT shall pay MRC in consideration of the grant made in this Agreement the
     following sums (exclusive of VAT thereon);

     7.1.1 the sum of [***] payable in [***] equal installments, the first
           payment of [***] being payable on the date of execution of this
           Agreement and thereafter a payment of [***] being payable on each of
           the first 4 anniversaries thereof;

     7.1.2 Subject always to the provisions of Clause 7.2 a Royalty of [***] of
           the Net Invoice Price on each sale of the Products by CAT or its
           Affiliates;

     7.1.3 Subject always to the provisions of Clause 7.2 a Royalty calculated
           in respect of the Net Invoice Price ("NIP") of each sale of the
           Products by CAT's sub-licensees, such Royalty to be calculated as
           follows:-

           (a) MRC to receive from CAT [***] of the royalty percentage
               calculated by reference to NIP payable to CAT by any sub-licensee
               up to a maximum of [***] of the NIP of CAT's sub-licensee's sale
               of Products provided always that MRC shall not on any occasion
               receive payments which represent less than [***] of the NIP of
               CAT's sub-licensees sale of Products; and

           (b) MRC to receive from CAT [***] of any additional royalty
               percentage calculated by reference to NIP payable to CAT by any
               sub-licensee in excess of [***] and up to [***] of the NIP of
               CAT's sub-licensee's sale of Products

7.2  There are 2 circumstances in which there will be a reduction to the
     royalties payable by CAT under Clauses 7.1.2 and 7.1.3 as follows:

     7.2.1 If CAT or its sub-licensees are required to licence any third party
           dominating patents in order to be able to exercise the rights granted
           to it hereunder involving use of the inventions disclosed in the
           patents and the corresponding patents listed in Schedule 1 as number
           [***] and number [***] and numbers [***] CAT may deduct from the sums
           due to MRC all such sums payable to such third parties up to a
           maximum of [***] of the sums due to MRC provided that such a
           reduction shall not be made where a reduction has already been or is
           to be made under Clause 7.5 below

     7.2.2 Where Products infringe only those of the Patent Rights which deal
           with [***] being those patents referred to in Schedule 1 as number
           [***] royalties shall be payable at [***] of the normal rate

7.3  Royalties due to MRC pursuant to clause 7.1 shall be payable in any country
     in respect of any Product covered by Valid Claim of the Patent Rights in
     the country or ten years from first commercial sale for use or consumption
     by the general public of that Product in that country, whichever is the
     later.

7.4  Save as otherwise provided in this Agreement no licence fee or royalty is
     due by CAT to

<PAGE>

     MRC in respect of any exploitation of the CAT Libraries as research tools
     including rights to Patent Rights and/or Technology as appropriate.

7.5  Royalties on Products paid by CAT to MRC under prior existing agreements
     between MRC and CAT shall be creditable against a maximum of [***] on
     Royalties payable on the same Products by CAT under clauses 7.1.2 and 7.1.3

7.6  CAT shall within 60 days of the end of each half year commencing on 2
     January and 1 July;

     7.6.1 prepare and deliver to MRC, a detailed statement confirming;

           (A) the quantity of the Products sale by CAT and sub-licensees during
               that half year;

           (B) whether the Product sold was by way of sale, hire, lease or other
               disposal;

           (C) the Net Invoice Price of each Product so sold; and

           (D) the amount of Royalties due; and

     7.6.2 pay to MRC the amount of Royalties due in respect of that half year.

7.7  If MRC shall within 90 days of the receipt of any such statement give to
     CAT notice that it does not accept the same, such statement shall be
     certified by an independent chartered accountant appointed by agreement
     between the Parties or, in default of agreement within 14 days, by the
     President for the time being of the Institute of Chartered Accountants of
     England and Wales in London. CAT shall make available all books and records
     required for the purpose of such certification at reasonable times during
     normal business hours and the statement so certified shall be binding
     between the parties. The costs of such certification shall be the
     responsibility of MRC unless the certificate shows that Royalties in excess
     of 5 per cent. of those stated in the original statement are payable in
     which case they shall be the responsibility of CAT. Following any such
     certification of the Parties shall make any adjustments necessary in
     respect of the Royalties already paid to MRC.

7.8  CAT shall keep separate and detailed true and accurate books and records
     containing all information necessary for the calculation of the Royalties.
     MRC shall be entitled at its expense to inspect the same by its authorized
     representative or representatives on reasonable notice during business
     hours and to take copies of or extracts from such books and records.

7.9  All sums payable hereunder are exclusive of value added tax (VAT), which
     shall where appropriate be paid in addition. MRC shall deliver to CAT a VAT
     invoice in respect of every payment affected by VAT.

7.10 All payments hereunder shall be made in Sterling. Any Net Invoice Price
     expressed in a currency other than Sterling shall be converted in Sterling
     by reference to the average of the relevant buying and selling rates of
     National Westminster Bank plc ruling at the end of the month in which the
     payment of Royalties pursuant to clause 7.3 is due or is made, whichever is
     the earlier.

7.11 If CAT defaults in the payment of any sum due to MRC, such sum shall bear
     interest or
<PAGE>

     from the end of the half year in which payment was due until payment is
     made (irrespective of whether the date of payment is before or after any
     judgment or award in respect of the same) at a rate per annum equal to 4
     per cent over the base rate from time to time of National Westminster Bank
     plc, such interest accruing daily but not itself bearing interest.

7.12 CAT shall make all payments of sums payable to MRC without any deduction or
     set-off other than such amount (if any) as it is required to deduct by law.
     If CAT is required to make such deduction, it shall do all things in its
     power which may be reasonably necessary to enable or assist MRC to claim
     exemption therefrom under any double taxation or similar agreement from
     time to time in force and shall from time to time give to MRC proper
     evidence as to the deduction and payment over of the tax or sums withheld.

8.   TERMINATION

8.1  Either Party (referred to in this clause as the "terminating Party") may
     terminate this Agreement forthwith by notice in writing to the other
     (referred to in this clause as the "other Party") upon the happening of one
     or more of the following events:

     8.1.1 if the other Party shall fail to pay any sum due to the terminating
           party within 30 days after the due date and the Party has failed to
           remedy such breach within 30 days after written notice has been given
           to it by the terminating Party, specifying the breach;

     8.1.2 if the other Party shall commit any other material breach of its
           obligations hereunder and (in the case of a breach capable of being
           remedied) shall fail to remedy such breach within 30 days after
           written notice has been given to it by the terminating Party
           specifying the breach;

     8.1.3 if an order is made, or a petition presented, or an effective
           resolution is passed for the winding up of the other Party (except
           for the purpose of an amalgamation or reconstruction, the terms of
           which have been previously been notified to and approved by the
           terminating Party;

     8.1.4 if an administration order is made, or a petition for such an order
           is presented, in respect of the other Party;

     8.1.5 if a voluntary arrangement under section 1 of the Insolvency Act 1986
           is proposed in respect of the other Party;

     8.1.6 if the other Party convenes a meeting of or proposes or enters into
           any arrangement or composition with its creditors;

     8.1.7 if any distress, execution, sequestration or other process is
           levied or enforced or sued out of upon or against any of the assets
           of the other Party and the same is not discharged within 14 days;

     8.1.8 if an encumbrancer takes possession or an administrative or other
           receiver or
<PAGE>

            manager is appointed of the whole or any part of the assets of the
            Party in breach;

     8.1.9  if the other Party is unable to pay its debts within the meaning of
            Section 123 of the Insolvency Act 1986;

     8.1.10 if the other Party shall stop or threaten to stop payment of its
            debts generally or cease or threaten to cease to carry on its
            business;

     8.1.11 if any event occurs in respect of the other Party in any
            jurisdiction outside England which is analogous to any of the events
            referred to in the foregoing paragraphs.

8.2  Without prejudice to clause 5.9 MRC may terminate this Agreement forthwith
     by notice in writing in any of the following circumstances:

     8.2.1  if CAT is consistently late in paying Royalties to MRC, and for the
            purpose of this clause CAT shall be deemed to be consistently late
            if it has failed for [***] to render statements and pay royalties
            within the due time; or

     8.2.2  if in any period of [***] there shall have been any delay or failure
            in performance under this Agreement on the part of CAT resulting
            from any occurrence of any event or events of Force Majeure which
            delay or failure shall have continued for an aggregate period of
            [***].

     8.2.3  if MRC shall have served on CAT notice requiring within [***] remedy
            of a delay or failure in performance under this Agreement on the
            part of CAT and such delay or failure by CAT has not been remedied
            by CAT within the time stated.

8.3  Upon the termination of this Agreement by MRC for whatever reason CAT shall
     forthwith cease to make any use of the Patent Rights save that if CAT has a
     stock of Products existing or in the course of manufacture or unfulfilled
     orders on hand at the Termination Date CAT may, but only with MRC's
     specific permissions not to be unreasonably withheld, sell such stock on
     the terms hereof.

8.4  Upon any termination of this Agreement by MRC, other than for breach by a
     CAT sub- licensee appointed pursuant to clause 6.1 MRC shall be made a
     party to any agreement between CAT and a sub-licensee of CAT's rights
     hereunder for the purpose of ensuring that CAT's sub-licensee hereunder may
     continue to exploit the Patent Rights and Technology sub-licensed to it by
     CAT.

8.5  It is expressly agreed that MRC shall not be liable to pay any severance
     payment or compensation to CAT for loss of profits or loss of goodwill or
     for any other loss or damage howsoever arising as a result of the expiry or
     termination, for whatever reason, of this Agreement.

8.6  For the avoidance of doubt, (and without prejudice to the generality of
     clauses 8.3 to 8.5), in relation to those of the Patent Rights in respect
     of which CAT is joint registered

<PAGE>

     proprietor with MRC (if any), upon expiry or termination of this Agreement
     for whatever reason, MRC and CAT shall both be entitled to use those
     rights, but shall not individually be entitled to assign those rights or to
     licence third parties under those rights without the prior written consent
     of the other Party not to be unreasonably withheld.

8.7  In the event of a breach by MRC of its obligations under Clauses 2.1.1,
     2.1.2, 2.1.4 or 2.1.10 and if CAT shall have served on MRC notice requiring
     within [***] remedy of a delay or failure in performance under this
     Agreement on the part of MRC or any other licensees of MRC and such delay
     or failure has not been remedied within the time stated CAT shall have the
     right on written notice to MRC forthwith to terminate the rights of MRC
     thereunder. Upon any such termination other than for breach by an MRC
     licensee CAT shall be made a party to any agreement between MRC and a
     licensee of MRC for the purpose of ensuring that MRC's licensee may
     continue to exploit the Patent Rights and Technology licensed to it by MRC.

8.8  Clauses 5, 7, 9, 18 and 22 and all accrued rights and liabilities of the
     Parties hereto shall survive the termination, for whatever reason, of this
     Agreement.

9.   INDEMNITY

9.1  CAT shall be liable for and will indemnify MRC (together with its officers,
     servants and agents) against any and all liability, loss, damages, costs,
     legal costs, professional and other expenses of any nature whatsoever
     incurred or suffered by MRC whether direct or consequential arising out of
     any dispute or contractual tortious or other claims or proceedings brought
     against MRC by a third party claiming relief against MRC by reason of the
     exercise and use of the Technology or the Patent Rights or manufacture, use
     or sale of any Products by CAT.

9.2  MRC shall be liable for and will indemnify CAT (together with its officers,
     servants and agents) against any and all liability, loss, damages, costs,
     legal costs, professional and other expenses of any nature whatsoever
     incurred or suffered by CAT whether direct or consequential arising out of
     any dispute or contractual tortious or other claims or proceedings brought
     against CAT as a third party claiming relief against CAT by reason of the
     exercise and use of the Technology or the Patent Rights or manufacture, use
     or sale of any Products by MRC or the Collaborative Centre.

10.  ASSIGNMENT

10.1 Save as otherwise provided in this Agreement neither Party shall without
     the prior written consent of the other assign the benefit and/or burden of
     this Agreement except to an Affiliate of CAT or a third party acquiring all
     of the business of CAT and then only provided that such Affiliate or third
     party undertakes to MRC to be bound by the terms of this Agreement.

10.2 This Agreement shall be binding on and enure for the benefit of the
     successors and agreed assigns of the Parties.

11.  FORCE MAJEURE

11.1 Neither Party to this Agreement shall have any liability whatsoever or
     (without prejudice to any payments of monies due) be deemed to be in
     default for any delays or failures in performance of any of its obligations
     under this Agreement resulting from any occurrence of an event of Force
     Majeure provided that this shall not apply to relieve CAT of any payment
     obligation where the occurrence or event consists of non-payment or late
     payment by a customer or otherwise consists of a shortage of funds.
<PAGE>

11.2 The occurrence or existence of any event of Force Majeure shall be
     immediately notified by the party affected thereby to the other. The
     affected party shall use all reasonable endeavours to remedy the event or
     limit the effects of the said event of Force Majeure upon the other party
     as quickly as possible.

12.  SEVERABILITY

     If any term or provision of this Agreement shall be found by a court of
     competent jurisdiction to be invalid, illegal or otherwise unenforceable,
     the same shall not affect the other terms or provisions hereof or the whole
     of this Agreement, but such term or provision shall be deemed modified to
     the extent necessary in the court's opinion to render such term or
     provision enforceable, and the rights and obligations of the Parties shall
     be construed and enforced accordingly, preserving to the fullest
     permissible extent the intent and agreements of the Parties in this
     Agreement.

13.  DELAY

     No failure or delay or other indulgence on the part of either Party to
     exercise any right or remedy under this Agreement shall be construed or
     operate as a waiver thereof nor shall any single or partial exercise of any
     right or remedy preclude the further exercise or such right or remedy as
     the case may be. The rights and remedies provided in this Agreement are
     cumulative and are not exclusive of any rights or remedies by law.

14.  CONFIDENTIALITY

14.1 Subject to clause 14.2 below, each Party shall keep secret and confidential
     all technical or financial information which may be disclosed to it by the
     other Party pursuant to this Agreement including, without limitation, any
     financial information which may be disclosed pursuant to clause 7.6 and may
     not disclose such information to any person except to those of its
     employees who have a need to know such information

14.2 The obligations of confidence referred to in clause 14.1 shall not extend
     to any information which:

            14.2.1 was already known to the recipient Party prior to its receipt
                         from the disclosing party;

            14.2.2 is subsequently disclosed to the recipient lawfully by a
                         third party owing no obligation of confidence in
                         respect of such information.

            14.2.3 is or shall be generally available to the public otherwise
                         than by reason of breach of clause 14.1 by the
                         recipient Party;

            14.2.4 is required by law to be disclosed and then only when prompt
                         written notice of this requirements has been given to
                         the disclosing Party so that such Party may seek
                         appropriate relief to prevent such disclosure

15.  NOTICES

15.1 A notice, approval, consent, or other communication given under or in
     connection with this Agreement (in this Clause known as a "Notice"):

     15.1.1 must be in writing in the English language;
<PAGE>

     15.1.2 must be left at the address of the addressee or sent by pre-paid
               first class post to the address of the addressee or sent by
               facsimile to the facsimile number of the addressee in each case
               which is specified in this clause, and marked for the attention
               of the person so specified, or to such other address or facsimile
               number and/or marked for the attention of such other person as
               the relevant party may from time to time specify by Notice given
               in accordance with this clause.

            The relevant details for each Party at the date of this Agreement
            are:

            MRC
            Address:-     20 Park Crescent, London W1N 4AL
            Facsimile:    0171 323 1331
            Attention:    Head of Technology Transfer Group

            CAT
            Address:-     The Science Park, Melbourn, Nr Royston,
                          Cambridgeshire, SG8 6JJ, UK
            Facsimile:    01763 263413
            Attention:    Company Secretary

15.2 In the absence of evidence of earlier receipt, any Notice shall take effect
     from the time that it is deemed to be received in accordance with
     sub-clause 3 below.

15.3 Subject to sub-clause 4 below, a Notice is deemed to be received:

            15.3.1 in the case of a notice left at the addressee, upon delivery
                          at that address;

            15.3.2 in the case of a posted letter, on the third day after
                          posting;

            15.3.3 in the case of a facsimile, on production of a transmission
                          report from the machine from which the facsimile was
                          sent which indicates that the facsimile was sent in
                          its entirety to the facsimile number of the recipient
                          provided that a confirmatory copy of such facsimile
                          shall have been sent by post in accordance with sub-
                          clause 1 within 24 hours of such transmission.

15.4 A Notice received or deemed to be received in accordance with sub-clause 3
     above on a day which is not a Business day or after 5 p.m., on any Business
     Day, shall be deemed to be received on the next following Business Day.

15.5 For the purposes of this clause, "Business Day" shall mean a day not being
     a Saturday on which trading banks are generally open for business in the
     City of London.

16.  NO PARTNERSHIP

     Nothing in this Agreement or in any document referred to in it or any
     arrangement contemplated by it shall constitute either Party a partner of
     the other nor shall the execution, completion and implementation of this
     Agreement confer on any Party any
<PAGE>

     power to bind or impose any obligations to any third parties on the other
     Party or to pledge the credit of the Party.

17.  ENTIRE AGREEMENT

17.1 This Agreement represents the entire understanding, and constitutes the
     whole agreement, in relation to its subject matter and supersedes any
     previous agreement between the Parties with respect thereto and without
     prejudice to the generality of the foregoing excludes any warranty,
     condition or other undertaking implied at law or by custom.

17.2 Each Party confirms that, except as provided in this Agreement and without
     prejudice to any liability for fraudulent misrepresentation, no Party has
     relied on any representation or warranty or undertaking which is not
     contained in the Agreement (or which was made by a party who is not a party
     to this Agreement), and neither Party shall have any remedy in respect of
     misrepresentation or untrue statement made by the other Party unless and to
     the extent that a claim lies under the Agreement.

17.3 In the event that any provision of this Agreement shall be void or
     unenforceable by reason of any applicable law, it shall be deleted and the
     remaining provisions hereof shall continue in full force and effect and if
     necessary, be so amended as shall be necessary to give effect to the spirit
     of this Agreement so far as possible.

18.  GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS

18.1 This Agreement shall be governed by, and construed in accordance with
     English law.

18.2 The Parties agree that the Courts of England shall have exclusive
     jurisdiction in relation to any claim, dispute or difference concerning
     this Agreement and any matter arising therefrom.

18.3 Each Party agrees that without preventing any other mode of service, any
     document in an action (including, but not limited to, any writ of summons
     or other originating process of any third or other party notice) may be
     served on the other Party by being delivered to or left for that Party at
     its address for service of notices under clause 15 and each Party
     undertakes to maintain such an address at all times in the United Kingdom
     and to notify the other Party in advance of any change from time to time of
     the details of such address in accordance with the manner prescribed for
     service of notices under clause 15.

19.  COMPLIANCE WITH LAWS AND REGULATIONS

     Each Party shall observe and abide by and shall require its sub-contractors
     to observe and abide by all laws, regulations and by laws as may apply in
     relation to the matters contemplated by this Agreement. Neither Party shall
     do anything or omit to do anything which will cause the other to be in
     breach of any applicable laws or regulations which have been notified by
     the other Party.


20.  VARIATION AND WAIVER

20.1 No variation of this Agreement shall be effective unless it is in writing
     signed by the Parties.

20.2 No waiver of any term, provision or condition of this Agreement shall be
     effective unless it is in writing and signed by the waiving Party.

20.3 Without prejudice to clause 14 no failure to exercise nor any delay in
     exercising any right or remedy hereunder shall operate as a waiver thereof
     or of any other right or remedy
<PAGE>

     hereunder, nor shall any single or partial exercise of any right or remedy
     prevent any further or other exercise thereof or the exercise of any other
     right or remedy.

21.  APPROVALS AND COMPLIANCE

21.1 Without prejudice to clause 19, CAT shall obtain any authorisation or
     approvals by the relevant authorities within the Territory as may be
     required for or as a result of this Agreement on for the use or sale of any
     Products and shall ensure that the validity of the same is maintained
     during the term of this Agreement.

21.2 CAT shall be responsible for ensuring that any Products and its packaging
     and labelling comply with all legislation, regulations, standards and codes
     of practice in the Territory.

22.  ANNOUNCEMENTS

22.1 Except as required by law or for the purpose of litigation or to the extent
     necessary to comply with the requirements of the Securities and Exchange
     Commission, the London Stock Exchange Limited and any other equivalent
     entity in another jurisdiction and then, so far as permitted and
     practicable, only when prompt written notice of this requirement has been
     given to the other Party:

     22.1.1 all press releases to be issued which relate to this Agreement shall
               be agreed between the Parties;

     22.1.2 no announcement shall be issued or publicly given concerning the
               financial terms set out in Clause 7 of this Agreement unless in a
               form agreed to by MRC and CAT; and

     22.1.3 neither MRC nor CAT shall disclose to any third party other than
               their respective professional advisers any of the financial terms
               of the Agreement.

23.  RTPA SUSPENSION OR RESTRICTIONS

     If a provision contained in this Agreement or in any arrangement of which
     this Agreement forms part makes this Agreement or any such arrangement
     registrable under the Restrictive Trade Practices Act 1976 that provision
     shall not come into effect until the day after the date on which full
     particulars of this Agreement and of any such arrangement have been
     furnished to the Office of Fair Trading pursuant to Section 24 of the
     Restrictive Trade Practices Act 1976.
<PAGE>

IN WITNESS

its duly authorised representatives the day and year first above written.

For and behalf of MRC

Signed: ____________________________
Printed: ___________________________
Title: _____________________________
Date: ______________________________

For and behalf of CAT

Signed: ____________________________
Printed: ___________________________
Title: _____________________________
Date: ______________________________

For and behalf of CAT GROUP

Signed: ____________________________
Printed: ___________________________
Title: _____________________________
Date: ______________________________
<PAGE>

                                  SCHEDULE 1
                                  ----------
                                 Patent Rights
                                 -------------

CAT/MRC PATENTS AND APPLICATIONS

Number        PCT/GB89/01344
Inventor      Winter et al (Winter 2)
Title         Cloning Immunoglobulin Variable Domain Sequences
Subject       Antibody PCR
Applicant     MRC
Status        Granted in Europe (EPO 368 684B1), Australia, application
                    elsewhere

Number        PCT/GB91/01134
Inventor      McCafferty et al
Title         Methods for producing members of specific binding pairs
Subject       Gene 3 protein antibody display (and display of other proteins)
Applicant     MRC/CAT
Status        Granted Australia, Europe (EPO 589 877B1), Divisional field,
                    Application elsewhere

Number        PCT/GB92/01755
Inventors     Hoogenboom et al
Title         Production of chimaeric antibodies, a combinational approach
Subject       Humanisation of antibodies by chain shuffling (Epitope Imprinted
                    Selection)
Applicant     MRC/CAT
Status        Granted Australia, Granted US 15.10.96, Application elsewhere

Number        PCT/GB92/02240 (W093/11236)
Inventors     Griffiths et al
Title         Production of anti-self antibodies from antibody segment
                    repertoires and displayed on phage
Subject       Anti-self antibodies
Applicant     MRC/CAT
Status        Granted Australia, Application elsewhere

Number        PCT/GB92/00883 (WO92/20791)
Inventors     Winter et al
Title         Methods for producing members of specific binding pairs
Subject       Dual combinatorial libraries
Applicant     MRC/CAT
Status        Granted Australia, notice of allowance US, Application elsewhere

Number        PCT/GB93/00605
Inventors     Winter et al
Title         Methods for producing members of specific binding pairs
<PAGE>

Subject       Site specific recombination e.g. lox P
Applicant     MRC/CAT
Status        Application

Number        US CIP 08/350260
Inventors     Griffiths et al
Title         Methods for producing Members of Specific Binding Pairs
Subject       Site specific recombination e.g. lox P, continuation in part (US)
Applicant     MRC/CAT
Status        Application

<PAGE>

Number        PCT/GB94/01422
Inventors     Jespers et al
Title         SBP members with a chemical moiety covalently bound within the
                    binding site production and selection thereof
Subject       Chemosynthetic libraries
Applicant     MRC
Status        Application

Number        PCT/GB94/02662
Inventors     Griffiths et al
Title         Recombinant Binding Proteins and Peptides
Subject       loxP/self splicing introns in antibody and peptide library
                    construction
Applicant     MRC
Status        Application

Number        PCT/GB92/01483
Inventors     Winter et al
Title         Treatment of cell populations
Subject       In cell PCR
Applicant     MRC
Status        Granted Australia, application elsewhere

[***]
<PAGE>

                                  SCHEDULE 2
                                  ----------
                             Draft Formal Licence
                             --------------------

THIS LICENCE is made the __________day of ____________ 1997

(1)  MEDICAL RESEARCH COUNCIL a public body incorporated under Royal Charter,
     whose principal office is at [________________________] (the "Licensor");
     and

(2)  CAMBRIDGE ANTIBODY TECHNOLOGY LIMITED a company incorporated in England and
     Wales with registered number [_________], whose registered office is at
     [__________________] (the "Licensee").

WHEREAS:

(A)  MRC is the registered proprietor or joint registered proprietor with the
     Licensee of the patents listed in Schedule A (hereinafter called the
     "Patents")

(B)  By an Agreement dated ________________ 1997 between the parties hereto (the
     "Agreement") MRC, amongst other things, agreed to grant CAT an exclusive
     licence under the Patents in certain fields and the parties wish formally
     to record that licence.

NOW IT IS HEREBY AGREED AND CONFIRMED:

1.   Pursuant to the Agreement MRC HEREBY GRANTS to CAT an exclusive licence
     under the Patents in certain fields on the terms and conditions of the
     Agreement.
<PAGE>

IN WITNESS WHEREOF MRC has granted this licence the day and year first above
written.

SIGNED BY:                   )
for and on behalf of         )
MEDICAL RESEARCH COUNCIL     )
in the presence of           )
Name                         )


SIGNED BY:                   )
for and on behalf of         )
CAMBRIDGE ANTIBODY     )
TECHNOLOGY LIMITED     )
in the presence of           )
Name                         )
<PAGE>

                                  SCHEDULE A
                                  ----------
                                 Patent Rights
                                 -------------

CAT/MRC PATENTS AND APPLICATIONS

Number      PCT/GB89/01344
Inventor    Winter et al (Winter 2)
Title       Cloning Immunoglobulin Variable Domain Sequences
Subject     Antibody PCR
Applicant   MRC
Status      Granted in Europe (EPO 368 684B1), Australia, application elsewhere

Number      PCT/GB91/01134
Inventor    McCafferty et al
Title       Methods for producing members of specific binding pairs
Subject     Gene 3 protein antibody display (and display of other proteins)
Applicant   MRC/CAT
Status      Granted Australia, Europe (EPO 589 877B1), Divisional field,
                    Application elsewhere

Number      PCT/GB92/01755
Inventors   Hoogenboom et al
Title       Production of chimaeric antibodies, a combinational approach
Subject     Humanisation of antibodies by chain shuffling (Epitope Imprinted
                    Selection)
Applicant   MRC/CAT
Status      Granted Australia, Granted US 15.10.96, Application elsewhere

Number      PCT/GB92/02240 (W093/11236)
Inventors   Griffiths et al
Title       Production of anti-self antibodies from antibody segment repertoires
                    and displayed on phage
Subject     Anti-self antibodies
Applicant   MRC/CAT
Status      Granted Australia, Application elsewhere

Number      PCT/GB92/00883 (WO92/20791)
Inventors   Winter et al
Title       Methods for producing members of specific binding pairs
Subject     Dual combinatorial libraries
Applicant   MRC/CAT
Status      Granted Australia, notice of allowance US, Application elsewhere

Number      PCT/GB93/00605
Inventors   Winter et al
<PAGE>

Title       Methods for producing Members of Specific Binding Pairs
Subject     Site specific recombination e.g. lox P
Applicant   MRC/CAT
Status      Application

Number      US CIP 08/350260
Inventors   Griffiths et al
Title       Methods for producing Members of Specific Binding Pairs
Subject     Site specific recombination e.g. lox P, continuation in part (US)
Applicant   MRC/CAT
Status      Application

<PAGE>

Number      PCT/GB94/01422
Inventors   Jespers et al
Title       SBP members with a chemical moiety covalently bound within the
                    binding site production and selection thereof
Subject     Chemosynthetic libraries
Applicant   MRC
Status      Application

Number      PCT/GB94/02662
Inventors   Griffiths et al
Title       Recombinant Binding Proteins and Peptides
Subject     loxP/self splicing introns in antibody and peptide library
                    construction
Applicant   MRC
Status      Application

Number      PCT/GB92/01483
Inventors   Winter et al
Title       Treatment of cell populations
Subject     In cell PCR
Applicant   MRC
Status      Granted Australia, application elsewhere

[***]
<PAGE>

                                  SCHEDULE 3
                                  ----------
                              Third Party Rights
                              ------------------

[***]
<PAGE>

                                  SCHEDULE 4
                                  ----------
                                 The Libraries
                                 -------------

[***]
<PAGE>

                                  SCHEDULE 5
                                  ----------
                                     [***]

                              Excluded Antibodies
                              -------------------

The following combinations of antibodies fall outside the scope of the licence:-
1/ [***] indicates that text has been deleted, which is subject to a
-
confidential treatment request. This text has been filed with the SEC on a
supplemental basis.