<PAGE>

                                                                    EXHIBIT 10.1




                              TERMINATION AGREEMENT



                        ELAN PHARMA INTERNATIONAL LIMITED


                        ELAN INTERNATIONAL SERVICES, LTD.


                            ATRIX LABORATORIES, INC.


                                       AND

                         TRANSMUCOSAL TECHNOLOGIES LTD.


<PAGE>

                                      INDEX


<Table>
<Caption>
Section                           Heading                             Page
-------                           -------                             ----
<S>           <C>                                                     <C>

   1          DEFINITIONS                                                2

   2          TERMINATION OF THE NEWCO AGREEMENTS                        7

   3          REPRESENTATIONS, WARRANTIES, CONFIRMATIONS AND
              INDEMNITIES                                                9

   4          INTELLECTUAL PROPERTY                                     14

   5          RIGHTS RELATED TO SECURITIES                              15

   6          SALE OF SHARES AND COMPLETION                             16

   7          CONFIDENTIALITY                                           17

   8          WAIVER OF ACCRUED RIGHTS/MUTUAL RELEASES                  20

   9          PAYMENTS, REPORTS AND AUDITS                              20

   10         GENERAL                                                   22
</Table>


                                       2
<PAGE>


THIS TERMINATION AGREEMENT made this 10th day of September 2003 (this
"AGREEMENT")

AMONG:-

(1)      ELAN PHARMA INTERNATIONAL LIMITED, a private limited company
         incorporated under the laws of Ireland, and having its registered
         office at WIL House, Shannon Business Park, Shannon, County Clare,
         Ireland ("EPIL SHANNON");

(2)      ELAN INTERNATIONAL SERVICES, LTD., an exempted limited liability
         company incorporated under the laws of Bermuda, and having its
         registered office at Clarendon House, 2 Church St., Hamilton, Bermuda
         ("EIS");

(3)      ATRIX LABORATORIES, INC., a Delaware corporation having its principal
         place of business at 2579 Midpoint Drive, Fort Collins, CO 80525-4417,
         United States of America ("ATRIX"); and

(4)      TRANSMUCOSAL TECHNOLOGIES LTD., an exempted company incorporated under
         the laws of Bermuda, and having its registered office at Clarendon
         House, 2 Church St., Hamilton, Bermuda.

RECITALS

A.       The Parties entered into various agreements whereby EPIL Shannon, EIS
         and Atrix established the joint venture company, Newco, and EPIL
         Shannon, EIS and Atrix each licensed certain intellectual property to
         Newco for a specified field of use. Specifically:

         (i)      EIS, EPIL Shannon, Atrix and Newco entered into a
                  Subscription, Joint Development and Operating Agreement dated
                  18 July 2000 (the "JDOA");

         (ii)     EPIL Shannon and Newco entered into a License Agreement dated
                  18 July 2000 (the "ELAN LICENSE AGREEMENT"); and

         (iii)    EIS, Atrix and Newco entered into a Registration Rights
                  Agreement with respect to the capital stock of Newco dated 18
                  July 2000 (the "NEWCO REGISTRATION RIGHTS AGREEMENT").

B.       The JDOA, Elan License Agreement and Newco Registration Rights
         Agreement are together defined in this Agreement as the "NEWCO
         AGREEMENTS".


<PAGE>


C.       The Parties also entered into agreements whereby Atrix sold and EIS
         purchased certain securities of Atrix and the Parties agreed to certain
         matters related to the ownership of such securities. Specifically:

         (i)      EIS and Atrix entered into a Securities Purchase Agreement
                  dated 18 July 2000 (the "SECURITIES PURCHASE AGREEMENT"); and

         (ii)     EIS and Atrix entered into a Registration Rights Agreement
                  with respect to the capital stock of Atrix dated 18 July 2000
                  (the "ATRIX REGISTRATION RIGHTS AGREEMENT");

         (iii)    Atrix issued and delivered to EIS a Convertible Promissory
                  Note, dated 18 July 2000, in a principal amount not to exceed
                  $8,010,000.00 (the "NOTE"); and

         (iv)     Atrix issued and delivered to EIS a Warrant, dated as of 18
                  July 2000, to purchase up to 1,000,000 shares of Common Stock,
                  par value $.01 per share, of Atrix ("WARRANT").

D.       The Parties wish to (i) terminate in full the Newco Agreements as set
         forth below; and (ii) set forth their agreement in relation to other
         matters, including, inter alia, the transfer of shares by EIS to Atrix.

IN CONSIDERATION OF THE MUTUAL COVENANTS CONTAINED HEREIN, AND OTHER GOOD AND
VALUABLE CONSIDERATION, THE RECEIPT AND ADEQUACY OF WHICH ARE HEREBY
ACKNOWLEDGED, IT IS HEREBY AGREED AS FOLLOWS:

1        DEFINITIONS

         CAPITALIZED TERMS USED IN THIS AGREEMENT SHALL HAVE THE SAME MEANINGS
         ASSIGNED TO THEM IN THE NEWCO AGREEMENTS OR ATRIX LICENSE AGREEMENT,
         UNLESS SUCH TERMS ARE EXPRESSLY DEFINED TO THE CONTRARY IN THIS
         AGREEMENT.

         "AFFILIATE" shall mean any corporation or entity controlling,
         controlled or under the common control of any other corporation or
         entity, excluding, in the case of Elan, an Elan JV. For the purpose of
         this definition, (i) "control" shall mean direct or indirect ownership
         of fifty percent (50%) or more of the stock or shares entitled to vote
         for the election of directors; and (ii) Newco shall not be an Affiliate
         of Elan.

         "AGREED COST DEDUCTION" shall mean the sum of all costs and expenses
         directly attributable to research and development, clinical trials,
         pre-launch commercialization and regulatory compliance (where such work
         is carried out by Atrix and/or Newco, and/or an Affiliate of Atrix
         and/or Newco, charged at cost without the addition of any profit
         margin) incurred by Atrix and/or Newco, and/or


                                       2
<PAGE>


         an Affiliate of Atrix and/or Newco, directly related to the development
         of the Deferred Consideration Product between the Effective Date and
         the Date of Commercialization or the date of first commercial launch,
         whichever is earlier, and all non-reimbursed costs of Phase IV or
         post-approval clinical studies to the extent funded by Atrix and/or
         Newco after the Date of Commercialization.

         "ATRIX CERTIFICATE OF DESIGNATIONS" shall mean that certain certificate
         of designations filed with the Delaware Secretary of State dated 18
         July 2000.

         "ATRIX IMPROVEMENTS" shall mean improvements to the Atrix Patents
         and/or the Atrix Know-How, developed (i) by Atrix outside the Project,
         (ii) by Atrix, Elan or Newco or by a third party (under contract with
         Newco, Elan or Atrix or any of their respective Affiliates) pursuant to
         the Project, and/or (iii) jointly by any combination of Atrix, Elan,
         Newco or a third party (under contract with Newco, Elan or Atrix or any
         of their respective Affiliates) pursuant to the Project.

         "ATRIX KNOW-HOW" shall have the meaning set forth in the Atrix License
         Agreement.

         "ATRIX LICENSE AGREEMENT" shall mean that certain License Agreement
         between Atrix and Newco dated 18 July 2000.

         "ATRIX PATENTS" shall have the meaning set forth in the Atrix License
         Agreement.

         "BALANCE SHEET" shall mean the unaudited balance sheet of Newco as of
         the Balance Sheet Date, as set forth in Schedule 1.

         "BALANCE SHEET DATE" shall mean June 30, 2003.

         "BEMA(TM) TECHNOLOGY" shall mean Atrix's proprietary bioerodible film
         technology for delivery of small molecules, peptides and proteins
         across mucosal surfaces, as described in more detail in the Atrix
         Patents.

         "COMMERCIALIZATION AGREEMENT" shall mean:

         (i)      any license agreement, research and development agreement, or
                  alternative form of collaboration or commercialization
                  agreement, such as, but not limited to, a co-promotion or
                  co-marketing arrangement to research, develop, import, make,
                  use, offer for sale, and/or sell the Deferred Consideration
                  Product, Newco Intellectual Property and/or the Newco IP
                  Product in the Territory;

         (ii)     any Disposal Agreement; or

         (iii)    an agreement comprising an option to do any of the foregoing.


                                       3
<PAGE>


         "CPI" shall mean the Consumer Price Index for All Urban Consumers, All
         Items, U.S.A. Area, 1982-1984 = 100, as published by the Bureau of
         Labor Statistics, United States Department of Labor (U.S. City
         Average). If such index is discontinued, CPI shall then mean the most
         nearly comparable index published by the Bureau of Labor Statistics or
         other official agency of the United States government.

         "DATE OF COMMERCIALIZATION" shall mean the date of execution by Atrix
         and/or Newco, and/or an Affiliate of Atrix and/or Newco, and any third
         party of a Commercialization Agreement.

         "DEFERRED CONSIDERATION" shall have the meaning set forth in Clause
         6.4.

         "DEFERRED CONSIDERATION PERIOD" shall mean the period commencing on the
         Effective Date and expiring on a country by country basis:

         (a)      on the 15th anniversary of the date of the first commercial
                  launch of the Deferred Consideration Product or Newco IP
                  Product in the country concerned; or

         (b)      in any country upon the expiration of the life of the last to
                  expire patent covering the Deferred Consideration Product or
                  Newco IP Product in that country;

         whichever date is the later to occur.

         "DEFERRED CONSIDERATION PRODUCT" shall mean formulations of fentanyl
         and ondansetron utilizing the BEMA(TM) Technology.

         "DISPOSAL AGREEMENT" shall mean any agreement for the assignment or
         outright sale or disposition, in whole or in part, of the Deferred
         Consideration Product, the Newco Intellectual Property and/or Newco IP
         Product.

         "EFFECTIVE DATE" shall mean the date of this Agreement.

         "ELAN" shall mean EPIL Shannon and its Affiliates.

         "ELAN IMPROVEMENTS" shall mean improvements to the Elan Patents and/or
         the Elan Know-How, developed (i) by Elan outside the Project, (ii) by
         Elan, Atrix or Newco or by a third party (under contract with Newco,
         Elan or Atrix or any of their respective Affiliates) pursuant to the
         Project, and/or (iii) jointly by any combination of Elan, Atrix, Newco
         or a third party (under contract with Newco, Elan or Atrix or any of
         their respective Affiliates) pursuant to the Project.

         "ELAN JV" shall mean an entity that Elan and a third party (i)
         establish or have established; (ii) take shareholdings in or have a
         right to take shareholdings in; and


                                       4
<PAGE>


         (iii) grant certain licenses in and to certain intellectual property
         rights for the purpose of implementing a strategic alliance.

         "ELAN KNOW-HOW" shall have the meaning set forth in the Elan License
         Agreement.

         "ELAN PATENTS" shall have the meaning set forth in the Elan License
         Agreement.

         "EPIL III" shall mean Elan Pharmaceuticals Investment III, Ltd. an
         exempted limited liability company incorporated under the laws of
         Bermuda.

         "EXCHANGE RIGHT" shall have the meaning set forth in the Atrix
         Certificate of Designations.

         "FORCE MAJEURE" shall mean causes beyond a Party's reasonable control,
         including, without limitation, acts of God, fires, strikes, acts of
         war, or intervention of a governmental authority.

         "INITIAL CONSIDERATION" shall have the meaning set forth in Clause
         6.1.2.

         "IN MARKET" shall mean the sale of the Deferred Consideration Product
         and/or Newco IP Product by Newco and/or Atrix, and/or an Affiliate of
         Newco and/or Atrix, to an unaffiliated third party, such as a
         wholesaler, managed care organization, hospital or pharmacy, and shall
         exclude the transfer pricing of the Deferred Consideration Product and
         Newco IP Product by one Affiliate of Newco and/or Atrix to another
         Affiliate of Newco and/or Atrix.

         "NET REVENUES" shall mean:

         (i)      all license fees, sublicense fees, license option payments
                  (whether in relation to the grant or exercise of any license
                  option) milestone payments, and royalties on sales of Deferred
                  Consideration Product, Newco Intellectual Property and/or the
                  Newco IP Product, and any other kinds of revenue whatsoever
                  received (including value received in the form of securities)
                  by Atrix and/or Newco, and/or an Affiliate of Atrix and/or
                  Newco, in respect of the commercialization of the Deferred
                  Consideration Product, Newco Intellectual Property and/or
                  Newco IP Product;

         (ii)     any net manufacturing profits realized by Atrix and/or Newco,
                  and/or an Affiliate of Atrix and/or Newco, on any commercial
                  supply of Deferred Consideration Product and/or Newco IP
                  Product;

         (iii)    any consideration received by Newco and or Atrix, and/or an
                  Affiliate of Newco and/or Atrix, in respect of any Disposal
                  Agreement;


                                       5
<PAGE>


         (iv)     research and development payments received by Atrix and/or
                  Newco, and/or an Affiliate of Atrix and/or Newco, in relation
                  to research and development of the Newco Intellectual Property
                  and/or Newco IP Product and/or the Deferred Consideration
                  Product, where such payments are made other than for
                  reimbursement of expenses incurred by Atrix and/or Newco,
                  and/or an Affiliate of Atrix and/or Newco, and other than on
                  FTE rates charged by Atrix, where such payments are made other
                  than on FTE rates charged by Atrix, the amount above $300,000
                  per employee per annum (as adjusted annually for percentage
                  increases in CPI) shall be included in the calculation of Net
                  Revenues; and

         (v)      in the context of any Commercialization Agreement, any premium
                  paid by a subscriber for stock of Atrix and/or Newco;

                  (1)    where Atrix and/or Newco, and/or an Affiliate of Atrix
                         and/or Newco, is not publicly listed on a recognized
                         stock exchange, the premium paid over the fair market
                         value of such stock as reasonably determined by the
                         board of directors of Atrix and/or Newco, and/or an
                         Affiliate of Atrix and/or Newco, in good faith and
                         certified in a board resolution (taking into account
                         (i) the most recently or concurrently completed arm's
                         length transaction in which the primary consideration
                         for the stock is cash between the Atrix or Newco,
                         and/or an Affiliate of Atrix and/or Newco, and an
                         unaffiliated third party that is not part of a
                         strategic investment and the closing of which occurs
                         within the six months preceding or on the date of such
                         calculation, if any) and shall be reasonably agreed to
                         by Elan (provided that in the event Elan reasonably
                         does not agree with Atrix's or Newco's, and/or an
                         Affiliate of Atrix and/or Newco, fair market value
                         determination, Elan and Atrix and/or Newco, as the case
                         may be, at Elan's sole cost and expense, shall jointly
                         appoint an independent nationally-recognized third
                         party to determine the fair market value), (ii) the
                         general market conditions for private biotech
                         securities, and (iii) the general state of progress in
                         clinical and commercial activities in Atrix and/or
                         Newco, and/or an Affiliate of Atrix and/or Newco; or

                  (2)    where Atrix and/or Newco, and/or an Affiliate of Atrix
                         and/or Newco, is publicly listed on a recognized stock
                         exchange, the premium paid over the average closing
                         price of such stock of Atrix and/or Newco, and/or an
                         Affiliate of Atrix and/or Newco, for the 30 trading day
                         period immediately prior to any such subscription;

         provided, however, that the amounts calculated pursuant to
         subparagraphs (i) through (v) above shall be reduced by :


                                       6
<PAGE>


         (i)      deductions in respect of any customs and excise duties or
                  other sales taxes that are actually paid by Atrix and/or
                  Newco, and/or an Affiliate of Atrix and/or Newco (but, for the
                  avoidance of doubt, not income or corporation tax), directly
                  related to the receipt of revenue by Atrix and/or Newco,
                  and/or an Affiliate of Atrix and/or Newco, as set forth above;
                  and

         (ii)     the Agreed Cost Deduction (to the extent not otherwise
                  previously deducted and offset in favor of Atrix, Newco and/or
                  any of their respective Affiliates).

         "NET SALES" shall mean that sum determined, in accordance with
         generally accepted accounting principles, by deducting the following
         deductions from the aggregate gross In Market sales proceeds received
         by Newco and/or Atrix for the Deferred Consideration Product and/or
         Newco IP Product by Newco and/or Atrix, and/or an Affiliate of Atrix
         and/or Newco:

         (i)      taxes, duties or other governmental charges (but, for the
                  avoidance of doubt not income or corporation tax), levied on,
                  absorbed, or otherwise imposed on the sale of the Deferred
                  Consideration Product and Newco IP Product that are actually
                  paid by Newco and/or Atrix, and/or by an Affiliate of Newco
                  and/or Atrix;

         (ii)     a discount from the gross sales proceeds to cover such
                  industry costs as are incurred by Newco and/or Atrix, and/or
                  by an Affiliate of Newco and/or Atrix, in respect of
                  transport, shipping and insurance costs; and discounts,
                  rebates or chargebacks directly related to the sale of the
                  Deferred Consideration Product and Newco IP Product;

         (iii)    amounts repaid or credited by Newco and/or Atrix, and/or by an
                  Affiliate of Newco and/or Atrix by reason of the rejection or
                  return of goods, including rejection or return of goods
                  attributable to a recall of a Deferred Consideration Product
                  and/or Newco IP Product; and

         (iv)     the Agreed Cost Deduction (to the extent not otherwise
                  previously deducted and offset in favor of Atrix, Newco and/or
                  any of their respective Affiliates).

         "NEWCO" shall mean Transmucosal Technologies Ltd. and its Affiliates.

         "NEWCO INTELLECTUAL PROPERTY" shall have the meaning set forth in the
         JDOA.

         "NEWCO IP PRODUCT" shall mean a product that utilizes, is based upon,
         or is derived directly or indirectly, from the Newco Intellectual
         Property.

         "PARTY" shall mean EPIL Shannon, EIS, Atrix or Newco, as the case may
         be, and "PARTIES" shall mean all such parties together.


                                       7
<PAGE>


         "PROJECT" shall have the meaning set forth in the JDOA.

         "TERRITORY" shall mean all of the countries of the world.

         "UNITED STATES DOLLAR" and "US$" and "$" shall mean the lawful currency
         of the United States of America.

2.       TERMINATION OF THE NEWCO AGREEMENTS

         2.1.     Subject to the provisions of Clause 2.2 hereof, the Parties
                  hereby agree to:

                  2.1.1.   terminate the Newco Agreements, including without
                           limitation, those provisions expressly stated to
                           survive termination, in each case, with effect from
                           the Effective Date; and

                  2.1.2.   cancel the Note with effect from the Effective Date,
                           each Party hereby acknowledging that no amounts were
                           drawn down under the Note.

         2.2.     For the avoidance of doubt and without prejudice to the
                  generality of the foregoing Clause 2.1, the Parties hereby
                  acknowledge and agree as follows as of the Effective Date:

                  2.2.1.   the EIS Director, Seamus Mulligan, holding office
                           with Newco immediately prior to the Effective Date
                           shall resign;

                  2.2.2.   the Management Committee and the R&D Committee (as
                           such terms are defined in the JDOA) shall each be
                           dissolved forthwith with effect from the Effective
                           Date and thereby cease to have any function;

                  2.2.3.   the nominees on the Management Committee of the EIS
                           Director shall be deemed to have been removed from
                           the Management Committee by the EIS Director;

                  2.2.4.   the nominees on the R&D Committee of the nominees on
                           the Management Committee of the EIS Director, shall
                           be deemed to have been removed from the R&D Committee
                           by the nominees on the Management Committee of the
                           EIS Director;

                  2.2.5.   all rights granted to Newco pursuant to the Elan
                           License Agreement to use the Elan Patents, the Elan
                           Know-How and the Elan Improvements shall terminate
                           forthwith;


                                       8
<PAGE>


                  2.2.6.   neither Atrix nor Newco shall have any rights in or
                           to the Elan Patents, the Elan Know-How, the Elan
                           Improvements and any other patents, know-how or any
                           other intellectual property rights whatsoever of
                           Elan;

                  2.2.7.   Elan shall not have any rights in or to the Atrix
                           Patents, the Atrix Know-How, the Atrix Improvements
                           and any other patents, know-how or any other
                           intellectual property rights whatsoever of Atrix;

                  2.2.8.   Elan shall terminate or shall cause to be terminated
                           any and all research and development work being
                           conducted by Elan in connection with or pursuant to
                           the Project, the Newco Agreements, or otherwise by or
                           on behalf of Newco;

                  2.2.9.   Elan shall terminate or cause to be terminated any
                           and all technical services and assistance being
                           conducted by Elan in connection with the Newco
                           Agreements;

                  2.2.10.  for the avoidance of doubt, Elan shall not have any
                           obligation to provide working capital, research or
                           development funding, or other funding or financing of
                           any nature to Newco; and

                  2.2.11.  Elan shall not have any obligation to pay any
                           milestone payment or make any milestone investment to
                           Newco, Atrix or any Affiliates of Atrix and/or Newco,
                           whether relating to the Project, the achievement of
                           any objectives set forth therein or otherwise.

         2.3      Each of the Parties acknowledges and agrees with the other
                  Parties that, as of the Effective Date, no monies are owed or
                  are refundable by any of the Parties to the others pursuant to
                  the Newco Agreements and/or Atrix License Agreement, other
                  than such sums owed to Atrix by Newco pursuant to the JDOA as
                  are set forth on Schedule 2.3. Atrix and EIS shall pay to
                  Newco the amounts set forth in Schedule 2.3 immediately prior
                  to the Effective Date to enable Newco to discharge its payment
                  obligations thereunder to Atrix.

                  For the avoidance of doubt, the Parties acknowledge that Newco
                  is liable to pay any fees due and owing to Codan Corporate
                  Administrative Services upon the Effective Date, and
                  thereafter.


3        REPRESENTATIONS, WARRANTIES, CONFIRMATIONS AND INDEMNITIES

         3.1      SUB-LICENSES:


                                       9
<PAGE>


                  Newco represents and warrants to the other Parties that it has
                  not granted any sub-licenses or any other rights of any nature
                  to any third parties pursuant to the Elan License Agreement or
                  the Atrix License Agreement.

         3.2      ATRIX SHARES:

                  Atrix confirms to the other Parties that it is the legal and
                  beneficial owner of the following:

                  3.2.1    6,000 shares of Newco Common Stock (as defined in the
                           Securities Purchase Agreement); and

                  3.2.2    3,612 shares of Newco Preferred Stock (as defined in
                           the Securities Purchase Agreement).

         3.3      EIS SHARES:

                  EIS confirms to the other Parties that it is the legal and
                  beneficial owner of 2,388 shares of Newco Preferred Stock (the
                  "EIS SHARES").

         3.4      BALANCE SHEET:

                  Atrix represents and warrants to the other Parties that the
                  Balance Sheet is accurate in all material respects and that,
                  to its knowledge, since the Balance Sheet Date, there has been
                  no material adverse change in the financial position of Newco.

                  Atrix represents and warrants to the other Parties that, to
                  its knowledge, there are no other creditors of Newco other
                  than as described in the Balance Sheet.

         3.5      THIRD PARTY AGREEMENTS / ORDERS / CLAIMS:

                  3.5.1    Each of the Parties confirms to the other Parties
                           hereto that, as of the Effective Date, to its actual
                           knowledge, Newco is not a party to, or bound by, any
                           judgment, order, decree or other directive of or
                           stipulation with any court or any governmental or
                           regulatory authority.

                  3.5.2    Atrix represents and warrants to the other Parties
                           that, as of the Effective Date, to its actual
                           knowledge, Newco is not a party to, or bound by, or
                           is a third party beneficiary of any agreement with
                           any third party, except for the Newco Agreements
                           and/or Atrix License Agreement.


                                       10
<PAGE>


                  3.5.3    Each of the Parties confirms to the other Parties
                           hereto that, as of the Effective Date, to its actual
                           knowledge, there are no claims, suits or proceedings
                           pending or threatened against Newco.

         3.6      REGULATORY APPLICATIONS:

                  Each of the Parties confirms to the other Parties that prior
                  to and as of the Effective Date, except as set forth on
                  Schedule 3.6, no regulatory applications have been filed by
                  Newco or by any Party with any government authority in any
                  part of the world for any product, including without
                  limitation Newco Intellectual Property or otherwise howsoever
                  in relation to the Project.

         3.7      EXCLUSION OF WARRANTIES / LIABILITY:

                  WITH REFERENCE TO THE TRANSFER BY EIS TO ATRIX OF THE EIS
                  SHARES AS PROVIDED BY CLAUSE 6 ON THE EFFECTIVE DATE (BUT
                  WITHOUT PREJUDICE TO EIS'S OBLIGATION UNDER CLAUSE 6.1.1
                  HEREOF TO TRANSFER THE EIS SHARES TO ATRIX FREE FROM ALL
                  LIENS, CHARGES AND ENCUMBRANCES), THE PARTIES ACKNOWLEDGE AND
                  AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
                  EIS AND ITS AFFILIATES MAKE NO REPRESENTATION OR WARRANTY OF
                  ANY NATURE TO ATRIX, ITS AFFILIATES OR ANY OTHER PERSON IN
                  RELATION TO NEWCO OR ANY OF ITS AFFAIRS PAST, PRESENT OR
                  FUTURE.

                  ATRIX ACKNOWLEDGES THAT IT IS ENTERING INTO THIS AGREEMENT IN
                  RELIANCE EXCLUSIVELY ON ITS OWN BUSINESS JUDGMENT, THE
                  INFORMATION WHICH HAS BEEN AVAILABLE TO IT AS A SHAREHOLDER OF
                  NEWCO AND OTHERWISE AND ON THE DUE DILIGENCE IT HAS CARRIED
                  OUT IN RELATION TO NEWCO.

                  EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, ALL OTHER
                  WARRANTIES, CONDITIONS OR REPRESENTATIONS, EXPRESS OR IMPLIED,
                  STATUTORY OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED BY THE
                  PARTIES.

                  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NO
                  PARTY SHALL BE LIABLE TO ANY OTHER PARTY BY REASON OF ANY
                  REPRESENTATION OR WARRANTY, CONDITION OR OTHER TERM OR ANY
                  DUTY OF COMMON LAW, OR UNDER THE EXPRESS TERMS OF THIS
                  AGREEMENT, FOR ANY CONSEQUENTIAL SPECIAL OR


                                       11
<PAGE>


                  INCIDENTAL OR PUNITIVE LOSS OR DAMAGE (WHETHER FOR LOSS OF
                  CURRENT OR FUTURE PROFITS, LOSS OF ENTERPRISE VALUE OR
                  OTHERWISE) AND WHETHER OCCASIONED BY THE NEGLIGENCE OF THE
                  RESPECTIVE PARTIES, THEIR EMPLOYEES OR AGENTS OR OTHERWISE.

         3.8      INDEMNITY BY ATRIX AND NEWCO:

                  3.8.1    Atrix and Newco and each of their respective
                           Affiliates, jointly and severally, hereby agree to
                           indemnify and hold harmless EIS and EPIL Shannon,
                           their respective Affiliates, officers, directors,
                           agents, representatives, employees and shareholders,
                           and any person holding office on or prior to the
                           Effective Date as an EIS Director (as defined in the
                           JDOA) (or any alternate director of the EIS Director)
                           or as a member of the Management Committee or the R&D
                           Committee (each such person or entity referred to as
                           an "INDEMNIFIED PARTY") against any claims, losses,
                           liabilities or damages and expenses (including
                           reasonable attorneys' fees and expenses) incurred or
                           sustained by such Indemnified Party arising in
                           relation to any claim or proceedings made against
                           Newco or an Indemnified Party which relate in any way
                           to the activities of Newco, past present or future,
                           including without limitation, claims arising with
                           respect to the conduct of clinical trials (if any) by
                           Newco, or by Atrix, its Affiliates or any other
                           person or entity on behalf of Newco whether in
                           connection with the Project or otherwise.

                  3.8.2    For the avoidance of doubt and without prejudice to
                           the generality of Clause 3.8.1, Atrix, Newco and each
                           of their respective Affiliates, jointly and
                           severally, shall indemnify and hold harmless Elan
                           against any claims, losses, liabilities or damages
                           and expenses (including reasonable attorneys' fees
                           and expenses) which may arise in relation to any
                           claim or proceedings made against EPIL Shannon or any
                           of its Affiliates alleging infringement or other
                           unauthorized use of the proprietary rights of a third
                           party arising from the manufacture, importation, use,
                           offer for sale, sale or other commercialization of
                           any Product, the Newco Intellectual Property and/or
                           any technology related thereto.

                  3.8.3    For the avoidance of doubt and with reference to the
                           indemnity in Clause 3.8.1, the Parties acknowledge
                           that clinical trials ("Clinical Trials") were carried
                           out by Atrix and/or any of its Affiliates on behalf
                           of Newco and agree that the indemnity in Clause 3.8.1
                           shall extend to any claims, losses, liabilities or
                           damages arising from such Clinical Trials.


                                       12
<PAGE>


                  3.8.4    Notwithstanding any provision contained in this
                           Clause 3.8 to the contrary, the indemnification
                           obligations of Atrix, Newco and each of their
                           respective Affiliates in Clause 3.8.1 shall not be
                           applicable to the extent that any claims or
                           proceedings of any third party arise from or relate
                           to:

                           3.8.4.1  the gross negligence, willful misconduct or
                                    violation of law by any Indemnified Party;

                           3.8.4.2  Elan's or any of Elan's Affiliates'
                                    accounting policies or procedures,
                                    disclosure obligations, or alleged
                                    violations of corporate or securities laws;
                                    or

                           3.8.4.3  any investigation of Newco or any
                                    Indemnified Party by the U.S. Securities and
                                    Exchange Commission relating to Elan's or
                                    any of Elan's Affiliates' accounting
                                    policies or procedures, disclosure
                                    obligations or alleged violations of
                                    corporate or securities laws.

                  3.8.5    Prior to the Effective Date, Atrix shall furnish Elan
                           Corp with copies of all policies of comprehensive
                           general liability insurance and/or other insurance
                           coverage (the "POLICIES") which it holds in respect
                           of the Clinical Trials referred to in Clause 3.8.3.

                           Atrix shall maintain the Policies in full force and
                           effect for so long as Atrix and/or Newco or any
                           Affiliate of Atrix and/or Newco is developing the
                           Deferred Consideration Product, maintaining at all
                           times at a minimum, the levels of cover evidenced in
                           the Policies, noting Elan Corp as an additional
                           insured, and shall, at the reasonable request of Elan
                           Corp from time to time, furnish to Elan Corp evidence
                           that all premiums or other payments on the Policies
                           are fully paid up and the Policies are subsisting.

         3.9      ORGANIZATION AND AUTHORITY:

                  Each of the Parties represents and warrants to the other
                  Parties that it is a corporation duly organized and validly
                  existing under the laws of its jurisdiction of organization
                  and has all the requisite corporate power and authority to
                  enter into this Agreement and to carry out the transactions
                  contemplated hereby.

         3.10     APPROVALS:

                  Each of the Parties represents and warrants to the other
                  Parties that no permit, authorization, consent or approval of
                  or by ("APPROVAL"), or any notification of or filing with
                  ("FILING"), any person or entity (governmental or otherwise)


                                       13
<PAGE>


                  is required in connection with the execution, delivery or
                  performance of this Agreement by such Party, or if any such
                  Approval or Filing is so required, that same has been obtained
                  or filed prior to the Effective Date.

         3.11     INVESTMENT REPRESENTATIONS:

                  Atrix hereby represents and warrants to the other Parties
                  that, as of the Effective Date, (i) it is sophisticated in
                  transactions of this type and capable of evaluating the merits
                  and risks of its investment in Newco, (ii) it has not been
                  formed solely for the purpose of making this investment and is
                  acquiring the EIS Shares for investment for its own account,
                  not as a nominee or agent, and not with the view to, or for
                  resale in connection with, any distribution of any part
                  thereof, and no other person has a direct or indirect
                  interest, beneficial or otherwise in the EIS Shares, (iii) it
                  understands that the EIS Shares have not been registered under
                  the Securities Act of 1933, as amended (the "SECURITIES ACT"),
                  or applicable state and foreign securities laws by reason of a
                  specific exemption from the registration provisions of the
                  Securities Act and applicable state and foreign securities
                  laws, the availability of which depends upon, among other
                  things, the bona fide nature of the investment intent and the
                  accuracy of its representations as expressed herein and (iv)
                  it understands that no public market now exists for any of the
                  EIS Shares and that there is no assurance that a public market
                  will ever exist for such shares.

         3.12     TRADEMARK APPLICATIONS:

                  Atrix represents and warrants to the other Parties that
                  neither Newco nor Atrix has filed for any trademark protection
                  or has not adopted any trademark in connection with Newco's
                  business or any product or service provided thereunder.

         3.13     REPRESENTATION AND WARRANTIES AS OF THE EFFECTIVE DATE:

                  Except where expressly stated otherwise, each of the
                  representations and warranties in this Agreement are made as
                  of the Effective Date.

4        INTELLECTUAL PROPERTY

         4.1      OWNERSHIP:

                  On and following the Effective Date:

                  4.1.1    For the avoidance of doubt, the Elan Patents, the
                           Elan Know-How, the Elan Improvements and/or the Elan
                           Trademarks shall remain the sole and exclusive
                           property of Elan.


                                       14
<PAGE>


                           Elan confirms that no Elan Improvements were
                           developed pursuant to the Project, or otherwise
                           pursuant to the Newco Agreements.

                  4.1.2    For the avoidance of doubt, the Atrix Patents, the
                           Atrix Know-How, the Atrix Improvements and/or the
                           Atrix Trademarks shall remain the sole and exclusive
                           property of Atrix.

                           A full list of the Atrix Improvements developed
                           pursuant to the Project or otherwise pursuant to the
                           Newco Agreements and/or Atrix License Agreement is
                           set forth in Schedule 4.1.2.

                  4.1.3    All Newco Intellectual Property shall remain the sole
                           and exclusive property of Newco.

                           A full list of Newco Intellectual Property developed
                           pursuant to the Project or otherwise pursuant to the
                           Newco Agreements and/or Atrix License Agreement is
                           set forth in Schedule 4.1.3.


5        RIGHTS RELATED TO SECURITIES

         5.1      Nothing contained herein shall constitute a waiver of any
                  right of EPIL Shannon, EPIL III or EIS or any of their
                  respective successors and assigns with respect to their
                  respective ownership of securities in Atrix under any
                  agreements of any kind in existence with Atrix with respect
                  thereto, which agreements shall remain unmodified and in full
                  force and effect, except as set forth in Schedule 5.1 hereof.

6        SALE OF SHARES AND COMPLETION

         6.1      Subject to the terms of this Agreement:

                  6.1.1    EIS shall sell as legal and beneficial owner and
                           Atrix shall purchase, free from all liens, charges
                           and encumbrances and together with all rights now or
                           hereafter attaching to them, the EIS Shares; and

                  6.1.2    the EIS Shares will be sold by EIS to Atrix for a
                           total initial consideration of $10 (the "INITIAL
                           CONSIDERATION") and the Deferred Consideration.

         6.2      On the Effective Date, Elan and Atrix shall take or (to the
                  extent that the same is within its powers) cause to be taken
                  the following steps prior to or at directors and shareholders
                  meetings of Newco, or such other meetings, as appropriate:


                                       15
<PAGE>


                  6.2.1    the delivery by EIS to Atrix of a stock transfer form
                           in respect of the EIS Shares duly executed by EIS in
                           favor of Atrix or as it may direct together with the
                           related share certificates;

                  6.2.2    the payment by Atrix to EIS of the Initial
                           Consideration;

                  6.2.3    the transfer to Atrix (or as it may direct) of the
                           share register, and all books and records of Newco in
                           the possession of Elan (including any minute books
                           and any company seal(s));

                  6.2.4    the change of the registered office of Newco from
                           Clarendon House, 2 Church St., Hamilton, Bermuda;

                  6.2.5    the resignation of the EIS Director on Newco's Board
                           of Directors and any alternate director of the EIS
                           Director;

                  6.2.6    the adoption of new Bye-Laws of Newco;

                  6.2.7    the modification, as appropriate, by board
                           resolutions of Newco of matters such as the removal
                           of EIS as book keeper for Newco, the removal of EIS
                           representatives as authorized signatories of Newco's
                           bank account, the resignation of the Company
                           Secretary and any other related matters whatsoever;

                  6.2.8    any other steps required by this Agreement.

         6.3      Atrix shall, following the Effective Date, promptly notify the
                  Bermuda Monetary Authority of the transfer of the EIS Shares.

         6.4      DEFERRED CONSIDERATION

                  6.4.1    In consideration of the sale by EIS to Atrix of the
                           EIS Shares under Clause 6.1, Atrix and its Affiliates
                           (except for Newco) shall be jointly and severally
                           liable to pay to EIS deferred consideration
                           ("DEFERRED CONSIDERATION"), which shall be calculated
                           as follows:

                           (1)      If Newco and/or Atrix, and/or an Affiliate
                                    of Newco and/or Atrix, sells the Deferred
                                    Consideration Product and/or Newco IP
                                    Product In Market, then 3% of Net Sales in
                                    the Territory shall be payable to EIS during
                                    the Deferred Consideration Period; and

                           (2)      If Newco and/or Atrix, and/or an Affiliate
                                    of Newco and/or Atrix, enters into a
                                    Commercialization Agreement with any third
                                    party then 10% of Net Revenues received from


                                       16
<PAGE>


                                    such third party shall be payable to EIS
                                    during the Deferred Consideration Period.

7        CONFIDENTIALITY

         7.1      CONFIDENTIALITY:

                  7.1.1    The Parties agree that it may be necessary pursuant
                           to this Agreement, from time to time, to disclose to
                           each other confidential and proprietary information,
                           including without limitation, inventions, trade
                           secrets, specifications, designs, data, know-how and
                           other proprietary information, processes, services
                           and business of the disclosing Party.

                           The foregoing together with the terms of this
                           Agreement shall be referred to collectively as
                           "ADDITIONAL CONFIDENTIAL INFORMATION".

                           The Parties also agree that it may have been
                           necessary to disclose to each other Confidential
                           Information (as defined in the JDOA) pursuant to the
                           Newco Agreements and/or Atrix License Agreement.

                           Together Additional Confidential Information and
                           Confidential Information shall be referred to
                           collectively as "PROPRIETARY INFORMATION".

                  7.1.2    Save as otherwise specifically provided herein, and
                           subject to Clauses 7.2 and 7.3, each Party shall
                           disclose Proprietary Information of another Party
                           only to those employees, representatives and agents
                           requiring knowledge thereof in connection with
                           fulfilling the Party's obligations under this
                           Agreement, and not to any other third party.

                           Each Party further agrees to inform all such
                           employees, representatives and agents of the terms
                           and provisions of this Agreement relating to
                           Proprietary Information and their duties hereunder
                           and to obtain their agreement hereto as a condition
                           of receiving Proprietary Information.

                           Each Party shall exercise the same standard of care
                           as it would itself exercise in relation to its own
                           confidential information (but in no event less than a
                           reasonable standard of care) to protect and preserve
                           the proprietary and confidential nature of the
                           Proprietary Information disclosed to it by another
                           Party.


                                       17
<PAGE>


                           Each Party shall promptly, upon request of another
                           Party, return all documents and any copies thereof
                           containing Proprietary Information belonging to, or
                           disclosed by, such Party, save that it may retain one
                           copy of the same solely for the purposes of ensuring
                           compliance with this Clause 7.

                  7.1.3    Any breach of this Clause 7 by any person informed by
                           one of the Parties is considered a breach by the
                           Party itself.

                  7.1.4    Proprietary Information shall be deemed not to
                           include:

                           (1)      information which is in the public domain;

                           (2)      information which is made public through no
                                    breach of this Agreement;

                           (3)      information which is independently developed
                                    by a Party, as evidenced by such Party's
                                    records;

                           (4)      information that becomes available to a
                                    receiving Party on a non-confidential basis,
                                    whether directly or indirectly, from a
                                    source other than another Party, which
                                    source did not acquire this information on a
                                    confidential basis.

                  7.1.5    The provisions relating to confidentiality in this
                           Clause 7 shall remain in effect during the term of
                           this Agreement, and for a period of 10 years
                           following the Effective Date of this Agreement.

                  7.1.6    The Parties agree that the obligations of this Clause
                           7 are necessary and reasonable in order to protect
                           the Parties' respective businesses, and each Party
                           agrees that monetary damages may be inadequate to
                           compensate a Party for any breach by another Party of
                           its covenants and agreements set forth herein.

                           The Parties agree that any such violation or
                           threatened violation may cause irreparable injury to
                           a Party and that, in addition to any other remedies
                           that may be available, in law and equity or
                           otherwise, each Party shall be entitled to seek
                           injunctive relief against the threatened breach of
                           the provisions of this Clause 7, or a continuation of
                           any such breach by another Party, specific
                           performance and other equitable relief to redress
                           such breach together with damages and reasonable
                           counsel fees and expenses to enforce its rights
                           hereunder.


                                       18
<PAGE>


         7.2      ANNOUNCEMENTS:

                  Subject to Clause 7.3, no announcement or public statement
                  concerning the existence, subject matter or any term of this
                  Agreement shall be made by or on behalf of any Party without
                  the prior written approval of the other Parties.

                  The terms of any such announcement shall be agreed in good
                  faith by the Parties.

         7.3      REQUIRED DISCLOSURES:

                  7.3.1    A Party (the "DISCLOSING PARTY") will be entitled to
                           make an announcement or public statement concerning
                           the existence, subject matter or any term of this
                           Agreement, or to disclose Proprietary Information
                           that the Disclosing Party is required to make or
                           disclose pursuant to:

                           (1)      a valid order of a court or governmental
                                    authority; or

                           (2)      any other requirement of law or any
                                    securities or stock exchange;

                           provided that if the Disclosing Party becomes legally
                           required to make such announcement, public statement
                           or disclosure hereunder, the Disclosing Party shall
                           give the other Parties prompt notice of such fact to
                           enable the other Parties to seek a protective order
                           or other appropriate remedy concerning any such
                           announcement, public statement or disclosure.

                           The Disclosing Party shall reasonably co-operate with
                           the other Parties, at the other Party's cost and
                           expense, in connection with that other Party's or
                           Parties' efforts to obtain any such order or other
                           remedy.

                           If any such order or other remedy does not fully
                           preclude announcement, public statement or
                           disclosure, the Disclosing Party shall make such
                           announcement, public statement or disclosure only to
                           the extent that the same is legally required.

                  7.3.2    Each of the Parties shall be entitled to provide a
                           copy of this Agreement (and any subsequent amendments
                           hereto) and the Newco Agreements to a potential third
                           party purchaser in connection with Clause 10.2.1(1)
                           and EIS (and/or any Affiliate) shall also be so
                           entitled in connection with Clause 10.2.2; PROVIDED
                           THAT the relevant third party purchaser or assignee
                           has entered into a confidentiality agreement on terms
                           no less protective than the terms of this Clause 7.


                                       19
<PAGE>


8        WAIVER OF ACCRUED RIGHTS/MUTUAL RELEASES

         8.1      With effect from the Effective Date, each Party and each of
                  its Affiliates ("RELEASOR"):

                  8.1.1    waives any accrued rights that Releasor may have
                           accrued against the other Parties and each of its
                           Affiliates, officers, directors, representative,
                           agents and employees and the assigns and successors
                           in interest of any of the foregoing entities
                           ("RELEASEES"), whether known or unknown, foreseen or
                           unforeseen, fixed or contingent, of any nature
                           whatsoever from the beginning of time to the
                           Effective Date under the Newco Agreements and Atrix
                           License Agreement; and

                  8.1.2    fully and finally releases and discharges the
                           Releasees from any and all manner of actions, claims,
                           promises, debts, sums of money, demands, obligations,
                           in law or in equity, directly or indirectly, whether
                           known or unknown, foreseen or unforeseen, fixed or
                           contingent, of any nature whatsoever that Releasor
                           may have by reason of any act, omission, matter,
                           provision, cause or thing whatsoever from the
                           beginning of time to the Effective Date under the
                           Newco Agreements and Atrix License Agreement.

         8.2      For the avoidance of doubt the provisions of this Clause 8
                  shall not in any way act as a waiver by any of the Parties in
                  respect of any of the provisions set forth in this Agreement
                  (including, for the avoidance of doubt, Clause 3.8.1).

9        PAYMENTS, REPORTS AND AUDITS

         9.1      With reference to Clause 6.4, Atrix and/or Newco, and/or any
                  Affiliate of Atrix and/or Newco, shall immediately following
                  the execution of any Commercialization Agreement (and any
                  subsequent amendment thereto), provide Elan with a copy of the
                  financial provisions and any other relevant terms of such
                  Commercialization Agreement.

         9.2      Atrix and Newco shall keep true and accurate records of Net
                  Revenues and Net Sales and any deductions made in calculating
                  same. Where Atrix and/or Newco or any Affiliates of Atrix
                  and/or Newco have Net Revenues and/or Net Sales, Atrix and/or
                  Newco, as the case may be, shall deliver to EIS a written
                  statement (the "STATEMENT") thereof within 45 days following
                  the end of each calendar quarter (or any part thereof) setting
                  forth in reasonable detail the calculation of Deferred
                  Consideration in respect of Net Sales and Net Revenues
                  attributable to each Deferred Consideration Product.


                                       20
<PAGE>


         9.3      Payments due on Net Revenues and Net Sales on amounts in a
                  currency other than US Dollars shall first be calculated in
                  the foreign currency and then converted to US Dollars on the
                  basis of the exchange rate in effect for the purchase of US
                  Dollars with such foreign currency quoted in the Wall Street
                  Journal (or comparable publication if not quoted in the Wall
                  Street Journal).

         9.4      Any income or other taxes which Atrix and/or its Affiliates
                  (excluding Newco) are required by law to pay or withhold on
                  behalf of EIS with respect to such Net Revenues and Net Sales
                  payments under this Agreement shall be deducted from the
                  amount of such Net Revenues and Net Sales payments. Atrix
                  and/or its Affiliates (excluding Newco), as the case may be,
                  shall furnish EIS with proof of such payments. Atrix and/or
                  its Affiliates (excluding Newco), as the case may be, shall
                  promptly provide EIS with a certificate or other documentary
                  evidence to enable EIS to support a claim for a refund or a
                  foreign tax credit with respect to any such tax so withheld or
                  deducted by Atrix and/or its Affiliates (excluding Newco), as
                  the case may be. The Parties will reasonably cooperate in
                  completing and filing documents required under the provisions
                  of any applicable tax treaty or under any other applicable
                  law, in order to enable Atrix and/or its Affiliates (excluding
                  Newco), as the case may be, to make such payments to EIS
                  without any deduction or withholding.

         9.5      Payment of monies hereunder shall be made by Atrix and/or its
                  Affiliates (excluding Newco), as the case may be to EIS within
                  45 days of the Statement.

                  All payments due hereunder shall be made in U.S. Dollars.

         9.6      All payments due hereunder shall be made to the designated
                  bank account of EIS in accordance with such timely written
                  instructions as EIS shall from time to time provide.

         9.7      Without prejudice to EIS's other remedies hereunder, Atrix
                  and/or its Affiliates (excluding Newco), as the case may be,
                  shall pay interest to EIS on sums not paid to EIS on the date
                  on which payment should have been made pursuant to the
                  applicable provisions of this Agreement ("DUE DATE") over the
                  period from the Due Date until the date of actual payment
                  (both before and after judgment) at the Prime Rate publicly
                  announced by Morgan Guaranty Trust Company of New York at its
                  principal office on the Due Date (or next to occur business
                  day, if such date is not a business day) plus 5%, such
                  interest payable on demand from time to time and compounded
                  monthly.


                                       21
<PAGE>


         9.8      For the 180 day period following the close of each calendar
                  year of the Agreement, Atrix and/or its Affiliates (excluding
                  Newco), as the case may be, shall, upon reasonable advance
                  notice to Atrix or the relevant Affiliate, provide EIS's
                  independent certified accounting firm (reasonably acceptable
                  to Atrix) ("ACCOUNTANT") with access, subject to reasonable
                  advance notice and during Atrix's regular business hours and
                  subject to the confidentiality provisions as contained in this
                  Agreement, to Atrix's and/or its Affiliates (excluding Newco),
                  as the case may be, books and records solely for the purpose
                  of verifying the accuracy and reasonable composition of the
                  Deferred Consideration for the calendar year then ended. If
                  the Accountant concludes that an underpayment was made, Atrix
                  shall pay EIS the amount of any such underpayments, plus
                  interest at a rate equal to the Prime Rate plus 5% accruing
                  from the date such payment was first due to EIS, within thirty
                  (30) days of the date of delivery of the Accountant's report
                  concluding an underpayment was made to EIS. If the Accountant
                  concludes that such payments were overpaid, EIS shall refund
                  the amount of any such overpayments, within thirty (30) days
                  of the date Atrix delivers to EIS such Accountant's report so
                  concluding that such payments were overpaid.

         9.9      In the event that Atrix and/or Newco, and/or an Affiliate of
                  Atrix and/or Newco, shall sell the Deferred Consideration
                  Product or the Newco IP Product to any third party, or enter
                  into any Commercialization Agreement with respect thereto with
                  any third party, together with other products of Atrix and/or
                  Newco, and/or an Affiliate of Atrix and/or Newco, by the
                  method commonly known in the pharmaceutical industry as
                  "bundling" and the price attributable to the Deferred
                  Consideration Product or the Newco IP Product is less than the
                  average price which would have been attributable thereto on an
                  "arms length" basis, the Net Sales or Net Revenues
                  attributable thereto hereunder shall be adjusted by the
                  Parties to reflect an average price on an "arms length" basis.

10       GENERAL

         10.1     GOVERNING LAW AND JURISDICTION:

                  10.1.1   This Agreement shall be governed by and construed in
                           accordance with the laws of the State of New York,
                           without regard to conflicts of law principles under
                           the laws of the State of New York.

                  10.1.2   For the purposes of this Agreement, the Parties
                           submit to the nonexclusive jurisdiction of the State
                           and Federal Courts of New York.

         10.2     ASSIGNMENT:


                                       22
<PAGE>


                  10.2.1   Subject to Clause 10.2.2 and Clause 10.2.3, this
                           Agreement shall not be assigned by any Party without
                           the prior written consent of the others, save that
                           any Party:

                           (1)      may assign this Agreement in whole or in
                                    part and delegate its duties hereunder to
                                    its Affiliate or Affiliates without such
                                    consent; and

                           (2)      may assign its rights and obligations to a
                                    successor (whether by merger, consolidation,
                                    reorganization or other similar event) or
                                    purchaser of all or substantially all of its
                                    assets relating to such Party's technology
                                    related to this Agreement, provided that
                                    such successor or purchaser has agreed in
                                    writing to assume all of such Party's rights
                                    and obligations hereunder and a copy of such
                                    assumption is provided to the other Parties.

                  10.2.2   EIS (and/or any Affiliate) shall be entitled to
                           assign the rights of EIS (or any Affiliate) to the
                           Deferred Consideration under Clause 6.4 without the
                           consent of any other Party hereto. EIS (and/or any
                           Affiliate) shall notify the other Parties hereto of
                           any such assignment within a reasonable time
                           following any such assignment.

                  10.2.3   For the avoidance of doubt, nothing in this Clause
                           10.2 shall affect the provisions governing assignment
                           of securities in Schedule 5.1 hereof.

         10.3     NOTICES:

                  10.3.1   Any notice to be given under this Agreement shall be
                           sent in writing in English by registered airmail,
                           internationally recognized courier or telefaxed to
                           the following addresses:

                           If to Newco at:

                                    Transmucosal Technologies Ltd
                                    c/o Atrix Laboratories, Inc.
                                    2579 Midpoint Drive
                                    Fort Collins, CO 80525-4417
                                    USA
                                    Attention:       Vice President,
                                                     Business Development
                                    Telephone:       970-212-4803
                                    Fax:             970-482-9735


                                       23
<PAGE>



                           with a copy to Atrix at the address set forth below.

                           If to Atrix at:

                                    Atrix Laboratories, Inc.
                                    2579 Midpoint Drive
                                    Fort Collins, CO 80525-4417
                                    USA
                                    Attention:       Vice President,
                                                     Business Development
                                    Telephone:       970-482-5868
                                    Fax:             970-482-9735

                                    with a copy to:

                                    Morrison & Foerster LLP
                                    5200 Republic Plaza
                                    370 17th Street
                                    Denver, Colorado  80202-5638
                                    USA
                                    Attention:       Warren L. Troupe, Esq.
                                    Telephone:       303-592-2255
                                    Facsimile:       303-592-1510


                           If to EIS and/or EPIL Shannon at:

                                    Elan Pharma International Limited
                                    Elan International Services, Ltd.
                                    c/o Elan International Services, Ltd.
                                    102 St. James Court
                                    Flatts,
                                    Smiths FL04
                                    Bermuda
                                    Attention:       Secretary
                                    Telephone:       441 292 9169
                                    Fax:             441 292 2224

                           or to such other address (es) and telefax numbers as
                           may from time to time be notified by any Party to the
                           others hereunder.

                  10.3.2   Any notice sent by mail shall be deemed to have been
                           delivered within seven (7) working days after
                           dispatch or delivery to the relevant courier and
                           notice sent by fax shall be deemed to have been
                           delivered upon confirmation receipt. Notice of change
                           of address shall be effective upon receipt.


                                       24
<PAGE>


         10.4     WAIVER:

                  No waiver of any right under this Agreement shall be deemed
                  effective unless contained in a written document signed by the
                  Party charged with such waiver, and no waiver of any breach or
                  failure to perform shall be deemed to be a waiver of any
                  future breach or failure to perform or of any other right
                  arising under this Agreement.

         10.5     SEVERABILITY:

                  If any provision in this Agreement is agreed by the Parties to
                  be, or is deemed to be, or becomes invalid, illegal, void or
                  unenforceable under any law that is applicable hereto:

                  10.5.1   such provision will be deemed amended to conform to
                           applicable laws so as to be valid and enforceable; or

                  10.5.2   if it cannot be so amended without materially
                           altering the intention of the Parties, it will be
                           deleted, with effect from the date of this Agreement
                           or such earlier date as the Parties may agree, and
                           the validity, legality and enforceability of the
                           remaining provisions of this Agreement shall not be
                           impaired or affected in any way.

         10.6     FURTHER ASSURANCES:

                  At the request of any of the Parties, the other Party or
                  Parties shall (and shall use reasonable efforts to procure
                  that any other necessary parties shall) execute and perform
                  all such documents, acts and things as may reasonably be
                  required subsequent to the signing of this Agreement for
                  assuring to or vesting in the requesting Party the full
                  benefit of the terms hereof.

         10.7     SUCCESSORS:

                  This Agreement shall be binding upon and inure to the benefit
                  of the Parties hereto and their respective successors and
                  permitted assigns.

         10.8     AMENDMENTS:

                  No amendment, modification or addition hereto shall be
                  effective or binding on any Party unless set forth in writing
                  and executed by a duly authorized representative of each
                  Party.


                                       25
<PAGE>


         10.9     COUNTERPARTS:

                  This Agreement may be executed in any number of counterparts,
                  each of which when so executed shall be deemed to be an
                  original and all of which when taken together shall constitute
                  this Agreement.

         10.10    COSTS:

                  Each Party shall bear its own costs and expenses in connection
                  with the transactions contemplated by this Agreement.

         10.11    FORCE MAJEURE:

                  No Party to this Agreement shall be liable for failure or
                  delay in the performance of any of its obligations hereunder
                  if such failure or delay results from Force Majeure, but any
                  such failure or delay shall be remedied by such Party as soon
                  as practicable; provided, however, that, no Party to this
                  Agreement shall be excused for a failure or delay in the
                  performance of any of its payment obligations hereunder, even
                  if such failure or delay results from Force Majeure.

         10.12    RELATIONSHIP OF THE PARTIES:

                  The Parties are independent contractors under this Agreement.
                  Nothing herein contained shall be deemed to create or
                  establish an employment, agency, joint venture, or partnership
                  relationship between the Parties or any of their agents or
                  employees, or any other legal arrangement that would impose
                  liability upon one Party for the act or failure to act of
                  another Party. No Party shall have any express or implied
                  power to enter into any contracts, commitments or negotiations
                  or to incur any liabilities in the name of, or on behalf of,
                  another Party, or to bind another Party in any respect
                  whatsoever.

         10.13    ENTIRE AGREEMENT:

                  10.13.1  This Agreement sets forth all of the agreements and
                           understandings between the Parties with respect to
                           the subject matter hereof. There are no agreements or
                           understandings with respect to the subject matter
                           hereof, either oral or written, between the Parties
                           other than as set forth in this Agreement.

                  10.13.2  No provision of this Agreement shall be construed so
                           as to negate, modify or affect in any way the
                           provisions of any other agreement between the Parties
                           unless specifically provided herein and only to the
                           extent so specified.

IN WITNESS WHEREOF the Parties have executed this Agreement.


                                       26
<PAGE>


SIGNED

BY: /s/ Debbie Buryj
   ---------------------------
for and on behalf of
ELAN PHARMA INTERNATIONAL LIMITED


SIGNED

BY: /s/ Debbie Buryj
   ---------------------------
for and on behalf of
ELAN INTERNATIONAL SERVICES, LTD.


SIGNED

BY: /s/ Allison Smith
   ---------------------------
for and on behalf of
TRANSMUCOSAL TECHNOLOGIES LTD.


SIGNED


BY: /s/ David R. Bethune
   ---------------------------
for and on behalf of
ATRIX LABORATORIES, INC.



                                       27
<PAGE>

                                   SCHEDULE 1

                                  BALANCE SHEET

<Table>
<Caption>
                                                                     JUNE 30, 2003
                                                                    --------------
<S>                                                                 <C>
                                 ASSETS

Cash                                                                $        1,864
Prepaid expense                                                     $        3,140
Interest receivable                                                 $           --
                                                                    --------------
Total Assets                                                        $        5,004
                                                                    ==============

                               LIABILITIES

Current liabilities
  Accounts payable and accrued expenses                             $           --
  Due to Atrix, Inc                                                 $      118,218
  Due to Elan                                                       $           --
                                                                    --------------
Total current liabilities                                           $      118,218
                                                                    ==============

                          SHAREHOLDERS' EQUITY

SHARE CAPITAL:
Non-voting convertible preferred stock, $1.00 par value;
6,000 shares authorized and outstanding:
           Atrix Laboratories - 3,612 preferred shares              $        3,612
                  EIS - 2,388 preferred shares                      $        2,388
                                                                    --------------
                                                                    $        6,000
                                                                    --------------
Voting common stock, $1.00 par value;
  6,000 shares authorized and outstanding
                                                                    --------------
           Atrix Laboratories - 6,000 common shares                 $        6,000
                                                                    --------------

  TOTAL SHARE CAPITAL                                               $       12,000
                                                                    ==============

CONTRIBUTED SURPLUS:
      Atrix Laboratories - Common shares                            $    7,494,000
      Atrix Laboratories - Preferred shares                         $    4,511,388
                                                                    --------------
                                                                    $   12,005,388
                                                                    --------------

                                                                    --------------
      EIS - Preferred shares                                        $    2,982,612
                                                                    --------------


      Capital Funding - Atrix Laboratories                          $    4,467,046
      Capital Funding - EIS                                         $    1,109,790

  TOTAL CONTRIBUTED SURPLUS                                         $   20,564,836
                                                                    ==============

YTD NET INCOME (LOSS)                                               $      (96,365)
ACCUMULATED DEFICIT                                                 $  (20,593,685)

Total shareholders' equity                                          $     (113,213)
                                                                    ==============

  Total liabilities and shareholders' equity                        $        5,004
                                                                    ==============
</Table>



                                       28
<PAGE>


                                  SCHEDULE 2.3

                                    PAYMENTS


Atrix:              $ 97,634.54

EIS:                $ 24,256.26

TOTAL               $121,890.80

The above amounts include payments to be made by Newco on the Effective Date to
Codan Corporate Administrative Services in the amount of $7.85 and Conyers Dill
& Pearman in the amount of $3,664.95, for services rendered through the
Effective Date, and to Atrix in the amount $118,218.00.


                                       29
<PAGE>


                                  SCHEDULE 3.6

                             REGULATORY APPLICATIONS

BEMA-fentanyl IND #62,864 was received by the FDA on July 1, 2002



                                       30
<PAGE>


                                 SCHEDULE 4.1.2

                               ATRIX IMPROVEMENTS


U.S. Patent Applications filed since July 18, 2000 and pending

<Table>
<Caption>
Serial Number           Matter Title
=============           ============
<S>                     <C>

09/909,671              Process and delivery vessel for lyophilizing active agent

09/684,682              Pharmaceutical carrier device suitable for delivery of
                        pharmaceutical compounds to mucosal surfaces

10/456,814              Coupling syringe system and methods for obtaining a
                        mixed composition

10/373,400              Polymeric delivery formulations of leuprolide with
                        improved efficacy

10/121,430              Process for loading a drug delivery device

10/391,480              Process an delivery vessel for lyophilized active agent

60/454,100              Compositions and methods for treatment of tumors

60/441,829              Bioerodible film for delivery of pharmaceutical
                        compounds to mucosal surfaces

60/359,396              Nucleic acid formulation for the prevention and
                        treatment of sexually transmitted diseases

60/425,508              Adhesive bioerodible ocular drug delivery system

10/284,682              A protectant for UV-induced skin damage

10/081,050              Topical dapsone for the treatment of acne
</Table>

US Patents allowed but not issued since July 18, 2000

<Table>
<Caption>
Serial Number           Matter Title
=============           ============
<S>                     <C>

09/643,289              Controlled release liquid delivery compositions with low
                        initial drug burst

10/054,624              Cover plate for use in lyophilization
</Table>


                                       31
<PAGE>



US Patents issued since July 18, 2000


<Table>
<Caption>
Serial Number           Matter Title
=============           ============
<S>                     <C>

6,120,789               Nonpolymeric sustained release delivery system

6,159,498               Bioerodible film for delivery of pharmaceutical
                        compounds to mucosal surfaces

6,290,984               Pharmaceutical preparation applicable to mucosal
                        surfaces and body tissues

6,103,266               Pharmaceutical preparation applicable to mucosal
                        surfaces and body tissues

6,355,657               System for percutaneous delivery of opioid analgesics

6,395,293               Biodegradeable implant precursor

6,432,415               Pharmceutical gel and aerosol formulations and methods
                        to administer the same to skin and mucosal surfaces

Re.37,950               Biodegradeable in-situ forming implants and methods of
                        producing the same

6,245,345               Filamentous porous films and methods for producing the
                        same

6,537,565               Filamentous porous films and methods for producing the
                        same

6,261,583               Moldable solid delivery system

6,143,314               Controlled release liquid delivery compositions with low
                        initial drug burst

6,566,144               Cover plate for use in lyophilization

6,461,631               Biodegradeable polymer composition

6,528,080               Biodegradeable polymer composition

6,565,874               Polymeric delivery formulations of leuprolide with
                        improved efficacy
</Table>


                                       32
<PAGE>


                                 SCHEDULE 4.1.3

                           NEWCO INTELLECTUAL PROPERTY

Data created between July 18, 2000 and the Effective Date related to
formulations of BEMA-fentanyl and BEMA-ondansetron, all as set forth below:

     1.   Data generated by Preclinical (animal) studies performed on various
          formulations of BEMA-fentanyl;

     2.   Data generated by a Clinical (human) study: Atrix Study No. FEN0104: A
          Single Center, Randomized, Single Dose, Crossover, Pharmacokinetic
          Study Comparing The Bioavailability Of BEMA*-Fentanyl (AL-3701.02) To
          A Reference Oral Transmucosal Fentanyl Citrate (Actiq(R)) In Healthy
          Volunteers; and

     3.   Data generated by Preclinical (animal) studies performed on various
          formulations of BEMA-ondansetron.


<PAGE>

                                  SCHEDULE 5.1

                        RIGHTS RELATED TO THE SECURITIES;
                       AMENDMENTS TO THE FINANCE DOCUMENTS


1. DEVELOPMENT FUNDING; TERMINATION OF CONVERTIBLE PROMISSORY NOTE

Effective as of the Effective Date, in accordance with Clause 2.1.2 hereof, the
Note is hereby cancelled and is of no further force and effect.

The parties acknowledge and agree that no amounts were drawn down under the Note
as of the Effective Date.

2. TRANSFER RESTRICTIONS

The following provisions are hereby amended as follows, effective as of the
Effective Date:

Section 1(e) ("Exemption from Registration") of the Securities Purchase
Agreement (as to second legend only) is hereby deleted in its entirety and is of
no further force and effect.

Section 15 ("Assignments and Transfers") of the Securities Purchase Agreement is
hereby amended by (i) deleting the word "permitted" in the first sentence
thereof, (ii) deleting the second and third sentences thereof in their entirety,
and (iii) adding a new second sentence to read as follows: "The Company shall
not assign all or any part of this Agreement without the prior written consent
of the other parties.".

Section 10 ("Transfer of Registration Rights") of the Atrix Registration Rights
Agreement is hereby deleted in its entirety and is of no further force and
effect. Section 14(d) ("Successors and Assigns") of the Atrix Registration
Rights Agreement is hereby amended by (i) deleting the word "permitted" in the
second sentence thereof and (ii) deleting in the second sentence thereof ", in
accordance with Section 10 hereof".

Section 5(b) (i) of the Warrant is hereby deleted in its entirety and replaced
by the following: "This Warrant may be transferred or assigned by the Holder, in
whole or in part; provided, however, that the transferor shall continue to be
liable and obligated for its respective obligations hereunder after any such
assignment. This Warrant and all of the provisions hereof shall be binding upon
and inure to the benefit of the Holders and their respective successors and
assigns. The Company shall not assign any of its rights or obligations
hereunder."

3. PLEDGE/SECURITY INTEREST

Section 6 ("Pledge of Newco Stock") of the Securities Purchase Agreement is
hereby deleted in its entirety and is of no further force or effect whatsoever
as of the Effective Date.


                                       2
<PAGE>


4. EXCHANGE RIGHT

Neither Elan Corp nor any of its Affiliates has any intention of acquiring
shares of Series A Convertible Exchangeable Preferred Stock, $.001 par value, of
Atrix Laboratories, Inc. ("Series A Preferred") from Elan Pharmaceutical
Investments III, Ltd. ("EPIL III"). In the event that Elan Corp or any such
Affiliate nonetheless in the future acquires or otherwise obtains ownership or
control over such Series A Preferred, neither Elan Corp nor such Affiliate will
exercise the EIS Exchange Right (as defined in the Securities Purchase
Agreement) relating thereto.

5. SECURITIES PURCHASE AGREEMENT

For purposes of this Agreement, "EIS Exchange Right" shall have the meaning
given to the term "Exchange Right" in the Certificate of Designations.

Effective as of the Effective Date, Section 5(a) of the Securities Purchase
Agreement is hereby deleted in its entirety.

Effective as of the Effective Date, Section 5(c) of the Securities Purchase
Agreement is hereby amended to read in its entirety as follows:

         "(c) Conversion Rights. The Company acknowledges that the Certificate
         of Designations sets forth certain rights of the holders of shares of
         Series A Preferred Stock to convert such shares of Series A Preferred
         Stock into newly issued shares of Atrix Common Stock or successor
         securities to Atrix Common Stock, and agrees that it will not take any
         action which would impair such rights other than as otherwise permitted
         by the provisions thereof or the other Transaction Documents."


                                       3