Exhibit 10.46

[*] indicates that a confidential portion of the text of this agreement has been
omitted.

                                LICENSE AGREEMENT

     This License Agreement (this "Agreement"), effective as of December 22,
2002 (the "Effective Date"), is entered into by and between XOMA Ireland
Limited, a company with limited liability organized under the laws of the
Republic of Ireland having offices at Shannon Airport House, Shannon, County
Clare, Ireland (with its Affiliates, "XOMA"), and Cambridge Antibody Technology
Limited (with its Affiliates, "CAT"), an English company having a principal
place of business at Milstein Building, Granta Park, Cambridge, CB1 6GH,
England.

                                   BACKGROUND

     A. XOMA is the owner or exclusive licensee of certain patent rights;

     B. CAT wishes to acquire non-exclusive licenses under such patent rights on
the terms and conditions set forth below; and

     C. XOMA is willing to grant CAT non-exclusive licenses on the terms and
conditions set forth below.

     NOW, THEREFORE, in consideration of the promises and the mutual covenants
hereinafter recited, the parties agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

     In this Agreement, the following terms shall have the meanings set forth in
this Article.

     1.1 "Affiliate" means any corporation or other entity which is directly or
indirectly controlling, controlled by or under common control with a party
hereto. For purposes of this Agreement, "control" (including, with correlative
meanings, the terms "controlled" and "controlling") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of the subject corporation or other entity, whether
through the ownership of voting securities, by agreement or otherwise.

     1.2 "Antibody" means, for purposes of Sections 1.5, 1.6, 1.20 and 1.27
only, a molecule or a gene encoding such a molecule comprising or containing
more than one immunoglobulin variable domain or parts of such domains or any
existing or future fragments, variants, modifications or derivatives thereof.


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                                      -2-


     1.3 "Antibody Phage Display" means the authorized use of Licensed Antibody
Phage Display Materials to conduct Research and Development.

     1.4 "CAT Collaborator" means any person or entity who is an authorized
end-user or intended recipient of Licensed Antibody Phage Display Materials
(including a CAT Library), Licensed Immunoglobulins or Licensed Immunoglobulin
Information transferred from CAT and/or a person or entity on whose behalf CAT
knowingly engages in Antibody Phage Display; provided, however, that except for
the entities identified on Schedule 1.4 such person or entity shall not be
deemed to be a CAT Collaborator unless and until the requirements of Section 2.4
are complied with. An initial list of CAT Collaborators with whom CAT has an
agreement in full force and effect as of the Effective Date is identified on
Schedule 1.4; provided, that such entities are in compliance with all of the
provisions of this Agreement applicable to CAT Collaborators or will be within a
reasonable time after the Effective Date. No person or entity shall be deemed to
be a CAT Collaborator if such person or entity is engaged in a Commercial
Antibody Phage Display Business unless, pursuant to a written agreement (other
than this Agreement), executed after the Effective Date, XOMA has granted to
such person or entity a valid license or covenant not to sue under the XOMA
Patent Rights which explicitly extends to the activities identified in this
third sentence of Section 1.4; provided, that a CAT Collaborator listed in
column (a) of Schedule 1.4 shall retain its status as such, notwithstanding that
it may after the Effective Date engage in a Commercial Antibody Phage Display
Business, but in all cases only with respect to activities of such CAT
Collaborator that are carried out pursuant to and in accordance with its
arrangement with CAT and the applicable terms of this Agreement using Licensed
Antibody Phage Display Materials and/or Licensed Immunoglobulins provided by
CAT. XOMA shall provide CAT prompt written notice of those written agreements or
covenants not to sue which satisfy the requirements of the prior sentence. No
person or entity may claim the status of CAT Collaborator with respect to any
acts or activities which are unrelated to the use of Licensed Antibody Phage
Display Materials, Licensed Immunoglobulins and/or Licensed Immunoglobulin
Information provided by CAT.

     1.5 "CAT Library" means the collection of bacteriophages each of which
displays an Antibody or a collection of host cells containing such collection of
bacteriophages controlled by CAT as of the Effective Date and all updates,
additions and improvements to such collection of bacteriophages or collection of
host cells containing such collection of bacteriophages.

     1.6 "CAT Library Antibody" means any Antibody to a Target identified,
generated or derived by XOMA or a Third Party from its use of the CAT Library
during the term of this Agreement.


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     1.7 "Change in Control" means, with respect to a particular entity, any
transaction or series of transactions as a result of which any person or group
(as defined under the U.S. Securities Exchange Act of 1934, as amended) becomes,
directly or indirectly, the beneficial owner of more than fifty percent (50%) of
the total voting power of such entity's equity securities or otherwise gains
control of such entity.

     1.8 "Commercial Antibody Phage Display Business" means, with respect to
antibody phage display services, antibody phage display libraries, products for
use in antibody phage display or the bacterial expression of antibodies, and
antibody phage display materials, the out-licensing, commercial manufacture,
sale, offer for sale, import for sale or export for sale of such services,
libraries, products and materials.

     1.9 "Confidential Information" means any proprietary or confidential
information or material disclosed by a party to the other party pursuant to this
Agreement, which is (i) disclosed in tangible form hereunder and is designated
thereon as "Confidential" at the time it is delivered to the receiving party, or
(ii) disclosed orally hereunder and identified as confidential or proprietary
when disclosed and such disclosure of confidential or proprietary information is
confirmed in writing within thirty (30) days by the disclosing party.

     1.10 "Diagnostic Product" means a Product used solely to diagnose any
disease or condition in any animal, including a human.

     1.11 "Dispose" means to transfer, assign, lease, or in any other fashion
dispose of control, ownership or possession, but shall not mean to license or
sell. "Disposition" shall have the correlative meaning.

     1.12 "Immunoglobulin" means any molecule, including without limitation full
immunoglobulin molecules (e.g., IgG, IgM, IgE, IgA and IgD molecules) and scFv,
Fv and Fab molecules, that has an amino acid sequence by virtue of which it
interacts with an antigen and wherein that amino acid sequence consists
essentially of a functionally operating region of an antibody variable region
including, by way of example and without limitation, any naturally occurring,
synthetic, or recombinant form of such a molecule; provided, however, that
"Immunoglobulin" shall not include a molecule or gene encoding such a molecule
which comprises solely a single variable domain (heavy or light).

     1.13 "Insolvency Event" means any one of the following:

     (a)  a notice shall have been issued to convene a meeting for the purpose
          of passing a resolution to wind up CAT, or such a resolution shall
          have been passed other than (i) a resolution for the solvent
          reconstruction or reorganization of CAT, or (ii) for the purpose of
          inclusion of any part of the share capital of CAT in the Official List
          of the London Stock Exchange or in the list of the New York


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                                      -4-


          Stock Exchange, American Stock Exchange or quotation of the same on
          the Nasdaq Stock Market in relation to an initial public offering; or

     (b)  a resolution shall have been passed by CAT's directors to seek a
          winding up or administration order, or a petition for a winding up or
          administration order shall have been presented against CAT, or such an
          order shall have been made; or

     (c)  a receiver, administrative receiver, receiver and manager, interim
          receiver, custodian, sequestrator or similar officer is appointed in
          respect of CAT or over a substantial part of its assets or any Third
          Party takes steps to appoint such an officer in respect of CAT or an
          encumbrancer takes steps to enforce or enforces its security; or

     (d)  a proposal for a voluntary arrangement shall have been made in
          relation to CAT under Part I Insolvency Act 1986 (UK); or

     (e)  a step or event shall have been taken or arisen outside the United
          Kingdom which is similar or analogous to any of the steps or events
          listed at (a) to (d) above; or

     (f)  CAT proposes or makes any general assignment, composition or
          arrangement with or for the benefit of all or some of CAT's creditors
          or makes or suspends or threatens to suspend making payments to all or
          some of CAT's creditors or CAT submits to any type of voluntary
          arrangement; or

     (g)  CAT is deemed to be unable to pay its debts within the meaning of
          Section 123 Insolvency Act 1986 (UK).

     1.14 "Library License" means that certain Antibody Library License
Agreement dated December 22, 2002 by and between CAT and XOMA Technology Ltd.

     1.15 "Licensed Antibody Phage Display Materials" means (i) any collection
or library of polynucleotide sequences (including without limitation a CAT
Library), created by CAT and under the exclusive control of CAT, which encodes
at least one Immunoglobulin and which is contained in filamentous bacteriophage
and/or bacteriophage or phagemid cloning vectors capable of propagation in
bacteria; or (ii) any collection or library of bacteriophage (including without
limitation a CAT Library), created by or under the exclusive control of CAT,
wherein an Immunoglobulin is expressed as a fusion protein comprising an
Immunoglobulin and an outer surface polypeptide of a bacteriophage. For the
avoidance of doubt, and without expanding the definition thereof, specifically
excluded from the definition of Licensed Antibody Phage Display Materials are
(x) any article of manufacture or composition of


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                                      -5-


matter suitable for display, expression or secretion of an Immunoglobulin in or
from any organism or system other than bacteria and (y) any materials or
composition of matter otherwise meeting the definition of Licensed Antibody
Phage Display Materials but created by or under the control of any entity, other
than CAT, engaged in a Commercial Antibody Phage Display Business; provided
that, notwithstanding the foregoing, any materials or composition of matter
otherwise meeting the definition of Licensed Antibody Phage Display Materials
but created by or under the exclusive control of a CAT Collaborator shall
constitute Licensed Antibody Phage Display Materials, but only to the extent
derived by such CAT Collaborator exclusively from Licensed Antibody Phage
Display Materials created by or under the exclusive control of CAT and properly
transferred by CAT to such CAT Collaborator in accordance with the applicable
provisions of this Agreement and, with respect to such transfers after the
Effective Date, such CAT Collaborator acknowledges that the transfer
restrictions and other provisions hereof apply thereto. "Licensed Antibody Phage
Display Materials" shall not include any such article of manufacture or
composition of matter infringing or arising out of the infringement of any Valid
Claim of any patent or patent application under the control of CAT and which is
excluded from the scope of any license grant made to XOMA Technology Ltd.
pursuant to the Library License solely by virtue of Clause 1.1.10.3, 1.1.13(ii)
or 7.9 thereof, which are set forth on Schedule 1.15.

     1.16 "Licensed Immunoglobulin" means any Immunoglobulin discovered,
isolated or characterized by CAT or a CAT Collaborator through the use of
Licensed Antibody Phage Display Materials. "Licensed Immunoglobulin" shall not
include any such Immunoglobulin infringing or arising out of the infringement of
any Valid Claim of any patent or patent application under the control of CAT and
which is excluded from the scope of any license grant made to XOMA Technology
Ltd. pursuant to the Library License solely by virtue of Clause 1.1.10.3,
1.1.13(ii) or 7.9 thereof, which are set forth on Schedule 1.15.

     1.17 "Licensed Immunoglobulin Information" means any data, know-how or
other information relating, concerning or pertaining to a Licensed
Immunoglobulin, including, without limitation, data, know-how or other
information characterizing or constituting such Licensed Immunoglobulin's
polynucleotide or amino acid sequence, purported function or utility, antigen
binding affinity, or physical or biochemical property. "Licensed Immunoglobulin
Information" shall not include any such data, know-how or other information
infringing or arising out of the infringement of any Valid Claim of any patent
or patent application under the control of CAT and which is excluded from the
scope of any license grant made to XOMA Technology Ltd. pursuant to the Library
License solely by virtue of Clause 1.1.10.3, 1.1.13(ii) or 7.9 thereof, which
are set forth on Schedule 1.15.

     1.18 "Major Market" means the United States of America, the United Kingdom,
Germany, France, Italy, Spain or Japan.


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     1.19 "Marketing Authorization" means any approval (including all applicable
pricing and governmental reimbursement approvals) required from the relevant
regulatory or other competent authority to market or sell a Product in any
country.

     1.20 "Microarray" means an Antibody based assay containing two (2) or more
CAT Library Antibodies of different analyte specificities for the purpose of
detecting and/or measuring two (2) or more different analyte molecules in the
same assay.

     1.21 "MRC" means the Medical Research Council.

     1.22 "Net Sales" means the gross invoice price of Product sold, whether
directly or through a Third Party, by CAT or any joint venture in which CAT is a
participant, to the first independent Third Party after deducting, if not
previously deducted, from the amount invoiced or received: (a) trade and
quantity discounts; (b) returns, rebates and allowances; (c) chargebacks and
other amounts paid on sale or dispensing of Product; (d) retroactive price
reductions that are actually allowed or granted; (e) sales commissions paid to
distributors and/or selling agents; (f) transportation and insurance charges;
and (g) taxes, tariffs, customs and surcharges and other governmental charges
incurred in connection with the sale, export or import of Product, all
determined in accordance with U.S. generally accepted accounting principles. The
deductions set out in (a) to (g) above shall not exceed ten percent (10%) of the
gross amount invoiced by or on behalf of CAT, or any joint venture or similar
entity or arrangement in which CAT is a participant, to Third Parties. Net Sales
shall not include the gross invoice price of Products sold by a CAT Collaborator
other than when sold directly or indirectly for CAT. Without limiting the prior
sentence, Net Sales shall include the gross invoice price of any Product as to
which at any time CAT had or retains decision-making authority over the
initiation of clinical trials and/or commercialization of such Product.

     1.23 "Phase III Clinical Trial" means a pivotal human clinical trial in any
country the results of which could be used to establish safety and efficacy of a
Product as a basis for a Marketing Authorization application that would satisfy
the requirements of U.S. 21 CFR 312.21(c) or its non-U.S. equivalent.

     1.24 "Product" means any composition of matter or article of manufacture,
including without limitation any diagnostic, prophylactic or therapeutic or
product, which (a) contains a Licensed Immunoglobulin; or (b) was discovered or
created by or arose directly out of use of Licensed Antibody Phage Display
Materials or the conduct of Antibody Phage Display by CAT or a CAT Collaborator;
or (c) is sold by or on behalf of CAT or a CAT Collaborator under conditions
which, if unlicensed, would constitute infringement of one or more Valid Claims
within the XOMA Patent Rights. For the avoidance of doubt, any composition of
matter or article of manufacture arising out of CAT's practice of cell-free
ribosome display or yeast display is not included in the definition of Product
but only to the extent such practice or the development or manufacture of such
composition of matter or article of manufacture does


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not include the use of any Licensed Antibody Phage Display Materials or the
infringement of any Valid Claim of any XOMA Patent Rights.

     1.25 "Research and Development" means the identification, selection,
isolation, purification, characterization, study and/or testing of an
Immunoglobulin for any purpose, including, without limitation, the discovery and
development of human therapeutics or diagnostics. Included within the definition
of "Research and Development" shall be all in vitro or in vivo screening or
assays customarily performed in pre-clinical and clinical research and uses
associated with obtaining FDA or equivalent agency regulatory approval.
"Research and Development" shall not include commercial or industrial
manufacture or any activities solely directed to the creation of such
capacities.

     1.26 "Research Quantities" means only those quantities of an Immunoglobulin
reasonably required for Research and Development purposes.

     1.27 "Target" means (i) DNA and all post-transcriptional material encoded
by such DNA, including all naturally occurring or disease-associated
truncations, mutations, variants, fragments and post-transcriptional
modifications thereof (including but not limited to splice variants) and all
material encoded by such post-transcriptional material including but not limited
to proteins; (ii) the DNA encoding a polypeptide or protein, as identified by a
sequence of amino acids, and all post-translational variants thereof including
but not limited to glycosylation and phosphorylation modifications. For the
avoidance of doubt for the purposes of this Agreement, an Antibody is not a
Target.

     1.28 "Third Party" means any person or entity other than CAT or XOMA.

     1.29 "Valid Claim" means a claim of an issued and unexpired patent included
within the XOMA Patent Rights or, in the case of Sections 1.15, 1.16 and 1.17,
under the control of CAT, in each case that has not been held invalid in a final
decision of a court of competent jurisdiction from which no appeal has been or
may be taken, and which has not been disclaimed or admitted to be invalid or
unenforceable through reissue or otherwise.

     1.30 "XOMA Patent Right(s)" means the patent applications and patents
listed on Schedule 1.30 hereto and all divisions, continuations,
continuations-in-part, applications claiming priority thereto, and substitutions
thereof; all foreign patent applications corresponding to the preceding
applications; and all U.S. and foreign patents issuing on any of the preceding
applications, including extensions, reissues and re-examinations; and any other
patent rights owned by XOMA which XOMA has the right to license or sublicense
and which would be infringed by the activities of CAT contemplated hereunder but
for this Agreement. XOMA Patent Rights shall also include (i) any improvements
of the foregoing that are owned or controlled by XOMA and (ii) any patents or
patent applications owned or controlled by XOMA containing a claim that is
dominating over the foregoing patent rights (i.e., is necessarily in-


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fringed by the practicing of a claim in one of the foregoing applications). For
the avoidance of doubt and consistent with the interpretation of the foregoing
definition that such patents are not included therein, the following patents are
excluded from the definition of XOMA Patent Rights: US Patent No. 5,576,195, US
Patent No. 5,846,818, and US Patent No. 6,120,787.


                                    ARTICLE 2

                               XOMA LICENSE TO CAT

     2.1 Grants. Subject to the other terms and conditions of this Agreement,
XOMA hereby grants to CAT a worldwide, non-exclusive, non-transferable license
(unless transferred under Section 8.2), solely on its own behalf and on behalf
of any CAT Collaborator, without any right to sublicense, under the XOMA Patent
Rights to:

     (a)  Make or have made Licensed Antibody Phage Display Materials;

     (b)  Solely for Research and Development purposes, conduct Antibody Phage
          Display;

     (c)  Make or have made Research Quantities of a Licensed Immunoglobulin;

     (d)  Transfer Antibody Phage Display Materials, Research Quantities of a
          Licensed Immunoglobulin or Licensed Immunoglobulin Information to a
          CAT Collaborator; and

     (e)  Use, sell, offer to sell, import and export Licensed Immunoglobulins.

     2.2 Covenant Not To Sue. XOMA covenants that it shall not initiate any
action asserting a claim of infringement under the XOMA Patent Rights against
CAT or any CAT Collaborator solely to the extent reasonably necessary to permit
the authorized use of Licensed Antibody Phage Display Materials, Licensed
Immunoglobulins or Licensed Immunoglobulin Information for activities or in a
manner otherwise permitted under the provisions of this Agreement. The covenant
not to sue provided by this Section 2.2:

     (a)  shall not extend to infringement of the XOMA Patent Rights arising out
          of making or the means or methods used to make any amount of a
          Licensed Immunoglobulin or Product other than Research Quantities;

     (b)  shall become void and without effect with respect to any entity or
          person who claims its benefit and fails to materially discharge or
          comply with any term of its written agreement with CAT provided for in
          Section 2.4, but only with repect to such entity or person;


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     (c)  is personal to CAT or, as applicable, a CAT Collaborator, and, except
          as provided for by Section 8.2, cannot be assigned or transferred; and

     (d)  subject to and without prejudice to the release set forth in Section
          2.8, does not constitute a release or waiver of past, present or
          future infringement of the XOMA Patent Rights by CAT or any Third
          Party, including, without limitation, any CAT Collaborator acting
          outside of the scope of the written agreement with CAT provided for in
          Section 2.4.

     2.3 No Implied Rights. Only the rights and licenses granted pursuant to the
express terms of this Agreement shall be of any legal force or effect. No
license or other rights shall be deemed to have been granted to CAT or a CAT
Collaborator other than as expressly provided for in this Agreement. For the
avoidance of doubt, the grants of rights made pursuant to Sections 2.1 and 2.2
do not include, and expressly exclude, the following:

     (a)  any right or license to engage in any activities on behalf of or in
          collaboration with any Third Party, other than a CAT Collaborator;

     (b)  any right or license to make or have made any amount (other than
          Research Quantities) of a Licensed Immunoglobulin or Product by
          practicing the XOMA Patent Rights; provided, however, that CAT or, as
          applicable, a CAT Collaborator shall be permitted to make or have made
          any Licensed Immunoglobulin by any means of its selection other than
          those which otherwise infringe a Valid Claim of the XOMA Patent
          Rights; and/or

     (c)  any right to release any Third Party, including a CAT Collaborator,
          from any claim of infringement under the XOMA Patent Rights.

     2.4 Transfer Restrictions. (a) Except for any person or entity constituting
a CAT Collaborator as of the Effective Date, CAT shall not (i) undertake any
Antibody Phage Display activities on behalf of a Third Party or (ii) Dispose of
Licensed Antibody Phage Display Materials, a Licensed Immunoglobulin, Licensed
Immunoglobulin Information or the product of the practice of any method within
the scope of the Valid Claims of the XOMA Patents ("Transferred Materials") to
any Third Party until (in the case of either clause (i) or clause (ii)) such
time as CAT has provided to such Third Party the redacted copy of this Agreement
referred to in Section 4.2 and the form of notice set out at Schedule 2.4. For
the avoidance of doubt, any person or entity constituting a CAT Collaborator on
the Effective Date may continue to claim the status of CAT Collaborator with
respect to articles of manufacture or compositions of matter Disposed of by CAT
after the Effective Date only to the extent CAT and such person or entity comply
with the requirements of this Section 2.4 with respect thereto.


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     (b) If CAT enters into a written arrangement after the Effective Date with
any Third Party or any entity identified in column (a) of Schedule 1.4 arising
out of or relating to activities as to which it or such Third Party does or
intends to claim the benefits of any of the licenses or other grants provided
for by this Agreement, such written arrangement shall contain provisions (i)
pursuant to which the recipient of any Transferred Materials agrees to abide by
each of the limitations, restrictions and other obligations applicable to CAT
Collaborators provided for by this Agreement as described in Schedule 4.2,
including, without limitation, the restrictions on use of Transferred Materials
for purposes other than Research and Development; (ii) providing that any
amounts paid to CAT shall not constitute payments to XOMA; and (iii) permitting
a CAT Collaborator to further Dispose of Licensed Antibody Phage Display
Materials or any materials the use of which results in the practice of any
method within the scope of any Valid Claim of the XOMA Patent Rights, but only
to a Third Party who otherwise meets the definition of a CAT Collaborator as
described in Schedule 4.2. Without limiting the foregoing, such CAT Collaborator
may transfer to a Third Party a Licensed Immunoglobulin or Licensed
Immunoglobulin Information derived from Licensed Antibody Phage Display
Materials under this Agreement. XOMA shall be, and the agreements subject to
this Section 2.4 shall provide that XOMA shall be, an intended third party
beneficiary with respect to the foregoing provisions. If no Disposition of
Transferred Materials is contemplated by such arrangement, then the provisions
of this Section 2.4(b) shall not apply. If, however, there is a subsequent
Disposition of Transferred Materials to such Third Party, then such Disposition
must occur under a written agreement which contains the provisions required by
this Section 2.4(b) or the Third party shall not have the benefit of any of the
licenses or other rights granted in this Agreement.

     (c) The provisions of Sections 2.4(a) and (b) shall not apply to any
persons or entities engaged solely in academic, non-commercial activity or who
are merely evaluating CAT's technology and who subsequently do not enter into
any written arrangement. Such persons or entities shall not have the benefit of
any of the licenses or other rights granted in this Agreement unless and until
the requirements of Sections 2.4(a) and (b) have been complied with.

     2.5 Reports, Records and Audits. (a) Thirty (30) days after the end of each
calendar quarter, commencing with the first calendar quarter commencing after
the Effective Date, CAT shall deliver to XOMA a written report which shall
specify the name, address and contact person for each and every CAT Collaborator
and any person or entity receiving Licensed Antibody Phage Display Materials or
a Licensed Immunoglobulin (other than persons or entities engaged solely in
academic, non-commercial activity or who are merely evaluating CAT's technology
and who subsequently do not enter into any written arrangement).

     (b) Not later than thirty (30) days after the end of each calendar year,
commencing with the first calendar year to commence after the Effective Date, as
and to the extent publicly disclosed by CAT (whether in press releases,
government filings or otherwise), CAT shall de-


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liver to XOMA written materials pertaining to the current status of activities
or compositions of matter as to which CAT claims the right of license hereunder.

     (c) CAT shall maintain records fully and properly reflecting those
activities covered by this Agreement (including, without limitation, work done
with the Licensed Antibody Phage Display Materials) and/or to be reported to
XOMA pursuant to this Section 2.5 (the "Records"), in reasonable detail and in
good scientific manner for at least three (3) years. Upon the written request of
XOMA and not more than once in each calendar year, CAT shall permit an
independent consultant appointed by XOMA and reasonably acceptable to CAT and
which executes a confidentiality agreement reasonably acceptable to CAT, at
XOMA's expense, to have access during normal business hours to such of the
records of CAT as may be reasonably necessary to verify fulfillment of the terms
of this Agreement, as well as the accuracy of the reports hereunder. CAT shall
verify in writing any statements by CAT personnel as to their accuracy and
correctness. The consultant shall not be permitted to see or receive any
specific information concerning targets or antibodies of either CAT or any of
its collaborators and shall disclose to XOMA only the results and conclusions of
its review and the specific details concerning any discrepancies. No other
information shall be shared by the consultant without the prior express written
consent of CAT unless disclosure is required by law, regulation or judicial
order.

     2.6 Ownership; Enforcement. At all times XOMA will retain ownership of the
XOMA Patent Rights and may use and commercialize such XOMA Patent Rights itself
or with any Third Party. XOMA retains the right, at its sole discretion, to
enforce, maintain and otherwise protect the XOMA Patent Rights. CAT will
reasonably cooperate with XOMA, at XOMA's expense, with respect to any actions
XOMA may choose to take related to the enforcement, maintenance or protection of
the XOMA Patent Rights; provided that nothing in the last sentence of this
Section 2.6 shall require CAT to breach any contractual obligations to any Third
Party.

     2.7 Oppositions and/or Appeals to Oppositions. So long as XOMA is in
material compliance with its obligations under this Agreement, and subject to
any specific contractual obligations of CAT existing on the Effective Date in
circumstances constituting, in the reasonable, written opinion of counsel to
CAT, a breach thereof, CAT agrees not to enter into any opposition to and/or
appeal from any decision by the patent authorities of any country regarding the
XOMA Patent Rights and shall not knowingly assist or otherwise cooperate with
another party in any such opposition or appeal.

     2.8 Release. For consideration set forth herein (including payment in full
of the amounts set forth in Section 3.1), the sufficiency of which (once so
paid) is hereby acknowledged, XOMA permanently and forever and without further
payment or condition releases CAT and its current, former and future parents,
subsidiaries, related entities, and their fiduci-


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                                      -12-


aries, predecessors, successors, officers, directors, shareholders, agents,
employees and permitted assigns and those Third Parties identified upon Schedule
1.4 from any and all claims, causes of action, liabilities, demands, rights of
action and/or damages (actual, direct, consequential or otherwise) of any nature
and of every kind, known or unknown, suspected or unsuspected, disclosed and
undisclosed, as of the Effective Date arising out of and/or based upon or
relating in any way to any infringement or alleged infringement of the XOMA
Patent Rights (the "Release"); provided, however, that the Release provided for
in this Section 2.8 shall extend only to claims, causes of action, liabilities,
demands, rights of action and/or damages existing as of the Effective Date and
which arose solely out of those activities specified in Schedule 1.4. XOMA
acknowledges that it may discover facts different from or in addition to those
which it now knows or believes to be true and that the Release shall be and
remain effective in all respects notwithstanding such different or additional
facts or the discovery thereof. XOMA expressly waives the benefits of any
statutory provision or common law rule that provides, in sum or substance, that
a release does not extend to claims which the party does not know or suspect to
exist in its favor at the time of executing the release, which if known by it,
would have materially affected its agreement to release the other party. In
particular, but without limitation, XOMA expressly waives the provisions of
California Civil Code section 1542, which statute reads:

     A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
     KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
     WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
     DEBTOR.

Nothing in this Section 2.8 shall be deemed to be a release of any claim, demand
or right of action XOMA may now or in the future have against [*] as of the
Effective Date or any of their collaborators. The Release shall become
irrevocable only upon receipt by XOMA of payment in full by CAT of the amounts
set forth in Section 3.1 and shall be revoked in its entirety and null and void
ab initio, immediately and without further action of the parties, in the event
any such payment by CAT is not received in full by XOMA on or prior to the date
on which such amount is due, regardless of any payment received thereafter.

     2.9 CAT Covenant Not To Sue. CAT covenants that it shall not initiate or
permit any Third Party over whom it has control to initiate or knowingly assist
in any way in the initiation or prosecution of any action asserting any claims,
including claims of infringement, under any patents or patent applications under
CAT's control or with respect to which it has the right to sue against XOMA or
any Third Party working with XOMA solely to the extent such claims arise out of
XOMA's activities constituting practice or infringement of any Valid Claim of
the XOMA Patent Rights; provided, however, that the covenant contained in this
Section 2.9 shall not extend to any claim of a patent or patent application that
specifically claims a particular Immunoglobulin or a particular Target.


<PAGE>
                                      -13-


                                    ARTICLE 3

                                    PAYMENTS

     3.1 Fees. In consideration for XOMA's execution of this Agreement,
including without limitation the license and other rights granted in Sections
2.1 and 2.2 and the release provided by Section 2.8, CAT shall enter into the
Library License and pay XOMA a non-refundable fee of Four Million Three Hundred
Fifty Thousand United States Dollars (US$4,350,000), payable in installments as
follows:

     (a)  the first such installment, in the amount of Two Million United States
          Dollars (US$2,000,000), shall be due on or before December 30, 2002
          and payable in cash; and

     (b)  the second such installment, in the amount of Two Million Three
          Hundred Fifty Thousand United States Dollars (US$2,350,000), shall be
          due on or before February 15, 2003 and payable in cash.

     3.2 Royalties. (a) During the term of this Agreement, CAT shall pay to XOMA
(i) a royalty in cash equal to [*] percent ([*]%) of Net Sales of Products other
than Diagnostic Products in each calendar quarter and (ii) a royalty in cash
equal to[*] percent ([*]%) of Net Sales of Diagnostic Products in each calendar
quarter, in each case commencing with the first calendar quarter ending after
the Effective Date. Notwithstanding the foregoing, CAT shall have the option of
reducing the royalty rate with respect to any particular Product (but only such
Product) to [*]% by making a one-time cash payment in the amount of (A) [*]
Dollars (US$[*]) to XOMA, provided such payment is made within thirty (30) days
of the granting of Marketing Authorization for such Product in the first Major
Market in which such a Marketing Authorization is granted, or (B) [*] Dollars
(US$[*]) to XOMA, provided such payment is made within thirty (30) days of
administration of such Product to the first human subject in the first Phase III
Clinical Trial of such Product. Timely payment of the applicable amount set
forth in the immediately preceding sentence (i) shall mean the license hereunder
shall be fully paid up with respect to the Product as to which such payment was
made and (ii) shall serve to reduce the royalty obligation as provided above
with respect to all variations in dosage or formulation, any additional
indications and any changes in manufacturing with respect to such Product. Any
royalty otherwise due hereunder on Net Sales of the CAT-152 (lerdelimumab) human
anti-TGF(beta)2 monoclonal antibody, as more fully described in the
Investigational New Drug Application submitted to the U.S. Food & Drug
Administration in November 2002, is hereby reduced to [*]%.

     (b) Royalties due under this Article 3 shall be payable on a
country-by-country and Product-by-Product basis from the first commercial sale
of such Product until the expiration of the last-to-expire XOMA Patent Right in
such country during the time and with respect to


<PAGE>
                                      -14-


which a Valid Claim covers the manufacture, use, sale, offer for sale, import or
export of such Product in such country. CAT shall be obligated to make only one
royalty payment for each such Product regardless of how many Valid Claims within
the XOMA Patent Rights may cover said Product.

     (c) In order to assist in the understanding of the provisions of Section
1.22 and Section 3.2, the following non-limiting examples are provided. Each
example assumes that the transactions described therein are bona fide, arms'
length transactions pursuant to legal, valid and binding agreements.

     Example 1A: Facts: CAT uses Antibody Phage Display to identify a Licensed
     Immunoglobulin which it subsequently sells directly or through an agent.
     Result: CAT owes a royalty to XOMA.

     Example 1B: Facts: CAT uses Antibody Phage Display to identify a Licensed
     Immunoglobulin which it subsequently licenses to a Third Party for such
     Third Party to sell directly or through an agent or sublicensee. Result:
     CAT owes a royalty to XOMA.

     Example 2: Facts: A CAT Collaborator uses Licensed Antibody Phage Display
     Materials to identify a Licensed Immunoglobulin which, by or on its own
     behalf, it subsequently sells directly or through an agent or licensee.
     Result: CAT and the CAT Collaborator do not owe a royalty to XOMA. This is
     true regardless of whether CAT is paid a royalty or other consideration
     contingent on the sales.

     Example 3: Facts: A CAT Collaborator provides CAT with a pre-existing
     Immunoglobulin or Target, and CAT uses Licensed Antibody Phage Display
     Materials to find an optimized Licensed Immunoglobulin and retains no
     ownership interest in the Licensed Immunoglobulin. Result: CAT and the CAT
     Collaborator owe no royalty to XOMA. This is true regardless of whether CAT
     is paid a royalty or other consideration contingent on amount of sales.

     Example 4A: Facts: A CAT Collaborator or CAT uses Licensed Antibody Phage
     Display Materials to identify a Licensed Immunoglobulin which, in a
     fifty/fifty joint venture that includes CAT, is sold directly or through an
     agent or licensee. Result: CAT owes a royalty to XOMA.

     Example 4B: Facts: A CAT Collaborator provides Targets to CAT who uses
     Licensed Antibody Phage Display Materials to identify a Licensed
     Immunoglobulin. The CAT Collaborator and CAT agree to jointly develop the
     Licensed Immunoglobulin. CAT retains ownership of the Licensed
     Immunoglobulin, which is subsequently sold directly or through an agent or
     licensee. Result: CAT owes a royalty to XOMA.


<PAGE>
                                      -15-


     3.3 Payments; Currency. All cash payments due hereunder shall be paid by
wire transfer in United States Dollars in immediately available funds to an
account designated by XOMA. Payments required pursuant to Section 3.2 hereof
shall be due and payable to XOMA when the corresponding Net Sales are received
by CAT (or any joint venture or similar entity in which CAT is a participant)
and shall be paid within sixty (60) days of the end of each calendar quarter. If
any currency conversion shall be required in connection with the payment of any
royalties hereunder, such conversion shall be made by using the exchange rate
for the purchase of United States Dollars quoted in the U.S. version of the Wall
Street Journal on the last business day of the calendar quarter to which such
payments relate.

     3.4 Payment Reports. After the first commercial sale of a Product on which
royalties are required to be paid hereunder, CAT shall make quarterly written
reports to XOMA within sixty (60) days after the end of each calendar quarter,
stating in each such report, by country, the number, description, and aggregate
Net Sales of each Product sold during the calendar quarter. XOMA shall treat all
such reports as Confidential Information of CAT. Concurrently with the making of
such reports, CAT shall pay XOMA the amounts specified in Section 3.2 hereof.

     3.5 Payment Records and Inspection. CAT shall keep complete, true and
accurate books of account and records for the purpose of determining the amounts
payable under this Agreement. Such books and records shall be kept at the
principal place of business of CAT for at least seven (7) years following the
end of the calendar quarter to which they pertain. Upon the written request of
XOMA and not more than once in each calendar year, CAT shall permit an
independent consultant appointed by XOMA and reasonably acceptable to CAT to
have access during normal business hours to such of the records of CAT as may be
reasonably necessary to verify the accuracy of the royalty reports hereunder for
any year ending not more than twenty-four (24) months prior to the date of such
request. The consultant shall disclose to XOMA only the results and conclusions
of its review and the specific details concerning any discrepancies. No other
information shall be shared by the consultant without the prior express written
consent of CAT unless disclosure is required by law, regulation or judicial
order. The consultant may be obliged to execute a reasonable confidentiality
agreement prior to commencing any such inspection. Inspections conducted under
this Section 3.5 shall be at the expense of XOMA, unless an underpayment
exceeding five percent (5%) of the amount stated for the full period covered by
the inspection is identified, in which case all out-of-pocket costs relating to
the inspection will be paid by CAT. Any underpayments or unpaid amounts
discovered by such inspections or otherwise will be paid immediately by CAT,
with interest from the date(s) such amount(s) were due at a rate equal to the
lesser of the prime rate reported by the Bank of America plus three percent (3%)
or the highest interest rate permitted under applicable law.


<PAGE>
                                      -16-


     3.6 No Admissions. The parties acknowledge and affirm that the amounts set
forth in this Article 3 do not constitute an admission by either party either as
to the alleged damages suffered by XOMA with respect to any alleged past
infringement of the XOMA Patent Rights or respecting the calculation of a
reasonable royalty by any court or trier of fact. The parties further
acknowledge and affirm that CAT has determined to enter into this license solely
for business reasons and the avoidance of unnecessary litigation, that CAT does
not acknowledge or admit that the XOMA Patent Rights are valid or infringed, and
that this license agreement may not be used under any circumstances, whether in
litigation or otherwise, as evidence of the validity or infringement of any of
the XOMA Patent Rights or any claims thereof.

                                    ARTICLE 4

                                 CONFIDENTIALITY

     4.1 Confidential Information. Except as expressly provided herein, the
parties agree that, for the term of this Agreement and for five (5) years
thereafter, the receiving party shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose except for the
purposes contemplated by this Agreement any Confidential Information furnished
to it by the disclosing party hereto, except to the extent that it can be
established by the receiving party by written proof that such Confidential
Information:

     (a)  was already known to the receiving party, other than under an
          obligation of confidentiality, at the time of disclosure;

     (b)  was generally available to the public or otherwise part of the public
          domain at the time of its disclosure to the receiving party;

     (c)  became generally available to the public or otherwise part of the
          public domain after its disclosure other than through any act or
          omission of the receiving party in breach of this Agreement; or

     (d)  was subsequently lawfully disclosed to the receiving party by a person
          other than a party hereto.

     4.2 Permitted Use and Disclosures. Each party hereto may use or disclose
information disclosed to it by the other party to the extent such use or
disclosure is reasonably necessary in complying with applicable law or
government regulations or conducting clinical trials; provided, however, that if
a party is required to make any such disclosure of another party's Confidential
Information, other than pursuant to a confidentiality agreement, it will give
reasonable advance notice to the latter party of such disclosure and will use
its reasonable efforts to secure confidential treatment of such information
prior to its disclosure (whether through protective orders or otherwise).
Attached hereto as Schedule 4.2 is a redacted copy of


<PAGE>
                                      -17-


this Agreement which CAT shall be free, without obtaining any consent from XOMA,
to provide to Third Parties who indicate an interest in becoming a CAT
Collaborator.

     4.3 Confidential Terms. Except as expressly provided herein, CAT agrees not
to disclose any terms of this Agreement to any Third Party without the consent
of XOMA, and XOMA agrees not to disclose any terms of this Agreement to any
Third Party without the express written consent of CAT; provided that
disclosures may be made as required by securities or other applicable laws, or
confidentially to a party's accountants, attorneys and other professional
advisors.

     4.4 Agreement Announcement. The parties hereby agree to the release of a
press release in the form attached hereto as Schedule 4.4 upon full execution of
this Agreement and that the consummation of this Agreement, as well as such
terms as are expressly described in such press release, shall be deemed to be in
the public domain.


                                    ARTICLE 5

                         REPRESENTATIONS AND WARRANTIES

     5.1 Representations and Warranties. (a) XOMA represents and warrants to CAT
that: (i) it is the sole and exclusive owner or exclusive licensee of all right,
title and interest in the XOMA Patent Rights; (ii) XOMA has the legal right,
authority and power to enter into this Agreement; (iii) this Agreement shall
constitute a valid and binding obligation of XOMA enforceable in accordance with
its terms; (iv) the performance of obligations under this Agreement by XOMA will
not result in a breach of any agreements, contracts or other arrangements to
which it is a party; and (v) based on the representation by CAT set forth in
Section 5.1(b)(iv), to XOMA's knowledge the patents set forth in the last
sentence of Section 1.30 need not be licensed to CAT.

     (b) CAT represents and warrants to XOMA that: (i) CAT has the legal right,
authority and power to enter into this Agreement; (ii) this Agreement shall
constitute a valid and binding obligation of CAT enforceable in accordance with
its terms; (iii) the performance of obligations under this Agreement by CAT will
not result in a breach of any agreements, contracts or other arrangements to
which it is a party; and (iv) CAT does not use and has not used the pelB signal
sequence.

     5.2 Disclaimer. Nothing in this Agreement is or shall be construed as:

          (a) A warranty or representation by XOMA as to the validity or scope
     of any claim or patent within the XOMA Patent Rights;


<PAGE>
                                      -18-


          (b) An admission, acceptance, acknowledgment, statement, declaration,
     or representation by either party as to the infringement, validity or scope
     of any claim or patent within the patents licensed hereunder or as to which
     rights are granted hereunder;

          (c) A warranty or representation that anything made, used, sold, or
     otherwise disposed of under any license granted in this Agreement is or
     will be free from infringement of any patent rights or similar intellectual
     property right of any Third Party; or

          (d) An obligation to bring or prosecute actions or suits against Third
     Parties for infringement of any of the XOMA Patent Rights.

     5.3 No Other Warranties. EXCEPT AS OTHERWISE SET FORTH IN SECTION 5.1
ABOVE, XOMA MAKES NO WARRANTIES WITH RESPECT TO ANY OF THE PATENT RIGHTS
LICENSED HEREUNDER, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW,
BY STATUTE OR OTHERWISE, AND XOMA SPECIFICALLY DISCLAIMS ANY EXPRESS OR IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF SUCH
PATENT RIGHTS OR NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF ANY
THIRD PARTY.

     5.4 Certain Agreements. CAT represents and warrants that it has in its
possession, and agrees that throughout the term of this Agreement and for five
(5) years thereafter it will maintain in an accessible location, true, complete
and legible copies of each of the agreements set forth on Schedule 1.4 as in
effect on the Effective Date, including all schedules, exhibits and other
similar documents necessary for the correct interpretation of the provisions
thereof.

                                    ARTICLE 6

                                 INDEMNIFICATION

     6.1 Indemnification. CAT agrees to indemnify, defend and hold XOMA and its
directors, officers, employees and agents (the "Indemnified Parties" and each,
an "Indemnified Party") harmless from and against any and all liabilities,
losses and expenses (including, without limitation, reasonable attorneys and
professional fees and other costs of litigation), resulting from any claims,
demands or causes of action by any party other than CAT (each, a "Liability")
arising out of (i) the possession, manufacture, use, sale or other disposition
of Product, Licensed Antibody Phage Display Materials, Licensed Immunoglobulin
or the provisions of any service or goods relating thereto by CAT or any
customer, vendor or other representative of CAT, whether based on breach of
warranty, negligence, product liability or otherwise, or (ii) the exercise of
any right granted to CAT pursuant to this Agreement, except to the ex-


<PAGE>
                                      -19-


tent, in each case, that such Liability is caused by the negligence or willful
misconduct of XOMA.

     6.2 Procedure. To receive the benefit of indemnification under Section 6.1,
an Indemnified Party must (a) promptly notify CAT in writing of a claim or suit;
provided that failure to give such notice shall not relieve CAT of its
indemnification obligations except where, and solely to the extent that, such
failure actually and materially prejudices the rights of CAT; (b) provide
reasonable cooperation (at CAT's expense); and (c) tender to CAT (and its
insurer) full authority to defend or settle the claim or suit; provided that no
settlement requiring any admission by the Indemnified Party or that imposes any
obligation on the Indemnified Party shall be made without the Indemnified
Party's consent, which consent shall not be unreasonably withheld; and provided,
further, that nothing herein shall be deemed to give CAT any right to control
any proceeding involving the XOMA Patent Rights or any claim XOMA may bring
against any Third Party. CAT shall not have any obligation to indemnify the
other party in connection with any settlement made without CAT's written
consent. The Indemnified Party has the right to participate at its own expense,
such expense not to be deemed a Liability, in the claim or suit and in selecting
counsel therefor. The Indemnified Party shall cooperate with CAT (and its
insurer), as reasonably requested.


                                    ARTICLE 7

                              TERM AND TERMINATION

     7.1 Term. Subject to Sections 7.4 and 7.5 hereof, the term of this
Agreement will commence on the Effective Date and remain in full force and
effect until the expiration of the last patent within the XOMA Patent Rights
unless earlier terminated pursuant to Sections 7.2, 7.3 or 7.6.

     7.2 Termination Event. This Agreement may be terminated by either CAT or
XOMA upon any material breach or default by XOMA or CAT, as the case may be, in
the performance of any obligation or condition of this Agreement or if any
representation or warranty made by XOMA or CAT, as the case may be, in this
Agreement is untrue or materially misleading, in any case effective fifteen (15)
days after giving notice to the breaching party of such termination in the case
of a payment breach and sixty (60) days after giving written notice to the
breaching party of such termination in the case of any other breach, which
notice shall describe such breach in reasonable detail. The foregoing
notwithstanding, (a) if such breach is cured or shown to be non-existent within
the aforesaid fifteen (15) or sixty (60) day period, the notice shall be deemed
automatically withdrawn and of no effect and the notifying party shall provide
written notice to the breaching party of the withdrawal; (b) no such termination
shall be effective so long as the parties are engaged in arbitration under
Section 8.13 in connection with such breach or default; and (c) with respect to
any person or entity constitut-


<PAGE>
                                      -20-


ing a CAT Collaborator as of the date of such a termination by XOMA, any such
termination shall be effective against such CAT Collaborator unless, within
forty-five (45) days after written notice from XOMA of such termination, such
CAT Collaborator executes a written agreement with XOMA directly obligating such
CAT Collaborator to comply with all of the provisions of this Agreement
applicable to CAT Collaborators and to fulfill the obligations of CAT (including
without limitation any royalty obligations) with respect to any and all Licensed
Antibody Phage Display Materials and Licensed Immunoglobulins Disposed of by CAT
to such CAT Collaborator as of the date of such termination. Upon any
termination by XOMA under this Section 7.2, CAT shall promptly (and in any event
not later than forty-five (45) days thereafter) deliver to XOMA a written report
specifying as of the date of such termination the information required by
Section 2.5(a).

     7.3 Termination for Insolvency. If voluntary or involuntary proceedings by
or against CAT are instituted in bankruptcy under any insolvency law, or a
receiver or custodian is appointed for CAT, or an Insolvency Event occurs in
relation to CAT, or substantially all of the assets of CAT are seized or
attached and not released within sixty (60) days thereafter, XOMA may
immediately terminate this Agreement effective upon notice of such termination.

     7.4 Effect of Termination. (a) Termination of this Agreement shall not
release any party hereto from any liability which, at the time of such
termination, has already accrued to the other party or which is attributable to
a period prior to such termination nor preclude either party from pursuing any
rights and remedies it may have hereunder or at law or in equity with respect to
any breach of this Agreement. It is understood and agreed that monetary damages
may not be a sufficient remedy for any breach of this Agreement and that the
non-breaching party may be entitled to injunctive relief as a remedy for any
such breach. Such remedy shall not be deemed to be the exclusive remedy for any
such breach of this Agreement, but shall be in addition to all other remedies
available at law or in equity.

     (b) Upon any termination of this Agreement, CAT and XOMA shall promptly
return to the other party all Confidential Information received from the other
party (except that each party may retain one copy for its files solely for the
purpose of determining its rights and obligations hereunder).

     (c) Except as expressly provided in Section 7.2, all licenses granted under
Article 2 hereof shall terminate and be of no further effect upon the
termination of this Agreement. No termination of this Agreement shall in and of
itself effect the validity of any provision hereof during any period prior
thereto or the applicability of any provision hereof to any activities conducted
prior thereto.

     7.5 Survival. Sections 2.5, 2.6, 2.8, 2.9, 3.2 (only as to any Products
identified prior to the date of termination, as to which the license provided in
Section 2.1 shall also survive), 3.3, 3.4, 3.5, 3.6, 7.2, 7.4, 7.5 and 7.6, and
Articles 4, 5, 6 and 8 of this Agreement,


<PAGE>
                                      -21-


shall survive any termination hereof; provided, however, that Section 2.9 shall
not survive any termination of this Agreement by CAT pursuant to Section 7.2.
Section 2.1 shall survive termination but only as provided in the parenthetical
clause of the immediately preceding sentence and as to any Product for which the
license hereunder is fully paid up prior to the date of termination in
accordance with the third sentence of Section 3.2(a).

     7.6 Contested Validity. Except to the extent CAT is compelled to do so by
legal process and subject to any specific contractual obligations of CAT
existing on the Effective Date in circumstances constituting, in the reasonable,
written opinion of counsel to CAT, a breach thereof, if CAT, a CAT Collaborator
or any person or entity controlled by any of the foregoing contests, directs
another to contest or knowingly assists another in contesting the validity or
enforceability of any of the XOMA Patent Rights licensed hereunder, XOMA shall
have the right to terminate all of the rights and licenses hereby granted to CAT
and any CAT Collaborator under the XOMA Patent Rights; provided, however, that
in the event a CAT Collaborator or any person or entity controlled by a CAT
Collaborator contests the validity or enforceability of any of the XOMA Patent
Rights licensed hereunder other than at the direction, and without the knowing
assistance, of CAT, then the foregoing termination right of XOMA shall apply
only to the rights hereby granted to such CAT Collaborator; and provided,
further, that, in the event of any such termination resulting from activities of
CAT, with respect to any person or entity constituting a CAT Collaborator as of
the date of such termination, any such termination shall be effective against
such CAT Collaborator unless, within forty five (45) days after written notice
from XOMA of such termination, such CAT Collaborator executes a written
agreement with XOMA directly obligating such CAT Collaborator to comply with all
of the provisions of this Agreement applicable to CAT Collaborators and to
fulfill the obligations of CAT (including without limitation any royalty
obligations) with respect to any and all Licensed Antibody Phage Display
Materials and Licensed Immunoglobulins Disposed of by CAT to such CAT
Collaborator as of the date of such termination. Upon any termination under this
Section 7.6 resulting from activities of CAT, CAT shall promptly (and in any
event not later than forty five (45) days thereafter) deliver to XOMA a written
report specifying as of the date of such termination the information required by
Section 2.5(a).


                                    ARTICLE 8

                            MISCELLANEOUS PROVISIONS

     8.1 Governing Laws. This Agreement and any dispute, including without
limitation any arbitration, arising from the performance or breach hereof shall
be governed by and construed and enforced in accordance with the laws of the
state of California, without reference to conflicts of laws principles.


<PAGE>
                                      -22-


     8.2 Assignment. (a) Neither party may transfer or assign this Agreement,
directly or indirectly, or any of its rights hereunder, other than to one or
more of its Affiliates and other than to a successor of XOMA Ltd. under a Change
in Control of XOMA Ltd. or to a successor of Cambridge Antibody Technology Group
plc under a Change in Control of Cambridge Antibody Technology Group plc to
which Section 8.3 does not apply, without the prior written consent of the other
party. Any such attempted transfer or assignment in violation of this Section
8.2 shall be void; provided, that in the event of a permitted Change in Control,
the original party's (or its successor's) obligations hereunder shall continue.
This Agreement shall be binding upon and inure to the benefit of the parties and
their permitted successors and assigns.

     (b) Notwithstanding the first sentence of Section 8.2(a), in the event CAT
disposes of at least a majority interest of a subsidiary, Affiliate or other
business unit the primary business of which is the making and/or selling of
Microarrays (a "Microarray Spin-out"), the entity resulting from such Microarray
Spin-out shall not have the benefit of this Agreement unless, within thirty (30)
days after consummation of that Microarray Spin-out, such entity executes and
delivers to XOMA for execution a written agreement incorporating all of the
terms of this Agreement (including without limitation the license grant in
Section 2.1, the covenant not to sue in Section 2.2 and the royalty obligations
of Sections 3.2 through 3.5, in the latter case modified to apply to such
entity's revenues from (i) its use of Licensed Antibody Phage Display Materials,
(ii) services provided by it arising out of the license grants in such agreement
and/or (iii) the sale by it of Products), other than Section 3.1 and this
Section 8.2(b).

     8.3 Certain Changes in Control. (a) Notwithstanding any other provision of
this Agreement to the contrary, except as set forth in Section 8.3(b), this
Agreement shall automatically terminate, without further action by the parties,
in the event of (i) a transaction or series of related transactions in which [*]
is a party and which results in a Change of Control of CAT, or (ii) a
transaction or series of related transactions in which CAT is a party and which
results in a Change in Control of a person or entity described in clause (i)
above; provided, that this Section 8.3(a) shall not apply if CAT shall make to
XOMA a cash payment of [*] Dollars (US$[*]) within five (5) business days
following consummation of such transaction or series of related transactions.

     (b) In the event that (i) a transaction or series of related transactions
described in Section 8.3(a) is consummated in accordance with the proviso
thereto and (ii) the party to such transaction or series of transactions other
than CAT (the "Acquisition Party") has in place at the time of such transaction
or series of transactions a license agreement with XOMA under the XOMA Patent
Rights covering substantially the same activities as are covered by this
Agreement (a "Separate License"), then (A) for so long as the phage display
businesses of CAT, on the one hand, and the Acquisition Party, on the other
hand, are operated as separate business units (as reflected in contemporaneous
Records and similarly reliable documents of


<PAGE>
                                      -23-


the Acquisition Party), then the Separate License shall apply to the business of
the Acquisition Party and this Agreement shall apply to the business of CAT; and
(B) if the phage display businesses of CAT, on the one hand, and the Acquisition
Party, on the other hand, are no longer operated as separate business units,
then this Agreement shall apply to the combined phage display business of CAT
and the Acquisition Party, except that the Separate License shall continue to
apply to any composition of matter or article of manufacture identified as a
potential product by the separate business unit operating the phage display
business of the Acquisition Party while such business was separately operated
(as reflected in contemporaneous Records and similarly reliable documents of the
Acquisition Party). Nothing herein shall affect any license or grant of rights
by any Acquisition Party to XOMA or, except as expressly provided above with
respect to obligations directly related to the activities covered by this
Agreement, any obligations of any Acquisition Party to XOMA.

     8.4 Waiver. No waiver of any rights shall be effective unless consented to
in writing by the party to be charged and the waiver of any breach or default
shall not constitute a waiver of any other right hereunder or any subsequent
breach or default.

     8.5 Severability. In the event that any provisions of this Agreement are
determined to be invalid or unenforceable by a court of competent jurisdiction,
the remainder of the Agreement shall remain in full force and effect without
said provision.

     8.6 Notices. All notices, requests and other communications hereunder shall
be in writing and shall be delivered or sent in each case to the respective
address specified below, or such other address as may be specified in writing to
the other party hereto, and shall be effective on receipt:

         CAT:                       Cambridge Antibody Technology Limited
                                    Milstein Building
                                    Granta Park
                                    Cambridge, CB1 6GH
                                    England
                                    Attn:  Company Secretary

         XOMA:                      XOMA Ireland Limited
                                    Shannon Airport House
                                    Shannon, County Clare
                                    Ireland
                                    Attn:  Company Secretary


<PAGE>
                                      -24-


         with a copy (which shall not constitute notice) to:

                                    XOMA (US) LLC
                                    2910 Seventh Street
                                    Berkeley, CA  94710
                                    U.S.A.
                                    Attn:  Company Secretary

     8.7 Independent Contractors. Both parties are independent contractors under
this Agreement. Nothing contained in this Agreement is intended nor is to be
construed so as to constitute XOMA or CAT as partners or joint venturers with
respect to this Agreement. Except as expressly provided herein, neither party
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 other contract, agreement, or undertaking with any third party.

     8.8 Compliance with Laws. In exercising their rights under this license,
the parties shall comply in all material respects with the requirements of any
and all applicable laws, regulations, rules and orders of any governmental body
having jurisdiction over the exercise of rights under this Agreement. CAT shall
be responsible, at its expense, for making any required registrations or filings
with respect to this Agreement and obtaining any necessary governmental
approvals with respect hereto.

     8.9 Bankruptcy. All rights and licenses granted under or pursuant to this
Agreement by one party to the other are, for all purposes of Section 365(n) of
Title XI of the United States Code ("Title XI"), licenses of rights to
"intellectual property" as defined in Title XI. During the term of this
Agreement each party shall create and maintain current copies to the extent
practicable of all such intellectual property. If a bankruptcy proceeding is
commenced by or against one party under Title XI, the other party shall be
entitled to a copy of any and all such intellectual property and all embodiments
of such intellectual property, and the same, if not in the possession of such
other party, shall be promptly delivered to it (a) upon such party's written
request following the commencement of such bankruptcy proceeding, unless the
party subject to such bankruptcy proceeding, or its trustee or receiver, elects
within thirty (30) days to continue to perform all of its obligations under this
Agreement, or (b) if not delivered as provided under clause (a) above, upon such
other party's request following the rejection of this Agreement by or on behalf
of the party subject to such bankruptcy proceeding. If a party has taken
possession of all applicable embodiments of the intellectual property of the
other party pursuant to this Section 8.9 and the trustee in bankruptcy of the
other party does not reject this Agreement, the party in possession of such
intellectual property shall return such embodiments upon request. If a party
seeks or involuntarily is placed under Title XI and the trustee rejects this
Agreement as contemplated under 11 U.S.C. 365(n)(1), the other


<PAGE>
                                      -25-


party hereby elects, pursuant to Section 365(n) of Title XI, to retain all
rights granted to it under this Agreement to the extent permitted by law.

     8.10 Use of Name. Neither party shall use the name or trademarks of the
other party, except to the extent that a party is permitted to use the
Confidential Information of the other party pursuant to Article 4, without the
prior written consent of such other party.

     8.11 Further Actions. Each party agrees to execute, acknowledge and deliver
such further instruments, and do such other acts, as may be necessary and
appropriate in order to carry out the purposes and intent of this Agreement.

     8.12 Entire Agreement; Amendment. This Agreement constitutes the entire and
exclusive Agreement between the parties with respect to the subject matter
hereof and supersedes and cancels all previous discussions, agreements,
commitments and writings in respect thereof. No amendment or addition to this
Agreement shall be effective unless reduced to writing and executed by the
authorized representatives of the parties.

     8.13 Arbitration. (a) Solely with respect to any dispute between the
parties to this Agreement (other than any dispute which arises out of or relates
to alleged infringement, validity and/or enforceability of the XOMA Patent
Rights) upon ten (10) days written notice, any party involved in the dispute may
initiate arbitration by giving notice to that effect to the other party or
parties involved in the dispute and by filing the notice with the American
Arbitration Association or its successor organization ("AAA") in accordance with
its Commercial Arbitration Rules. Such dispute shall then be settled by
arbitration in New York, New York, in accordance with the Commercial Arbitration
Rules of the AAA or other rules agreed to by the parties involved in the
dispute, by a panel of three neutral arbitrators, who shall be selected by the
parties involved in the dispute using the procedures for arbitrator selection of
the AAA.

     (b) The parties acknowledge that this Agreement evidences a transaction
involving interstate commerce. Insofar as it applies, the United States
Arbitration Act shall govern the interpretation of, enforcement of, and
proceedings pursuant to the arbitration clause in this Agreement. Except insofar
as the United States Arbitration Act applies to such matters, the agreement to
arbitrate set forth in this Section 8.13 shall be construed, and the legal
relations among the parties shall be determined in accordance with, the
substantive laws of the State of New York.

     (c) The panel shall render its decision and award, including a statement of
reasons upon which such award is based, within thirty (30) days after the
arbitration hearing. The decision of the panel shall be determined by majority
vote among the arbitrators, shall be in writing and shall be binding upon the
parties involved in the dispute, final and non-appealable. Judgment upon the
award rendered by the panel may be entered in any court having jurisdiction
thereof in accordance with Section 8.14(a).


<PAGE>
                                      -26-


     (d) Except as provided under the United States Arbitration Act, no action
at law or in equity based upon any dispute that is subject to arbitration under
this Section 8.13 shall be instituted.

     (e) All expenses of any arbitration pursuant to this Section 8.13,
including fees and expenses of the parties' attorneys, fees and expenses of the
arbitrators, and fees and expenses of any witness or the cost of any proof
produced at the request of the arbitrators, shall be paid by the non-prevailing
party.

     8.14 Venue; Jurisdiction. (a) Any action or proceeding brought by either
party seeking to enforce any provision of, or based on any right arising out of,
this Agreement must be brought against any of the parties in the courts of the
State of California. Each party (i) hereby irrevocably submits to the
jurisdiction of the state courts of the State of California and to the
jurisdiction of any United States District Court in the State of California, for
the purpose of any suit, action, or other proceeding arising out of or based
upon this Agreement or the subject matter hereof brought by any party or its
successors or assigns, (ii) hereby waives, and agrees not to assert, by way of
motion, as a defense, or otherwise, in any such suit, action, or proceeding, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution, that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action, or proceeding is improper or that this Agreement or
the subject matter hereof may not be enforced in or by such court, and (iii)
hereby waives and agrees not to seek any review by any court of any other
jurisdiction that may be called upon to grant an enforcement of the judgment of
any such California state or federal court.

     (b) Process in any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Agreement may be served on any
party anywhere in the world. Each party consents to service of process by
registered mail at the address to which notices are to be given and further
consent that any service of process, writ, judgment or other notice of legal
process shall be deemed and held in every respect to be effectively served upon
it in connection with proceedings in the State of California, if delivered to CT
Corporation System, whose current address is 1350 Treat Boulevard, Suite 100,
Walnut Creek, CA 94596, which each party irrevocably designates and appoints as
its authorized agent for the service of process in the courts in the State of
California. Nothing herein shall affect the right of a party to serve process in
any other manner permitted by applicable law. Without affecting the validity of
process served otherwise pursuant to this Section 8.14(b), XOMA shall
simultaneously provide CAT with written notice thereof. Each party further
agrees that final judgment against it in any such action or proceeding arising
out of or relating to this Agreement shall be conclusive and may be enforced in
any other jurisdiction within or outside the United States of America by suit on
the judgment, a certified or exemplified copy of which shall be conclusive
evidence of the fact and of the amount of its liability.


<PAGE>
                                      -27-


     (c) Each party agrees that it shall not, and that it shall instruct those
in its control not to, take any action to frustrate or prevent the enforcement
of any writ, decree, final judgment, award (arbitral or otherwise) or order
entered against it with respect to this Agreement or the XOMA Patent Rights and
shall agree to be bound thereby as if issued or executed by a competent judicial
tribunal having personal jurisdiction situated in its country of residence or
domicile.

     8.15 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.



<PAGE>
                                      -28-




     IN WITNESS WHEREOF, XOMA and CAT have executed this Agreement in duplicate
originals by duly authorized officers.

CAMBRIDGE ANTIBODY                 XOMA IRELAND LIMITED
   TECHNOLOGY LIMITED


By:                                By:
    --------------------------          -------------------------------------
      Name:                              Alan Kane, Director
      Title:                             duly authorized for and on behalf of
                                         XOMA Ireland
Limited in the presence of:






<PAGE>





                                  Schedule 1.4

                                       [*]




<PAGE>





                                  Schedule 1.15

                       Certain Library License Provisions


1.1.10 "CAT Background IP Third Party Improvements" - shall mean any Materials
and Know How which constitute improvements of, enhancements to or modifications
of the CAT Background IP and:

     1.1.10.1 which are conceived, originated or reduced to practice by Third
              Party licensees of CAT (other than a XOMA Collaborator or XOMA
              licensee) of the CAT Background IP; and

     1.1.10.2 which come into the Control of CAT during the term of [the Library
              License] pursuant to agreements between CAT and such Third
              Parties; and

     1.1.10.3 for which no consideration was payable by CAT to such Third
              Parties pursuant to such agreements; and

     1.1.10.4 which CAT has the right to license to XOMA hereunder.

1.1.13 "CAT Background Patent Rights" - shall mean the Patent Rights more
particularly set out in Schedule 1 relating to the CAT Library and its use
together with any Patent Rights which become Controlled by CAT after the
Effective Date which relate to the CAT Library or its use. For the avoidance of
doubt, CAT Background Patent Rights do not and shall not include (i) the CAT
Diabodies Patent Rights, (ii) any Patent Rights acquired by or licensed to CAT
after the Effective Date for which the consideration paid by CAT exceeds one
hundred thousand US dollars (US$100,000), or equivalent in the case of non-cash
consideration and (iii) the practice of the CAT Background Patent Rights within
the fields licensed to Third Parties pursuant to the agreements set out in
Schedule 7 (the "Additional Excluded Fields") for as long as such Additional
Excluded Fields are exclusively licensed to such Third Parties pursuant to those
agreements.

7.9 Nothing in this Agreement shall confer any right upon XOMA and XOMA shall
not exercise or use the CAT IP in the commercial sale or sublicense of single
variable domains (heavy or light) of Antibodies.



To aid in understanding the foregoing, the following additional definitions from
the Library License are provided:


<PAGE>
                                      -2-

1.1.8 "CAT Background IP" - shall mean the CAT Background Materials, CAT
Background Know How, CAT Background Patent Rights and the CAT Library.

1.1.11 "CAT Background Know How" - shall mean (a) all of the Know How Controlled
by CAT at the Effective Date which relates to the CAT Library and its use and
(b) any Know How which relates to any improved version of the CAT Library made
available to XOMA by CAT during the term of the Library Licence [as defined in
the Library License] as set forth in Clause 4.2 [of the Library License].

1.1.12 "CAT Background Materials" - shall mean (a) the Materials (including
without limitation cloning and expression vectors, polynucleotides and phagemid
vectors) comprising or relating to the CAT Library at the Effective Date and (b)
the Materials (including without limitation cloning and expression vectors,
polynucleotides and phagemid vectors) comprising or relating to any improved
version of the CAT Library made available to XOMA by CAT during the term of the
Library Licence [as defined in the Library License] as set forth in Clause 4.2
[of the Library License].

1.1.18 "CAT IP" - shall mean CAT Background IP, CAT Foreground IP and CAT
Foreground Patent Rights.

1.1.28 "Control", "Controls" or "Controlled by" - shall mean either (a) being an
Affiliate of either XOMA or CAT, (b) with respect to any item of CAT IP or XOMA
IP, the possession of (whether by ownership or licence, other than pursuant to
[the Library License]) or the ability of such [p]arty to grant access to or a
licence or sublicence thereof without violating the terms of any agreement or
other arrangement with any Third Party existing at the time such [p]arty would
be required hereunder to grant the other [p]arty such access or licence or
sublicence or (c) with respect to any Materials, the CAT Library or an Antibody,
physical possession.

1.1.35 "Effective Date" - shall mean the date of execution of [the Library
License] by [CAT and XOMA].

1.1.55 "Patent Rights" - shall mean patent applications and patents, author
certificates, inventor certificates, utility certificates, improvement patents
and models and certificates of addition and all foreign counterparts of them,
including any divisional applications and patents, refilings, renewals,
continuations, continuations-in-part, patents of addition, extensions, reissues,
substitutions, confirmations, registrations, revalidation and additions of or to
any of them, as well as any supplementary protection certificates and equivalent
protection rights in respect of any of them.



<PAGE>



                                  Schedule 1.30

                                  Patent Rights


Title: Modular Assembly of Antibody Genes, Antibodies Prepared Thereby and Use

Inventors: Robinson, Liu, Horwitz, Wall, Better

1)   Based on PCT/US86/02269, which is a continuation-in-part of U.S. Serial No.
     06/793,980 filed November 1, 1985 (abandoned).

     COUNTRY              SERIAL NO.                         PATENT NO.
     -------              ----------                         ----------
     *United States       06/793,980
     Australia            65981/86                           Issued  606,320
     Canada               521,909                            Abandoned
     Denmark              3385/87                            Pending
     Taiwan               75105650                           Issued  51922
     *United States       U.S. National Phase of
                          PCT/US86/02269

2)   Based on PCT/US88/02514, which corresponds to U.S. Serial No. 07/077,528,
     which is a continuation-in-part of PCT/US86/02269 (abandoned), which is a
     continuation-in-part of U.S. Serial No. 06/793,980 (abandoned).

     COUNTRY                   SERIAL NO.               PATENT NO.
     -------                   ----------               ----------
     Australia                 23244/88                 Issued 632,462
     Austria                   EP 88907510.7            Granted EP/0371998
     Belgium                   EP 88907510.7            Granted EP/0371998
     Canada                    572,398                  Granted 1,341,235
     Denmark                   192/90                   Pending
     Europe                    EP 88907510.7            Granted EP/0371998
     Europe                    EP 95119798.7            Granted EP/0731167
     France                    EP 88907510.7            Granted EP/0371998
     Germany                   EP 88907510.7            Granted EP/0371998
     Italy                     EP 88907510.7            Granted EP/0371998
     Japan                     506481/88                Granted 2991720
     Luxembourg                EP 88907510.7            Granted EP/0371998
     Netherlands               EP 88907510.7            Granted EP/0371998
     Sweden                    EP 88907510.7            Granted EP/0371998
     Switzerland/
     Liechtenstein             EP 88907510.7            Granted EP/0371998

<PAGE>
                                      -2-

     COUNTRY              SERIAL NO.                         PATENT NO.
     -------              ----------                         ----------
     United Kingdom            EP 88907510.7            Granted EP/0371998
     Europe                    EP 93100041.8            Granted EP/0550400
     Austria                   EP 93100041.8            Granted EP/0550400
     Belgium                   EP 93100041.8            Granted EP/0550400
     France                    EP 93100041.8            Granted EP/0550400
     Germany                   EP 93100041.8            Granted EP/0550400
     Italy                     EP 93100041.8            Granted EP/0550400
     Luxembourg                EP 93100041.8            Granted EP/0550400
     Netherlands               EP 93100041.8            Granted EP/0550400
     Sweden                    EP 93100041.8            Granted EP/0550400
     Switzerland/
     Liechtenstein             EP 93100041.8            Granted EP/0550400
     United Kingdom            EP 93100041.8            Granted EP/0550400
     *United States            07/077,528

3)   Based on U.S. Serial No. 07/501,092 filed March 29, 1990, which is a
     continuation-in-part of U.S. Serial No. 07/077,528 (Modular Assembly of
     Antibody Genes, Antibodies Prepared Thereby and Use; Robinson, Liu,
     Horwitz, Wall, Better) and of U.S. Serial No. 07/142,039 (Novel Plasmid
     Vector with Pectate Lyase Signal Sequence; Lei, Wilcox).

     COUNTRY                  SERIAL NO.                PATENT NO.
     -------                  ----------                ----------
     *United States           07/501,092
     *United States           07/987,555
     *United States           07/870,404
     *United States           08/020,671
     United States            08/235,225                5,618,920
     United States            08/299,085                5,595,898
     United States            08/472,691                6,204,023
     United States            08/467,140                5,698,435
     United States            08/450,731                5,693,493
     United States            08/466,203                5,698,417
___________________

*    Cases abandoned in favor of a continuing application.


<PAGE>




                                  Schedule 2.4

                                 Form of Notice


XOMA owns a number of patents said to cover various aspects of bacterial
antibody expression and phage display.

XOMA has licensed these patents on a non-exclusive basis to CAT.

Under the license agreement with XOMA:

o    CAT cannot provide phage display services or transfer phage display
     materials, products or information to you without first showing you a
     redacted copy of its license from XOMA and this notice.

o    If you and CAT enter into a written agreement by which you become a "CAT
     Collaborator," then you will be permitted to use phage display services,
     phage display materials, products and information from CAT to research,
     develop and commercialize antibody products.

o    Collaborators do not, however, have the right to produce commercial
     quantities of antibodies under the XOMA license. Rather, collaborators only
     have the right to make research and development quantities of antibodies
     under that license. Thus, the collaborator may wish to obtain a commercial
     production license from XOMA (which may be available), or produce
     commercial quantities of antibodies using another method.

o    If you and CAT enter into a written agreement, that agreement must contain
     the following provisions:

     o    Terms pursuant to which you, as the recipient of any transferred
          materials, would agree to abide by each of the limitations,
          restrictions and other applicable obligations provided for by the
          license agreement with XOMA, including, without limitation, the
          restrictions on use of such transferred materials for purposes other
          than research and development.

     o    A provision stating that any amounts paid to CAT shall not constitute
          payments to XOMA.

     o    An agreement by you to further dispose of phage display materials or
          materials covered by the XOMA patents only to a third party who
          otherwise meets the definition of a "CAT Collaborator" set forth in
          the license agreement with XOMA.


<PAGE>




                                  Schedule 4.4

                              Form of Press Release


Investor and Media Contacts:
---------------------------
Laura Zobkiw                                        Peter Davis
Corporate Communications & Investor Relations       Chief Financial Officer
(510) 204-7200                                      (510) 204-7200

Cambridge Antibody Technology Contacts:
--------------------------------------
Tel: +44 (0) 1223 471 471
Peter Chambre, Chief Executive Officer
John Aston, Chief Financial Officer
Rowena Gardner, Director of Corporate Communications

Weber Shandwick Square Mile (Europe)         BMC Communications/The Trout Group
Tel: +44 (0) 20  7067 0700                   (USA)
Kevin Smith                                  Tel: 001 212 477 9007
Graham Herring                               Brad Miles, ext 17 (media)
                                             Brandon Lewis, ext.15 (investors)

                  Cambridge Antibody Technology (CAT) and XOMA
                      Cross-License Antibody Technologies
********************************************************************************

CAMBRIDGE, UK and BERKELEY, CALIFORNIA, USA --December XX, 2002 --Cambridge
Antibody Technology (LSE: CAT; Nasdaq: CATG) and XOMA Ltd. (Nasdaq: XOMA)
announce today that they have entered into a cross-licensing arrangement for
antibody-related technologies.

Under the agreement CAT, and its collaborators, receive rights to use the XOMA
antibody expression technology for developing products using CAT's phage-based
antibody technology, in return for license payments to XOMA. XOMA will receive
the right to use CAT's phage antibody libraries for its target discovery and
research programs, with an option to develop antibodies into therapeutics.
Should any therapeutic antibodies derived from CAT's libraries be identified and
developed by XOMA, license payments will be made by XOMA to CAT.

Peter Chambre, CAT's Chief Executive Officer, commented, "Clarifying the
intellectual property issues in the antibody field remains an important priority
for both CAT and XOMA. As CAT progresses with its transition to a product-based
biopharmaceutical company, we are pleased to have reached this cross-licensing
arrangement with XOMA".

"We are very pleased to enter into this phage-based antibody related licensing
arrangement with CAT, a company with excellent capabilities in the important
field of antibody drug discovery," said Jack Castello, Chairman, President and
Chief Executive Officer of XOMA. "Our license to CAT, which is the fourth such
license we've entered into with a significant antibody library company this
year, further validates the fundamental position our antibody expression
technology holds in the phage display arena."

Cambridge Antibody Technology (CAT):

o    CAT is a UK-based biotechnology company and a leader in the discovery and
     development of human therapeutic antibodies: HumiraTM, the leading
     CAT-derived antibody, has been submitted for regulatory review by Abbott
     (responsible for development and marketing) following the


<PAGE>
                                       -2-


     completion of Phase III trials. Six other CAT-derived human therapeutic
     antibodies are at various stages of clinical trials.

o    CAT has an advanced proprietary platform technology for rapidly isolating
     human monoclonal antibodies using phage display systems. CAT has extensive
     phage antibody libraries, currently incorporating more than 100 billion
     distinct antibodies. These libraries form the basis for the Company's
     strategy to discover and develop a portfolio of antibody-based drugs.

o    CAT has alliances with a large number of pharmaceutical and biotechnology
     companies to discover, develop and commercialize human monoclonal
     antibody-based products. CAT has also licensed its proprietary human phage
     antibody libraries to several companies for target validation and drug
     discovery. CAT's collaborators include: Abbott, Amgen, Amrad, Chugai, Elan,
     Genzyme, Human Genome Sciences, Merck & Co, Pharmacia and Wyeth Research.

o    Based near Cambridge, England, CAT currently employs around 290 people.

o    CAT is listed on the London Stock Exchange and on NASDAQ since June 2001.
     CAT raised (pound)41m in its IPO in March 1997 and (pound)93m in a
     secondary offering in March 2000.

About XOMA and its Antibody Expression Technology:

XOMA scientists were the first to demonstrate the secretion of antibody domains
directly from bacterial cells as fully functional, properly folded molecules.
XOMA has received nine U.S. patents to date relating to aspects of its bacterial
cell expression system, including six patents that broadly cover the secretion
of functional immunoglobulins from bacteria, including antibody fragments such
as Fab and single-chain antibodies. Corresponding foreign patents have also been
granted.

Bacterial antibody expression is an enabling technology used to discover and
screen, as well as develop and manufacture, recombinant antibodies for
commercial purposes. Bacterial antibody expression is also a key technology used
in multiple systems for high-throughput screening of antibody domains. Further
information on XOMA's bacterial cell expression technology can be found at
l_expression.jsp.

XOMA develops and manufacturers innovative biopharmaceuticals for disease
targets that include cancer, immunological and inflammatory disorders, and
infectious diseases. XOMA's programs include collaborations: with Genentech,
Inc. on the Raptiva(TM) antibody for psoriasis (Phase III), rheumatoid arthritis
(Phase II) and other indications; with Onyx Pharmaceuticals, Inc. to develop and
manufacture its ONYX-015 product for various cancers (Phase II and III); with
Baxter Healthcare Corporation to develop NEUPREX(R) (rBPI-21) for Crohn's
disease (Phase II) and other indications; and with Millennium Pharmaceuticals,
Inc. on two biotherapeutic agents, CAB-2 and MLN-01, for certain vascular
inflammation indications (preclinical). Earlier-stage development programs
include compounds to treat cancer, retinopathies, autoimmune diseases and
infections. For more information about XOMA's pipeline and activities, please
visit XOMA's web site at .

As to CAT: Application of the Safe Harbor of the Private Securities Litigation
Reform Act of 1995: This press release contains statements about Cambridge
Antibody Technology Group plc ("CAT") that are forward looking statements. All
statements other than statements of historical facts included in this press
release may be forward looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934. These forward looking statements are based
on numerous assumptions regarding CAT's present and future business strategies
and the environment in which CAT will operate in the future. Certain factors
that could cause CAT's actual results, performance or achievements to differ
materially from those in the forward looking statements include: market
conditions, CAT's ability to enter into and maintain collaborative arrangements,
success of product candidates in clinical trials, regulatory developments and
competition.



<PAGE>
                                       -3-


As to XOMA:

Statements made in this news release to collaborative arrangements and
development capabilities, or that otherwise relate to future periods, are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements are based on assumptions that may not prove accurate. Actual results
could differ materially from those anticipated due to certain risks inherent in
the biotechnology industry and for companies engaged in the development of new
products in a regulated market. These risks, including those related to changes
in the status of existing collaborative relationships, the availability of
future collaborative relationships, the ability of collaborators and other
partners to meet their obligations, the timing of results of pending or future
clinical trials, market demand for products, actions by the Food and Drug
Administration or the US Patent and Trademark Office, and uncertainties
regarding the status of biotechnology patents, are discussed in XOMA's most
recent annual report on Form 10-K and in other SEC filings. Consider such risks
carefully in evaluating XOMA's prospects.