<PAGE>   1
                                LICENSE AGREEMENT



                                     BETWEEN



                            ATRIX LABORATORIES, INC.


                                       AND


                           AMARILLO BIOSCIENCES, INC.






                                SEPTEMBER 7, 2001




<PAGE>   2






<Table>
<S>                  <C>                                                                           <C>
Article I DEFINITIONS....................................................................................6

Article II RESEARCH AND DEVELOPMENT.....................................................................12

     Section 2.01.   Atrix Obligations..................................................................12
     Section 2.02.   ABI Obligations....................................................................14
     Section 2.03.   Availability of Resources; Cooperation.............................................14
     Section 2.04.   Orphan Drug Certification..........................................................14
     Section 2.05.   Reporting Obligations of Atrix.....................................................15

Article III LICENSE.....................................................................................15

     Section 3.01.   License Grant......................................................................15
     Section 3.02.   Restrictions.......................................................................15
     Section 3.03.   Retained Rights....................................................................15

Article IV PAYMENTS AND ROYALTIES.......................................................................15

     Section 4.01.   Initial Fee........................................................................15
     Section 4.02.   Royalty Payments...................................................................16
     Section 4.03.   Milestone Payments.................................................................16
     Section 4.04.   Reports............................................................................17
     Section 4.05.   Records and Audits.................................................................17
     Section 4.06.   Exchange Rate; Manner and Place of Payment.........................................17
     Section 4.07.   Late Payments......................................................................17
     Section 4.08.   Taxes..............................................................................18

Article V TERM AND TERMINATION..........................................................................18

     Section 5.01.   Term...............................................................................18
     Section 5.02.   Termination By Atrix...............................................................18
     Section 5.03.   Termination By ABI.................................................................18
     Section 5.04.   Termination Upon Certain Events....................................................19
     Section 5.05.   Remedies...........................................................................19
     Section 5.06.   Effect of Termination..............................................................20
     Section 5.07.   Effect of Expiration or Termination by Atrix.......................................20
     Section 5.08.   Bankruptcy.........................................................................20
     Section 5.09.   Continuing Obligations.............................................................20
     Section 5.10.   Return of Confidential Information.................................................20

Article VI SUPPLY, MANUFACTURE AND PURCHASE OF PRODUCT..................................................21

     Section 6.01.   Supply of Clinical Samples.........................................................21
     Section 6.02.   Supply and Manufacturing Rights....................................................21
     Section 6.03.   Quality Assurance..................................................................22
     Section 6.04.   ABI's Duties.......................................................................22
     Section 6.05.   Failure to Supply..................................................................23
     Section 6.06.   Allocation.........................................................................23
     Section 6.07.   Records and Audits.................................................................24
</Table>




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<Table>
<S>                  <C>                                                                           <C>
Article VII PURCHASE AND SALE...........................................................................24

     Section 7.01.   Purchase Price and Payment.........................................................24
     Section 7.02.   Labeling and Artwork...............................................................24
     Section 7.03.   Purchase Forms.....................................................................25
     Section 7.04.   Confirmation.......................................................................25
     Section 7.05.   Delivery...........................................................................25
     Section 7.06.   Forecasts and Orders...............................................................25

Article VIII WARRANTY, REJECTION AND INSPECTIONS........................................................26

     Section 8.01.   ABI Warranty.......................................................................26
     Section 8.02.   Rejection of Product for Failure to Conform to Specifications......................27
     Section 8.03.   Atrix Inspections..................................................................27

Article IX REGULATORY COMPLIANCE........................................................................28

     Section 9.01.   Maintenance Of Marketing Authorizations............................................28
     Section 9.02.   Adverse Drug Event Reporting and Phase IV Surveillance.............................28
     Section 9.03.   Commercial Sale Testing And Reporting..............................................29
     Section 9.04.   Assistance.........................................................................29
     Section 9.05.   Compliance.........................................................................29

Article X PATENTS.......................................................................................29

     Section 10.01.   Maintenance of Patents............................................................29
     Section 10.02.   Cooperation.......................................................................29
     Section 10.03.   ABI to Prosecute Infringement.....................................................30
     Section 10.04.   Infringement Claimed by Third Parties.............................................30
     Section 10.05.   Third Party Licenses..............................................................30

Article XI REPRESENTATIONS, WARRANTIES AND COVENANTS....................................................31

     Section 11.01.   Corporate Power...................................................................31
     Section 11.02.   Due Authorization.................................................................31
     Section 11.03.   Binding Obligation................................................................31
     Section 11.04.   Ownership of ABI Patent Rights....................................................31
     Section 11.05.   Material Agreements...............................................................31
     Section 11.06.   Orphan Drug Designations..........................................................32
     Section 11.07.   Patent Proceedings................................................................32
     Section 11.08.   Adverse Properties................................................................32
     Section 11.09.   Preservation of Name and Reputation...............................................33
     Section 11.10.   Debarment.........................................................................33
     Section 11.11.   Limitation on Warranties..........................................................33
     Section 11.12.   Limitation of Liability...........................................................33

Article XII COVENANTS OF ATRIX AND ABI..................................................................33

     Section 12.01.   Covenant Not to Launch Competing Product..........................................33
     Section 12.02.   Access to Books and Records.......................................................33
</Table>



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<Table>
<S>                  <C>                                                                           <C>
     Section 12.03.   Further Actions...................................................................33
     Section 12.04.   Equitable Relief..................................................................34

Article XIII INDEMNIFICATION AND INSURANCE..............................................................34

     Section 13.01.   Atrix Indemnified by ABI..........................................................34
     Section 13.02.   ABI Indemnified by Atrix..........................................................35
     Section 13.03.   Prompt Notice Required............................................................35
     Section 13.04.   Indemnitor May Settle.............................................................35
     Section 13.05.   Insurance.........................................................................36

Article XIV DISPUTE RESOLUTION..........................................................................36

     Section 14.01.   Disputes..........................................................................36
     Section 14.02.   Trial Without Jury................................................................36
     Section 14.03.   Performance to Continue...........................................................36
     Section 14.04.   Provisional Remedies..............................................................37
     Section 14.05.   Determination of Patents and Other Intellectual Property..........................37

Article XV CONFIDENTIALITY..............................................................................37

     Section 15.01.   Confidentiality...................................................................37
     Section 15.02.   Publicity Review..................................................................37

Article XVI MISCELLANEOUS...............................................................................38

     Section 16.01.   No Solicitation...................................................................38
     Section 16.02.   Commercially Reasonable Efforts...................................................38
     Section 16.03.   Notices...........................................................................38
     Section 16.04.   Severability......................................................................39
     Section 16.05.   Entire Agreement/Merger...........................................................39
     Section 16.06.   Amendment.........................................................................40
     Section 16.07.   Counterparts......................................................................40
     Section 16.08.   No Waiver of Rights...............................................................40
     Section 16.09.   Force Majeure.....................................................................40
     Section 16.10.   Further Assurances................................................................40
     Section 16.11.   Assignment and Sublicense.........................................................40
     Section 16.12.   Expenses..........................................................................41
     Section 16.13.   Binding Effect....................................................................41
     Section 16.14.   Governing Law.....................................................................41
     Section 16.15.   Survival of Representations and Warranties........................................41
     Section 16.16.   No Strict Construction............................................................41
     Section 16.17.   Independent Contractors...........................................................41
</Table>

<Table>
<S>            <C>                                                                                      <C>
Exhibit A  --  ABI Patent Rights.........................................................................A-1
Exhibit B  --  Specifications............................................................................B-1
Exhibit C  --  Certificate of Compliance.................................................................C-1
</Table>


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<PAGE>   5



                                LICENSE AGREEMENT

         This License Agreement ("Agreement") is made as of September 7, 2001
(the "Effective Date"), by and between Atrix Laboratories, Inc., a Delaware
corporation ("Atrix"), with its principal place of business located at 2579
Midpoint Drive, Fort Collins, Colorado 80525-4417, and Amarillo Biosciences,
Inc., a Texas corporation ("ABI "), with its principal place of business located
at 800 W. 9th Avenue, Amarillo, Texas 79101. ABI and Atrix are sometimes
referred to collectively herein as the "Parties" and individually as a "Party."

         WHEREAS, ABI and its contract suppliers have substantial expertise in
the production and use of oral interferon alpha ("IFN") and have proprietary
rights and Know-How in the field of production, purification and formulation of
IFN;

         WHEREAS, ABI is willing to disclose to Atrix the ABI Know-How
consisting of human data for oral warts in HIV positive patients and Behcet's
Disease and all other data, including safety, bioavailability, and clinical
trial data necessary for Atrix to obtain regulatory approval for products for
the treatment of oral warts in HIV positive patients and Behcet's Disease in the
Territory; and

         WHEREAS, ABI has a non-exclusive worldwide license (except Japan) to
market and distribute the oral formulation of HBL IFN, and desires to provide
HBL IFN to Atrix on the terms and conditions herein set forth, and Atrix desires
to obtain the right to perform clinical trials on, distribute and market HBL IFN
on the terms and conditions herein set forth;

         WHEREAS, ABI owns certain proprietary information, intellectual
property, Patents and ABI Know-How, and other rights relating to the use of low
dose IFN for the treatment of oral warts in HIV positive patients and Behcet's
Disease;

         WHEREAS, subject to the terms of this Agreement, ABI desires to grant
to Atrix, and Atrix wishes to obtain from ABI, an exclusive license, subject to
existing rights, to such Patents, Know-How and related intellectual property
rights in the Territory in connection with the Products; and

         WHEREAS, ABI is willing to grant such rights and licenses to Atrix
under the terms and conditions hereinafter set forth.

         NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the Parties mutually agree as follows:



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<PAGE>   6




                                    ARTICLE I

                                   DEFINITIONS

                  (a) The following terms as used in the Agreement shall, unless
         the context clearly indicates to the contrary, have the meaning set
         forth below:



         "ABI Know-How" means all Know-How under the Control of ABI as of the
Effective Date and at any time during the Term related to (but not claimed
under) the ABI Patent Rights and which is necessary or useful to develop,
Manufacture and/or commercialize the Product, including all information,
reports, results, inventions, materials, and any other technical and scientific
data, specifications and formulae directly related to the development,
regulatory approval, Manufacture, testing, use, marketing and/or sale of
Product, including non-patentable Improvements, and any nonpublic information
relevant to the ABI Patent Rights, including preclinical and clinical data from
ABI's past, current or future studies, relating to safety or bioavailability, or
preclinical or clinical data relating to the use of HBL IFN and/or IFN for oral
warts or Behcet's Disease.

         "ABI Patent Rights" means all Patent Rights that are under the Control
of ABI as of the Effective Date and at any time during the Term that are
necessary or useful to the use, development, Manufacture, marketing, promotion,
distribution, sale and/or commercialization of the Products in the Territory for
use in the treatment of the Licensed Indications, and Improvements thereto
developed by or on behalf of ABI during the Term. The ABI Patent Rights as of
the Effective Date are set forth on Exhibit A.

         "ABI Technology" means the ABI Patent Rights and the ABI Know-How.

         "Acceptance for Filing" means Atrix's receipt of a letter issued by the
FDA indicating acceptance for filing of an NDA or equivalent marketing
application pursuant to Applicable Laws in the United States.

         "Act" means the United States Food, Drug and Cosmetic Act, as amended,
and all Regulations thereunder.

         "Affiliate" means any entity which directly or indirectly controls, is
controlled by or is under common control with either Atrix or ABI. The term
"control" as used in the preceding sentence means the power to direct or control
the affairs of such entity by reason of ownership of at least 50% of such entity
by voting stock, equity interest, contract or otherwise.

         "Applicable Laws" means all applicable laws, rules, regulations and
guidelines within or without the Territory that may apply to the marketing or
sale of the Products in the Territory or the performance of either Party's
obligations under this Agreement including laws, regulations and guidelines
governing the marketing, distribution and sale of the Products in the Territory,
to the extent applicable and relevant, and including all cGMP or current Good
Clinical Practices standards or guidelines promulgated by the FDA or the
Governmental Authorities and including trade association guidelines.



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<PAGE>   7


         "Approval Letter" means a letter issued by the FDA indicating approval
of a product for commercialization, as defined in 21 CFR Section 314.105.

         "Behcet's Orphan Drug Designation" means the orphan drug designation
granted to ABI on January 18, 2000 by the FDA for the use of IFN for the
treatment of Behcet's Disease.

         "Certificate of Compliance" means the certificate of compliance in the
form attached hereto as Exhibit C.

         "CFR" means the United States Code of Federal Regulations.

         "cGMP" means current good manufacturing practices as defined in 21 CFR
Section 110 et seq. and established under the Act and applicable Regulations.

         "Competing Product" means a product for human use that contains IFN and
is marketed, distributed or sold in the Territory that is likely to be confused
with or used as a substitution for any of the Products, such confusion and
likelihood of substitution being determined based on an analysis of factors such
as, but not limited to, recommended dosage, similarity in indications for which
it is marketed, distributed or sold, or similarity in tradedress or trademarks
used in the marketing, distribution or sale thereof.

         "Confidential Information" means any confidential information
(including Know-How) of a Party relating to any use, process, method, compound,
research project, work in process, future development, scientific, engineering,
Manufacturing, marketing, business plan, financial or personnel matter relating
to the disclosing Party, its present or future products, sales, suppliers,
customers, employees, investors or business, whether in oral, written, graphic
or electronic form. Confidential Information shall not include any information
which the receiving Party can prove by competent evidence:

                  (a) is now, or hereafter becomes, through no act or failure to
         act on the part of the receiving Party, generally known or available;

                  (b) is known by the receiving Party at the time of receiving
         such information, as evidenced by its written records maintained in the
         ordinary course of business;

                  (c) is hereafter furnished to the receiving Party by a Third
         Party, as a matter of right and without restriction on disclosure;

                  (d) is independently developed by the receiving Party, as
         evidenced by its written records, without knowledge of, and without the
         aid, application or use of, the disclosing Party's Confidential
         Information; or

                  (e) is the subject of a written permission to disclose
         provided by the disclosing Party.

         "Control" means the possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
or other arrangement with any Third Party.


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<PAGE>   8


         "Europe" means the countries located on the European continent and all
territories, possessions, commonwealths and dependencies thereof. Such countries
include, but are not limited to: Albania, Andorra, Austria, Belarus, Belgium,
Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark,
Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy,
Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malta, Moldova, Monaco,
Netherlands, Norway, Poland, Portugal, Romania, Russia, San Marino, Slovakia,
Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, Vatican
City, and Yugoslavia (Serbia and Montenegro).

         "Existing Licensees" means, as applicable, Pharma Pacific Management
Pty, Ltd., HBL and ****, their successors, transferees and licensees.

         "Existing Licenses" means, as applicable, the HBL Agreement, the PPM
Agreement and the ****.

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

         "First Commercial Sale" means the first sale for use, consumption or
resale of a Product by Atrix, its Affiliates or its sublicensees in the
Territory (excluding any sales for clinical trials). A sale to an Affiliate
shall not constitute a First Commercial Sale unless the Affiliate is the end
user of the Product.

         "GAAP" means United States generally accepted accounting principles,
consistently applied in accordance with past practice.

         "Good Clinical Practices" means good clinical practices as defined in
21 CFR Section 50 et. seq. and Section 312 et. seq.

         "Governmental Approval" means all permits, licenses and authorizations,
including Marketing Authorizations, required by the FDA or any other
Governmental Authority as a prerequisite to the Manufacturing, packaging,
marketing and selling of the Products.

         "Governmental Authority" means any federal, state, local or other
government, administrative or regulatory agency, authority, body, commission,
court, tribunal or similar entity, including the FDA and other entities in each
country in the Territory responsible for the regulation of medicinal products
intended for human use.

         "HBL" means Hayashibara Biochemical Laboratories, Inc.

         "HBL Agreement" means the Joint Development and Manufacturing/Supply
Agreement by and between HBL and ABI dated as of March 13, 1992, as amended by
the First Amendment to Joint Development and Manufacturing/Supply Agreement
dated as of January 17, 1996 and the Addendum to Manufacturing/Supply Agreements
dated as of May 10, 1996.

         "HBL IFN" means the cell culture derived human lymphoblastoid IFN
produced by HBL.




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<PAGE>   9


         "Hoffman-La Roche Agreement" means the License Agreement dated July 22,
1997 between ABI and Hoffman-La Roche, Inc.

         "Improvements" means any and all developments, inventions or
discoveries in the Licensed Indications relating to the ABI Patent Rights
developed, or acquired by ABI at any time during the Term and shall include
developments intended to enhance the safety and/or efficacy of a Product.

         "**** Agreement" means the ****.



         "Know-How" means all know-how, trade secrets, inventions, data,
processes, techniques, procedures, compositions, devices, methods, formulas,
protocols and information, whether or not patentable, which are not generally
publicly known, including, without limitation, all chemical, biochemical,
toxicological, and scientific research information, whether in written, graphic
or video form or any other form or format.

         "Licensed Indications" means only the human indications of oral warts
in HIV positive patients and Behcet's Disease treated or treatable by the oral
administration of IFN.

         "Manufacture" or "Manufacturing Process" means the storage, handling,
production, processing and packaging of the Product, in accordance with this
Agreement and Applicable Laws.

         "Marketing Authorization" means all necessary and appropriate
regulatory approvals, including Pricing and Reimbursement Approvals, where
applicable, to put a Product on the market in the Territory.

         "Material Agreements" means the Existing Licenses, the TAMU License
Agreement and the Hoffman-La Roche Agreement.

         "NDA" means a new drug application, biological license application or
establishment license application, as applicable, and all amendments and
supplements thereto, filed or to be filed, with the FDA seeking authorization
and approval to Manufacture, package, ship and sell a Product as more fully
described in the Regulations.

         "Net Sales" means ****.



         Components of Net Sales shall be determined in the ordinary course of
business in accordance with historical practice and using the accrual method of
accounting in accordance with GAAP, but shall not include any sales of a Product
for pre-clinical or clinical testing or for other than commercial purposes.

         In the event Atrix transfers a Product to a Third Party in a bona fide
arm's length transaction, for consideration, in whole or in part, other than
cash or to a Third Party in other than a bona fide





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<PAGE>   10


arm's length transaction, the Net Sales price for such Product shall be deemed
to be the standard invoice price then being invoiced by Atrix in an arms length
transaction with similar customers for similar amounts less the items set forth
in (a) through (f) above.

         "Oral Wart Orphan Drug Designation" means the orphan drug designation
granted to ABI on August 10, 2000 by the FDA for the use of IFN for the
treatment of papillomavirus warts in the oral cavity of HIV-positive patients.

         "Orphan Drug Designation(s)" means the Oral Wart Orphan Drug
Designation or the Behcet's Orphan Drug Designation or both, as the context
requires.

         "Patent Rights" means all rights under patents and patent applications,
and any and all patents issuing therefrom (including utility, model and design
patents and certificates of invention), together with any and all substitutions,
extensions (including supplemental protection certificates), registrations,
confirmations, reissues, divisional, continuations, continuations-in-part,
re-examinations, renewals and foreign counterparts of the foregoing and all
improvements, supplements, modifications or additions.

         "Phase III Study" means a well-controlled study of sufficient size and
appropriate design to demonstrate the safety and efficacy of the Product for its
intended use.

         "Phase IV" means, as applicable, a study or program designed to obtain
additional safety or efficacy data, detect new uses for a drug, or to determine
effectiveness for labeled indications under conditions of widespread usage,
which is commenced after Government Approval of the Product in the applicable
country in the Territory or any such study or program required by the FDA or
other applicable Governmental Authority.

         "PPM Agreement" means the PPM/ACC Sublicense Agreement dated April 27,
1995 by and between Pharma Pacific Management Pty, Ltd. and ABI.

         "Pricing and Reimbursement Approvals" means any pricing and
reimbursement approval that must be obtained before placing a Product on the
market in the territory in which such approval is required.

         "Prime Rate of Interest" means the prime rate of interest published
from time to time in The Wall Street Journal as the prime rate; provided,
however that if The Wall Street Journal does not publish the prime rate of
interest, then the term "Prime Rate of Interest" shall mean the rate of interest
publicly announced by Bank of America, N.A., as its prime rate, base rate,
reference rate or the equivalent of such rate, whether or not such bank makes
loans to customers at, above, or below said rate.

         "Product" or "Products" means a formulation or composition containing
IFN and designated, detailed, or labeled for oral use in the treatment of the
Licensed Indications.

         "Regulations" means regulations, statutes, rules, guidelines and
procedures promulgated by the FDA or other governmental agency pursuant to the
Act or other law, including without limitation, those regulations currently
contained in Title 21 of the CFR.


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         "Shipment" or "Shipped" means each individual group of Product received
by Atrix from ABI or its agent.

         "Specifications" means the specifications for the Products as may be
amended from time to time by Atrix on notice to ABI or in compliance with
Applicable Laws. The initial Specifications are attached hereto as Exhibit B.

         "TAMU License Agreement" means the License Agreement between The Texas
A&M University System and ABI dated March 22, 1988, as amended by Amendment No.
1 dated September 17, 1998.

         "Territory" means the United States, Europe and Canada and all
territories, possessions and commonwealths of Canada.

         "Third Party" means any entity other than ABI or Atrix or an Affiliate
of ABI or Atrix.

         "Unit" means a single finished dosage form of Product in the form
designated by Atrix, which initially, for clinical supplies, shall consist of a
200mg by weight, or 150 international units by activity, tablet or lozenge.

         "United States" means the United States and all territories,
possessions and commonwealths of the United States, Puerto Rico, Guam and the
U.S. Virgin Islands.

                  (b) Each of the following terms is defined in the Section or
         under the defined term set forth opposite such term below:


<Table>
<S>                                                    <C>
         ABI.......................................................Preamble
         ADE................................................Section 9.02(a)
         Agreement.................................................Preamble
         Atrix.....................................................Preamble
         Behcet's Disease Product..............................Section 2.01
         Clinical Records......................................Section 2.01
         Disputed Amount....................................Section 5.03(a)
         DMF...................................................Section 2.02
         Effective Date............................................Preamble
         Force Majeure........................................Section 16.09
         IFN.......................................................Recitals
         Indemnitee...........................................Section 13.03
         Indemnitor...........................................Section 13.03
         Initial Supply........................................Section 6.01
         Initiating Group.....................................Section 16.01
         Loss.................................................Section 13.01
         Oral Warts Product....................................Section 2.01
         Other Group..........................................Section 16.01
         Parties...................................................Preamble
         Party.....................................................Preamble
</Table>


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<PAGE>   12


<Table>
<S>                                                    <C>
         Purchase Price........................................Section 7.01
         Representatives......................................Section 15.01
         Royalty Payment Date..................................Section 4.02
         Royalty Statement.....................................Section 4.04
         SEC..................................................Section 15.02
         SOP................................................Section 9.02(c)
         Term..................................................Section 5.01
</Table>

                  (c) Interpretation. The section headings contained in this
         Agreement are for reference purposes only and shall not affect the
         meaning or interpretation of this Agreement. Except where the context
         clearly requires to the contrary: (i) each reference in this Agreement
         to a designated "Section" or "Exhibit" is to the corresponding Section
         or Exhibit of or to this Agreement; (ii) instances of gender or
         entity-specific usage (e.g., "his" "her" "its" "person" or
         "individual") shall not be interpreted to preclude the application of
         any provision of this Agreement to any individual or entity; (iii) the
         word "or" shall not be applied in its exclusive sense; (iv) "including"
         shall mean "including, without limitation"; (v) references to laws,
         regulations and other governmental rules, as well as to contracts,
         agreements and other instruments, shall mean such rules and instruments
         as in effect at the time of determination (taking into account any
         amendments thereto effective at such time without regard to whether
         such amendments were enacted or adopted after the effective date of
         this Agreement) and shall include all successor rules and instruments
         thereto; (vi) references to "$" or "dollars" shall mean the lawful
         currency of the United States; (vii) references to "Federal" or
         "federal" shall be to laws, agencies or other attributes of the United
         States (and not to any State or locality thereof); (viii) the meaning
         of the terms "domestic" and "foreign" shall be determined by reference
         to the United States; (ix) references to "days" shall mean calendar
         days; (x) references to months or years shall be to the actual calendar
         months or years at issue (taking into account the actual number of days
         in any such month or year); (xi) days, business days and times of day
         shall be determined by reference to local time in Denver, Colorado;
         (xii) the English language version of this Agreement shall govern all
         questions of interpretation relating to this Agreement, notwithstanding
         that this Agreement may have been translated into, and executed in,
         other languages; and (xiii) the terms "Product" and "Products" shall
         refer to each individual Product and all Products collectively, unless
         the context clearly indicates otherwise.

                                   ARTICLE II

                            RESEARCH AND DEVELOPMENT


         Section 2.01. ATRIX OBLIGATIONS.

                  (a) Atrix will use commercially reasonable efforts to timely
         complete at the sole cost and expense of Atrix (i) clinical trials and
         development of a Product for the treatment of each of the Licensed
         Indications (referred to herein respectively as the "Behcet's Disease
         Product" and the "Oral Warts Product"), (ii) animal toxicology and
         other pre-clinical studies required



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<PAGE>   13


         for commercial launch of the Products, (iii) Phase III Studies, and
         (iv) other tasks supporting commercialization of the final formulation
         of the Products.

                  (b) The Parties acknowledge that Atrix shall initially focus
         its efforts on the development of the Oral Warts Product and after the
         development thereof will focus its efforts on the development of the
         Behcet's Disease Product. Atrix shall use commercially reasonable
         efforts to timely secure any and all Governmental Approvals in the
         Territory and shall own and maintain all Governmental Approvals and
         related information as provided herein. The Parties agree and
         acknowledge that Governmental Approvals for each of the Behcet's
         Disease Product and the Oral Warts Product will first be sought in the
         United States and then, subject to receipt of such Governmental
         Approvals, Canada and Europe using the Governmental Approvals received
         in the United States. Atrix shall seek Governmental Approval for a
         Product in Canada no later than 12 months, and in a country in Europe
         chosen by Atrix in its sole discretion no later than six months,
         following receipt of an Approval Letter for such Product from the FDA;
         provided that if clinical trials or studies in addition to those
         required in connection with the Governmental Approvals for the United
         States are required for any Governmental Approval in Canada or such
         country in Europe, Atrix will seek such Governmental Approval in a
         commercially reasonable time period following receipt of an Approval
         Letter for a Product from the FDA.

                  (c) Atrix shall maintain records in sufficient detail and in
         good scientific manner appropriate for patent and regulatory purposes
         and shall properly reflect all work done and results achieved in the
         performance of its duties hereunder (including all data in the form
         required to be maintained under any Applicable Laws), and any
         subsequent pre-clinical or clinical studies (the "Clinical Records").
         The Clinical Records shall be owned by Atrix, shall be considered
         Confidential Information of Atrix and shall include books, records,
         reports, research notes, charts, graphs, comments, computations,
         analyses, recordings, photographs, computer programs and documentation
         thereof, computer information storage means, samples of materials and
         other graphic or written data generated in connection with Atrix's
         research and development activities with respect to the Products.

                  (d) ABI has the right, upon five business days prior written
         notice to Atrix, to inspect the Clinical Records upon request and
         during normal business hours, and Atrix shall, subject to Applicable
         Laws, provide ABI upon request with a summary of all requested Clinical
         Records, to the extent reasonably required for the exercise of ABI's
         rights under this Agreement. ABI may use the Clinical Records and the
         summaries thereof internally for non-commercial purposes. If ABI wants
         to provide a Third Party with the Clinical Records or a summary thereof
         or use information contained in such records for a commercial purpose,
         ABI shall give Atrix written notice and the Parties will negotiate an
         agreement therefor, including appropriate compensation to Atrix and
         confidentiality requirements, in good faith. Notwithstanding the above,
         ABI may provide HBL with copies of any summaries of Clinical Records
         provided to ABI by Atrix hereunder provided that HBL agrees in writing
         to the restrictions set forth in this Agreement with respect to such
         information.


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         SECTION 2.02.  ABI OBLIGATIONS.

                  (a) As soon as reasonably practicable after the Effective
         Date, ABI will make available all ABI Know-How to Atrix for Atrix's
         inspection and at Atrix's request will provide Atrix with a copy of all
         ABI Know-How in tangible form and a written summary of all ABI Know-How
         not in tangible form. In the event Atrix requests that more than 1,000
         pages be copied in connection with the foregoing, Atrix shall reimburse
         ABI for ABI's actual out-of-pocket costs for making copies in excess of
         1,000 pages. Atrix shall pay ABI such amounts within 30 days following
         Atrix's receipt of an invoice therefor accompanied by documentation
         reasonably supporting such invoice.

                  (b) ABI hereby grants to Atrix reference rights to ABI's, and
         agrees to cause HBL to grant to Atrix rights of reference to HBL's, as
         the case may be, FDA Drug Master File ("DMF"), when filed, and FDA
         Investigational New Drug File, when filed, for HBL IFN and agrees to
         execute or cause HBL to execute any necessary authorization letters in
         this regard.

                  (c) ABI agrees to maintain, or cause HBL to maintain, the DMF
         for HBL IFN up-to-date at all times during the Term. ABI shall
         cooperate fully with Atrix in order to obtain all the Marketing
         Authorizations which now are or later become necessary to develop,
         Manufacture, use, market or sell any Product. Such cooperation shall
         include, but not be limited to, ABI providing Atrix with the ABI
         Know-How and ABI appearing at and participating in meetings with
         regulatory agencies at the reasonable request of Atrix to assist Atrix
         in obtaining such Marketing Authorizations as are now required, or may
         in the future be required to Manufacture, use, market or sell any
         Product. ABI shall execute, or cause third parties to execute, upon
         request by Atrix, any and all documents reasonably necessary to obtain
         such Marketing Authorizations. Atrix shall reimburse ABI for any
         reasonable out-of-pocket costs, including reasonable attorney's fees,
         incurred by ABI in connection with such cooperation.

                  (d) ABI shall provide to Atrix or any sublicensee of Atrix, at
         Atrix's request and, unless otherwise set forth in this Agreement, sole
         expense, with any technical assistance reasonably necessary to enable
         Atrix or such sublicensee to exercise fully its rights and fulfill its
         obligations under this Agreement.

         SECTION 2.03. AVAILABILITY OF RESOURCES; COOPERATION. Each Party shall
maintain laboratories, offices and/or other facilities reasonably necessary to
carry out the activities to be performed by such Party hereunder. Upon
reasonable advance notice, each Party agrees to make its employees and
non-employee consultants reasonably available at their respective work locations
to consult with the other Party on issues arising during the collaboration and
in connection with any request from any Governmental Authority, including
regulatory, scientific, technical and clinical testing issues.

         SECTION 2.04. ORPHAN DRUG CERTIFICATION. Within ten days after the
Effective Date, ABI shall submit a letter to the FDA with a copy to Atrix
assigning all of its right, title and interest in and to the Orphan Drug
Designations to Atrix, and shall take such other actions necessary or desirable
to transfer ownership in the Orphan Drug Designations to Atrix in accordance
with Applicable Laws, including 21 CFR Section 316.27.


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         SECTION 2.05. REPORTING OBLIGATIONS OF ATRIX. On or prior to December
31st of each year during the Term of this Agreement Atrix shall provide ABI with
a report of ongoing development efforts, including a report of efforts by Atrix
with respect to clinical testing, regulatory approval efforts, marketing/sales
strategy, and any other areas into which Atrix's reasonable business efforts in
accordance with this paragraph may reasonably be categorized. Such report shall
be provided in English and shall be accompanied by samples of labeling,
instructions, promotional and other support materials, if any, developed for
Atrix's sales force, patients, physicians, or other outside parties.

                                  ARTICLE III

                                     LICENSE

         SECTION 3.01. LICENSE GRANT. Subject to the terms of this Agreement and
the Existing Licenses, ABI hereby grants to Atrix:

                  (a) an exclusive (including as to ABI) sublicense, with rights
         to sublicense, under the ABI Technology to use the ABI Technology to
         market, advertise, promote, Manufacture, offer for sale, sell, and
         distribute Products in the Territory; and

                  (b) an exclusive (including as to ABI) sublicense, with rights
         to sublicense, under all rights granted to ABI pursuant to the HBL
         Agreement to market, advertise, promote, Manufacture, offer for sale,
         sell, and distribute Products in the Territory.

         SECTION 3.02. RESTRICTIONS. Atrix shall have the right to use and sell
Product only in the Territory and only for use in the treatment of the Licensed
Indications. Atrix shall not seek customers, establish any branch or maintain
any distribution depot for Product in any country outside the Territory. Atrix
shall not sell Product to any customer in any country outside the Territory or
to any customer in the Territory if, to the knowledge of Atrix, such customer
intends to resell such Product in any country outside the Territory.

         SECTION 3.03. RETAINED RIGHTS. ABI retains all rights other than as set
forth in this Agreement to HBL IFN and IFN, including without limitation, the
right to test, develop, license, sublicense, market, distribute or otherwise use
IFN and HBL IFN for treatment of all indications other than the Licensed
Indications, and for treatment of the Licensed Indications outside the
Territory.

                                   ARTICLE IV

                             PAYMENTS AND ROYALTIES

         SECTION 4.01. INITIAL FEE. On the Effective Date (a) in consideration
for the initial supply of lozenges described in Section 6.01, Atrix shall pay to
ABI a fee equal to Fifty Thousand Four Hundred Dollars ($50,400) and (b) as an
initial license fee, reimbursement of research and patent expenses, and
consideration for the assignment of the Orphan Drug Designations to Atrix
hereunder, Atrix shall pay to ABI a fee equal to Four Hundred Thirty-Four
Thousand Six Hundred Dollars ($434,600), which ABI has allocated as follows:
**** Dollars ($****) to offset research and patent expenses incurred by ABI;
**** Dollars ($****) for the assignment hereunder of the Orphan Drug



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<PAGE>   16

Designations; **** Dollars ($****) as a license fee for the ABI Patent Rights
listed under "HBL Patents" on Exhibit A; and **** Dollars ($****) as a license
fee for the ABI Patent Rights listed under "Texas A&M Patents" on Exhibit A,
each by wire transfer of immediately available funds to an account designated in
writing by ABI to Atrix prior to the Effective Date.

         SECTION 4.02. ROYALTY PAYMENTS. During the Term, Atrix will pay ABI a
royalty on a Product-by-Product basis equal to ****% of the aggregate Net Sales
of each Product in each calendar year. Royalties shall be due and payable 45
days after the end of each calendar quarter (each a "Royalty Payment Date").
Notwithstanding the above, the royalty with respect to a given Product will be
reduced to ****% of the aggregate Net Sales of such Product at such time, and
for all periods during the Term thereafter, as (i) the FDA revokes the Orphan
Drug Designation with respect to such Product or Atrix otherwise loses exclusive
rights to market such Product and (ii) there is a Competing Product on the
market in the Territory. Atrix may prepay, in whole or in part, any royalties
prior to the applicable Royalty Payment Date.

         SECTION 4.03. MILESTONE PAYMENTS. Atrix shall pay to ABI, as licensing
fees, the following milestone payments within 30 calendar days after ABI
receives notice from Atrix of the occurrence of the specified milestone event
with respect to the applicable Product:


                  (a) **** Dollars ($****) 30 days following Atrix's submission
         of a protocol for a pivotal Phase III Study for the Oral Warts Product;
         provided that if the FDA places such Phase III Study on clinical hold,
         such payment shall be due if and when the clinical hold is withdrawn by
         the FDA;

                  (b) **** Dollars ($****) upon the FDA's Acceptance for Filing
         of an NDA filed by Atrix for the Oral Warts Product;

                  (c) **** Dollars ($****) following Atrix's receipt of an
         Approval Letter for the Oral Warts Product; provided that such amount
         will be reduced to **** Dollars ($****) if prior to Atrix's receipt of
         such Approval Letter the FDA has either (i) revoked the Orphan Drug
         Designation with respect to the Oral Warts Product or (ii) failed to
         grant Atrix exclusive rights to market the Oral Warts Product under 21
         CFR Section 316.31;

                  (d) **** Dollars ($****) following Atrix's receipt of an
         Approval Letter for the Behcet's Disease Product; provided that such
         amount will be reduced to **** Dollars ($****) if prior to Atrix's
         receipt of such Approval Letter the FDA has either (i) revoked the
         Orphan Drug Designation with respect to the Behcet's Disease Product or
         (ii) failed to grant Atrix exclusive rights to market the Behcet's
         Disease Product under 21 CFR Section 316.31; and

                  (e) **** Dollars ($****) following Atrix's receipt of all
         required Governmental Approvals to market a Product for human use from
         the applicable Governmental Authority in any country in Europe;
         provider, however, that this Section 4.03(e) will only apply with
         respect to the first Product and the first country in Europe in which
         such Governmental Approvals are obtained.



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         The Parties currently estimate that the milestone events set forth in
subsections (a), (b), (c) and (d) above will occur, if at all, in ****, ****,
the fourth calendar quarter of **** and the **** calendar year, respectively.
The Parties currently do not have an estimate of when the event set forth in
subsection (e) above will occur. The failure to meet such estimates shall not by
itself be deemed to be a breach of this Agreement by either Party.

         SECTION 4.04. REPORTS. Atrix shall furnish to ABI a quarterly written
report (in sufficient detail to determine the relevant amounts and dates
specified in this Section 4.04) on a Product-by-Product basis, which report
shall contain at a minimum (a) the calculation of Net Sales; (b) royalties
payable in U.S. dollars, if any, which shall have accrued hereunder based upon
Net Sales; (c) withholding taxes, if any, required by law to be deducted with
respect to such sales; (d) the dates of the First Commercial Sale of any
Product; and (e) the exchange rates, if any, used to determine the amount of
United States dollars (collectively, the "Royalty Statement"). Reports shall be
due on the 45th day following the close of each quarter.

         SECTION 4.05. RECORDS AND AUDITS. During the Term and for a period of
two years thereafter or upon written notice to Atrix received prior to the
expiration of such two year period as otherwise required in order for ABI to
comply with Applicable Law, Atrix shall keep complete and accurate records in
sufficient detail to permit ABI to confirm the completeness and accuracy of the
information presented in each Royalty Statement and all payments due hereunder.
Atrix shall permit an independent, certified public accountant reasonably
acceptable to Atrix to audit and/or inspect those records of Atrix (including
financial records) that relate to Net Sales for the sole purpose of verifying
the completeness and accuracy of the Royalty Statements and the calculation of
Net Sales and confirming royalty payments for the Products, during the preceding
calendar year. Such inspection shall be conducted during Atrix's normal business
hours, no more than once in any 12 month period and upon at least ten days prior
written notice by ABI to Atrix. If such accounting firm concludes that such
payments were underpaid during the periods reviewed by such accountants, Atrix
shall pay ABI the amount of any such underpayments, plus interest at a rate
equal to the Prime Rate of Interest, within 30 days of the date ABI delivers to
Atrix such accounting firm's report so concluding that such payments were
underpaid. If such accounting firm concludes that such payments were overpaid
during such period, ABI shall pay to Atrix the amount of any such overpayments,
without interest, within 30 days of the date ABI delivers to Atrix such
accounting firm's report so concluding that such payments were overpaid. ABI
shall bear the full cost of such audit unless such audit discloses an
underpayment by more than ****% of the amount due during such period. In such
case, Atrix shall bear the full cost of such audit.

         SECTION 4.06. EXCHANGE RATE; MANNER AND PLACE OF PAYMENT. All payments
hereunder shall be payable in United States dollars. With respect to each
calendar quarter, whenever conversion of payments from any foreign currency
shall be required, such conversion shall be made at the rate of exchange
reported in The Wall Street Journal on the last business day of the applicable
calendar quarter. All payments owed under this Agreement shall be made by wire
transfer to a bank account designated in writing by ABI, unless otherwise
specified in writing by ABI.

         SECTION 4.07. LATE PAYMENTS. Unless otherwise provided in this
Agreement, upon the failure of Atrix to pay any amount due under this Agreement
within five days after receipt of notice by Atrix


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<PAGE>   18


that such amount has become due and payable and has not been paid, Atrix shall
pay interest to ABI on such amount from the date such amount is due under this
Agreement at the Prime Rate of Interest, calculated on the number of days such
payment is delinquent, unless such payment is being disputed by Atrix in good
faith pursuant to Section 5.03(a).

         SECTION 4.08. TAXES. All taxes levied on account of the payments
accruing to ABI under this Agreement shall be paid by ABI for its own account,
including taxes levied thereon as income to ABI. If provision is made in law or
regulation for withholding, such tax shall be deducted from the payment made by
Atrix, paid to the proper taxing authority and a receipt of payment of the tax
secured and promptly delivered to ABI.

                                   ARTICLE V

                              TERM AND TERMINATION

         SECTION 5.01. TERM. This Agreement will take effect on the Effective
Date and will expire on a Product-by-Product basis upon the later to occur in
the United States of (i) the expiration of the last applicable ABI Patent Right
or loss of patent protection for each Product or (ii) the expiration of the
Orphan Drug Designation for each Product (the "Term").

         SECTION 5.02. TERMINATION BY ATRIX. Atrix may terminate this Agreement
by notice to ABI as follows:

                  (a) at any time with or without cause upon three months prior
         written notice to ABI;

                  (b) if ABI shall commit any material breach of the provisions
         of this Agreement; provided however, that: (i) Atrix has first given
         ABI notice specifying the details of the material breach, and (ii) ABI
         has not cured such material breach, if such breach is capable of being
         cured within such time period, within 45 days of the date of notice of
         the material breach;

                  (c)immediately, if the TAMU License Agreement is terminated;

                  (d) immediately, if the HBL Agreement is terminated; or

                  (e) immediately, if Atrix reasonably determines based upon the
         clinical trials and after consultation with ABI that receipt of
         Governmental Approval for a Product is unlikely.

         SECTION 5.03. TERMINATION BY ABI. ABI may terminate this Agreement by
notice to Atrix, upon any of the following conditions:

                  (a) if Atrix shall fail to make any payments to ABI on the
         date on which such payments are due hereunder and such failure
         continues for more than 15 days after Atrix's receipt of notice of such
         failure to pay; provided, however, that this subsection (a) shall not
         apply to any payment, or portion thereof, under this Agreement, which
         is the subject of a good faith


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<PAGE>   19


         dispute (a "Disputed Amount") between Atrix and ABI. Any Disputed
         Amount shall be resolved by the Parties within 30 days from the date
         Atrix notifies ABI of a good faith dispute; provided, however, if the
         Disputed Amount cannot be resolved to the mutual satisfaction of the
         Parties within such 30 day period then either Party may request that
         the dispute be submitted to the Chief Executive Officers of ABI and
         Atrix, respectively, or their designees, for joint resolution. If the
         Disputed Amount is not jointly resolved by the Parties' Chief Executive
         Officers, or their designees, within ten days after the submission
         thereto, then ABI shall be entitled to pursue any and all remedies at
         law available to it. In no event will the dispute resolution period for
         the activities set forth above exceed a maximum of 60 days unless
         otherwise agreed in writing by the Parties. Further, Atrix may in its
         discretion elect to pay any such Disputed Amount and in the event such
         amount is finally determined not to have been payable by Atrix, ABI
         shall reimburse Atrix for such amount, without interest;

                  (b) if Atrix shall fail to deliver to ABI a Royalty Statement
         by the Royalty Payment Date and shall fail to cure such default within
         15 days after notice from ABI with respect thereto;

                  (c) if Atrix shall commit any material breach of the
         provisions of this Agreement other than a breach set forth in
         subsections (a) or (b) above, provided that ABI has first given Atrix
         notice specifying the details of the material breach, and Atrix has not
         cured such material breach, if such breach is capable of being cured
         within such time period, within 45 days of the effective date of such
         notice; or

                  (d) if Atrix has not, due solely to the act or omission of
         Atrix or its agents or Affiliates, filed a protocol for a pivotal Phase
         III Study for the Oral Warts Product with the FDA on or prior to the
         second anniversary of the Effective Date.

         SECTION 5.04. TERMINATION UPON CERTAIN EVENTS. This Agreement may be
terminated by the Party specified below immediately upon written notice to the
other Party of the occurrence of either of the following events:

         (a) by either Party upon a cessation of operations in the ordinary
course of the other Party or the institution by or against such Party as debtor
of any proceeding (whether voluntary or involuntary) in bankruptcy or for
dissolution, liquidation, reorganization, arrangement or the appointment of a
receiver, trustee or judicial administrator (or the equivalent thereof in the
jurisdiction in question) or any other proceeding under the law for the relief
of debtors, if, in the case of an involuntary proceeding, the same shall not
have been dismissed or stayed within 45 days after its institution; or

         (b) by either Party if the other Party makes an assignment for the
benefit of, or arrangement with, its creditors or becomes unable to pay its
debts as they become due.

         A Party's failure to terminate this Agreement for any of the reasons
specified in this Section 5.04 shall not in any way be deemed a waiver of such
Party's rights in respect thereof or otherwise limit its rights to enforce the
obligations hereunder.

         SECTION 5.05. REMEDIES. All of the non-breaching Party's remedies shall
be cumulative, and the exercise of one remedy hereunder by the non-defaulting
Party shall not be deemed to be an



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election of remedies. These remedies shall include the non-breaching Party's
right to sue for damages for such breach without terminating this Agreement.

         SECTION 5.06. EFFECT OF TERMINATION. Except as otherwise set forth in
Section 5.01 and except with respect to termination by Atrix pursuant to
Sections 5.02(b) through 5.02(d), in the event of termination of this Agreement:

                  (a) Each Party shall not thereby be discharged from any
         liability or obligation to the other Party that became due or payable
         prior to the effective date of such termination;

                  (b) Atrix shall discontinue, and shall cause its Affiliates
         and sublicensees to discontinue, the sale of the Products and shall
         assign any sublicenses granted hereunder, the Orphan Drug Designations
         assigned to Atrix by ABI pursuant to Section 2.04, and any Marketing
         Authorizations received by Atrix for the Products, to ABI;

                  (c) In the event of termination by ABI under Section 5.03, all
         duties of ABI (other than under Section 5.09) and all rights (but not
         duties) of Atrix (other than under Section 5.09) under this Agreement
         shall immediately terminate without the necessity of any action being
         taken either by ABI or by Atrix; and

                  (d) Atrix shall have a period of six months to sell off its
         inventory of Product existing on the date of termination of this
         Agreement and shall pay royalties to ABI with respect to such Product
         within 30 days following the expiration of such six-month period.

         SECTION 5.07. EFFECT OF EXPIRATION OR TERMINATION BY ATRIX. Following
expiration of this Agreement pursuant to Section 5.01 or termination by Atrix
pursuant to Sections 5.02(b) through 5.02(d), ABI shall be deemed to have
granted to Atrix and Atrix shall be deemed to have, without any further action
of either Party, a fully paid-up, exclusive (including as to ABI) license under
ABI's rights to the ABI Technology existing as of the date of such expiration or
termination to exercise Atrix's rights hereunder.

         SECTION 5.08. BANKRUPTCY. In the event that ABI as a debtor in
possession, or a trustee in bankruptcy under the U.S. Bankruptcy Code, rejects
this Agreement or Atrix's right to continue the licenses under this Agreement,
Atrix may elect to retain its license rights under the Agreement by paying all
applicable fees, and otherwise acting in accordance with Section 365(n) of the
U.S. Bankruptcy Code. Thereafter, neither ABI as debtor in possession, nor a
trustee in bankruptcy, shall interfere with the rights of Atrix to use the ABI
Technology under this Agreement.

         SECTION 5.09. CONTINUING OBLIGATIONS. Expiration or termination of this
Agreement shall not relieve the Parties of any obligation accruing prior to such
expiration or termination. Except as otherwise set forth in this Agreement, the
obligations and rights of the Parties under Articles XI, XIII (other than
Section 13.05), XIV (other than Section 14.03), XVI and Sections 5.06-5.10,
12.04 and 15.01 (for the period set forth therein) shall survive expiration or
termination of this Agreement.

         SECTION 5.10. RETURN OF CONFIDENTIAL INFORMATION. Except to the extent
necessary for Atrix to exercise its rights to the ABI Technology under Sections
5.07 and 5.08, within 30 days following



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the expiration or termination of this Agreement, each Party shall return to the
other Party, or destroy, upon the written request of the other Party, any and
all Confidential Information of the other Party in its possession and upon a
Party's request, such destruction (or delivery) shall be confirmed in writing to
such Party by a responsible officer of the other Party. Notwithstanding the
provisions of this Section 5.10, either Party may retain one (1) copy of such
Confidential Information for the sole purpose of determining its continuing
confidentiality obligation to the other Party under this Agreement.

                                   ARTICLE VI

                   SUPPLY, MANUFACTURE AND PURCHASE OF PRODUCT

         SECTION 6.01.SUPPLY OF CLINICAL SAMPLES. Subject to the terms of this
Agreement, ABI agrees to Manufacture or cause to be Manufactured for, and sell
exclusively to Atrix in the Territory, Atrix's total requirements for the
Product in the Territory on the terms and conditions set forth herein. ABI shall
provide Product in either bulk or Unit form as directed in a forecast by Atrix,
in Atrix's sole discretion. Specifically, ABI shall supply clinical trial
samples of HBL IFN lozenges for clinical trials, including an initial supply of
**** HBL IFN lozenges to Atrix at a designated sale price of $**** per Unit (the
"Initial Supply"), which amount shall be deemed paid by Atrix upon payment of
the initial fee under Section 4.01. Each lozenge provided as part of the Initial
Supply shall have an expiration date, if refrigerated, of no earlier than
October 31, 2003. Additional samples of Product for clinical trials, if any,
shall be provided to Atrix by ABI at Atrix's request. Subject to notice to and
prior written approval of Atrix, which approval shall not be unreasonably
withheld, conditioned or delayed, ABI may, at its sole expense, subcontract any
part of the Manufacturing Process for the Product to Third Parties provided the
Product and the facilities used to Manufacture the Product continue to meet the
requirements set forth in this Agreement. If subcontracting is initiated by ABI,
ABI will bear the cost of validation and necessary stability work.

         SECTION 6.011. SUPPLY AND MANUFACTURING RIGHTS.

                  (a) Notwithstanding Section 6.01, during the Term, Atrix shall
         have the right to purchase Product from ABI in accordance with the
         terms of this Agreement or negotiate directly with HBL, subject to
         Section 6.02(b), and/or any substitute supplier of IFN to supply IFN
         (or any component thereof) or any other component of the Product
         directly to Atrix. During the Term, Atrix also shall have the right to
         substitute vendors in any step in the Manufacturing Process in
         accordance with the Marketing Authorizations and Applicable Law. In the
         event that Atrix exercises any of the rights of substitution set forth
         in this Section 6.02 Atrix shall: (a) bear sole responsibility for
         compliance with all Applicable Laws relating to such substitution and
         (b) provide ABI with 30 days prior written notice of its decision,
         which notice shall set forth the effective date of such substitution.
         As of the effective date of such substitution, the applicable
         provisions of the Agreement that relate to ABI's obligation to
         Manufacture Product shall automatically terminate; provided that Atrix
         shall retain all rights, if any, arising thereunder prior to such
         termination. ABI shall provide Atrix, at Atrix's expense, with
         reasonable assistance in the exercise of its rights under this Section
         6.02.


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                  (b) At any time during the Term, Atrix may negotiate and enter
         into an agreement with HBL pursuant to which HBL will supply Atrix with
         IFN provided that any such agreement will provide that HBL will not
         supply Atrix with IFN until such time as Atrix notifies HBL that (i)
         this Agreement has been terminated by Atrix pursuant to Sections
         5.02(b) through 5.02(d) or 5.04, or (ii) Atrix has made a good faith
         determination that ABI will not be able to satisfy its obligations
         under this Agreement. Further, in connection with the foregoing, ABI
         agrees to enter into an amendment of the HBL Agreement with HBL to
         amend the exclusive nature of the HBL Agreement to allow for the
         foregoing and further agrees to execute such other agreements,
         documents or other instruments as are reasonably requested by Atrix in
         connection with the provisions of this Section 6.02(b).

         SECTION 6.03. QUALITY ASSURANCE. ABI shall Manufacture or cause to be
Manufactured the Product in accordance with the Specifications and this
Agreement. ABI shall promptly notify Atrix in writing of any changes required by
a Governmental Authority in the Specifications or Atrix's quality assurance
procedures that would render ABI or its supplier unable to supply the Product in
accordance with the terms of this Agreement. The Parties agree to develop and
execute an appropriate action plan in such situation. Any additional costs or
expenses shall be shared between the Parties in such proportion as is equal to
each Party's relative fault in causing such change or changes to occur;
provided, however, that if the Parties cannot reach an agreement in good faith
as to the relative fault of each Party or if neither Party is at fault, such
additional costs and expenses shall be born equally by the Parties.

         SECTION 6.04. ABI'S DUTIES. ABI agrees to furnish to Atrix with every
Shipment a written certificate of analysis and Certificate of Compliance that
confirms conformity of the Product to the Specifications and this Agreement.
Atrix shall analyze each Shipment promptly upon receipt in accordance with
Section 8.02. In addition, ABI shall:

                  (a) provide Atrix with written sampling and testing procedures
         used by ABI or its manufacturer to assure that the Product conforms to
         the Specifications;

                  (b) retain a sample of each batch of Product for a period
         equal to the greater of (i) one year after the date of Manufacture of
         such batch of Product or (ii) such period as required by Applicable
         Laws. Upon the request of Atrix, ABI shall make such samples available
         to Atrix for inspection. The retained sample shall be sufficient in
         size to allow Atrix to perform tests to determine whether the Product
         meets the Specifications. ABI shall store the retained sample in
         accordance with the Specifications and Applicable Law;

                  (c) maintain records to ensure Atrix's ability to perform a
         complete lot history via lot tracing of the Product;

                  (d) keep on file all manufacturing records and analytical
         results pertaining to the Manufacture of each batch of Product for a
         period expiring not earlier than one year after the expiration date of
         the last lot of the last batch of Product Manufactured and Shipped to
         Atrix. ABI shall make, and shall cause any Third Party manufacturer to
         make, such records available to Atrix upon request;



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                  (e) provide Atrix with notice within 48 hours following ABI's
         receipt of notification of any scheduled inspection, and as soon as
         possible following ABI's receipt of notification of any unscheduled
         inspection, by any Governmental Authority of ABI's facilities, books or
         records, or of the facilities, books or records of any subcontractor
         being utilized by ABI to perform any portion or all of the Manufacture
         or development of the Product. ABI shall inform such Governmental
         Authority that Atrix may desire to be present at such inspection;
         provided that Atrix's right to be present is subject to approval by
         such Governmental Authority and subject to Atrix being available at the
         time and date established by such Governmental Authority and, with
         respect to any inspection of HBL's facilities, HBL's consent to the
         presence of Atrix at such inspection. ABI shall use reasonable efforts
         to secure a time and date for such inspection that is reasonably
         acceptable to Atrix; provided, however, that ABI alone shall have the
         right to make the final decision on all such matters;

                  (f) maintain at its expense any and all licenses, permits and
         consents necessary or required to perform its obligations under this
         Agreement; and

                  (g) ensure that all Product delivered, other than the Initial
         Supply as set forth in Section 6.01, has a remaining shelf life from
         the time of manufacture of not less than five years if refrigerated to
         at least 2-8(Degree) Centigrade or two years, if not so refrigerated.

         SECTION 6.05. FAILURE TO SUPPLY.

                  (a) ABI shall immediately notify Atrix if ABI is unable to
         fill any purchase order placed by Atrix pursuant to Section 7.06, and
         advise Atrix of the revised delivery date. Atrix shall then have the
         option of terminating the purchase order without obligation of payment
         or of accepting the revised delivery date. If ABI is unable to cure to
         Atrix's reasonable satisfaction the circumstances giving rise to such
         failure within 15 business days after such notice, Atrix shall not be
         obligated to purchase any further Product from ABI under the then
         existing forecasts.

                  (b) Notwithstanding the foregoing, ABI shall not be deemed to
         be unable to fill any order placed by Atrix if ABI's inability to fill
         any order arises as a result of a 50% increase in Atrix's order over
         Atrix's immediately prior forecast. For example, if Atrix's forecast
         for the initial three month period was for 100 Units and Atrix's
         forecast for the second three month period was for 200 Units, then, if
         after the time the second three month forecast becomes firm pursuant to
         Section 7.06(a)(i), Atrix changed its forecast by the maximum amount
         allowed of 100 Units (i.e., 50% times 200 Units), ABI would not be
         deemed to be unable to supply Product for any amount in excess of 300
         Units for such three month period.

         SECTION 6.06. ALLOCATION. If ABI is unable to supply all of the
requirements of the Product, and quantities ordered by Atrix in accordance with
Section 7.06, then ABI shall allocate the resources available to it so that
Atrix receives at least its proportional share of available supplies as
determined based on reasonable forecasts (taking into consideration past sales
and sales performance against forecast) of Atrix.


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         SECTION 6.07. RECORDS AND AUDITS. During the Term and for a period of
two years thereafter or such longer period as is required in order for Atrix to
comply with Applicable Law, ABI shall keep complete and accurate records in
sufficient detail to permit Atrix to confirm the completeness and accuracy of
the information presented in each invoice sent to Atrix pursuant to this
Agreement and all payments made by Atrix relying on such invoices hereunder. ABI
shall permit an independent, certified public accountant reasonably acceptable
to ABI to audit and/or inspect those records of ABI (including financial
records) that relate to such invoices for the sole purpose of verifying the
completeness and accuracy of such invoices during the preceding calendar year.
Such inspection shall be conducted during ABI's normal business hours, no more
than once in any 12 month period and upon at least ten days prior written notice
by Atrix to ABI. If such accounting firm concludes that such payments were
overpaid during the periods reviewed by such accountants, ABI shall pay Atrix
the amount of any such overpayments, plus interest at a rate equal to the Prime
Rate of Interest, within 30 days of the date Atrix delivers to ABI such
accounting firm's report so concluding that such payments were overpaid. Atrix
shall bear the full cost of such audit unless such audit discloses an
overpayment by more than ****% of the amount due during such period. In such
case, ABI shall bear the full cost of such audit.

                                   ARTICLE VI

                                PURCHASE AND SALE

         SECTION 7.01. PURCHASE PRICE AND PAYMENT. Except for Atrix's rights to
use an alternate supplier as set forth in Section 6.02, ABI shall sell, and
Atrix shall purchase, Product at a purchase price equal to, except as set forth
in Section 6.01 with respect to the Initial Supply, the actual amount (exclusive
of the Royalties as defined in the HBL Agreement) paid to HBL under the HBL
Agreement as in effect on the Effective Date and all other reasonable costs of
Manufacture actually paid by ABI to Third Parties with respect to such Product
for all Product supplied by ABI to Atrix pursuant to this Agreement (the
"Purchase Price"). ABI shall invoice Atrix monthly for all Product Shipped by
ABI to Atrix, which invoice shall be accompanied by reasonable documentation,
i.e., invoices from Third Parties paid by ABI, supporting the amounts set forth
in the invoice, and payment shall be due 30 days from receipt of the invoice.

         SECTION 7.02. LABELING AND ARTWORK.

                  (a) After execution of this Agreement, ABI shall review and
         comment on any labeling and proposed changes to the labeling of the
         Product and shall be entitled to participate in discussions with the
         Governmental Authorities concerning any labeling or proposed labeling
         change so long as Atrix is purchasing the Product from ABI.
         Notwithstanding the above, Atrix shall make the final decision with
         regard to any labeling or labeling revisions.

                  (b) Both Parties will approve all artwork developed for
         inclusion in the Product packaging, including carton labels, package
         inserts, etc., which approval will not be unreasonably withheld,
         conditioned or delayed by either Party. If Atrix wishes to institute
         changes in labeling artwork, both Parties will develop a mutually
         acceptable implementation schedule. The actual cost of implementing
         such change will be at Atrix's sole cost and



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         expense, including any materials made obsolete by Atrix's changes to
         the artwork. Neither Party shall alter, change or in any way modify the
         artwork, which has previously been approved, for any reason, without
         prior written authorization from the other Party, which approval will
         not be unreasonably withheld, conditioned or delayed, and provided that
         such approved artwork shall conform to all Applicable Laws.

         SECTION 7.03. PURCHASE FORMS. Purchase orders, purchase order releases,
confirmations, acceptances and similar documents submitted by a Party in
conducting the activities contemplated under this Agreement are for
administrative purposes only and shall not add to or modify the terms of the
Agreement. To the extent of any conflict or inconsistency between this Agreement
and any such document, the terms of this Agreement shall govern.

         SECTION 7.04. CONFIRMATION. ABI shall confirm each purchase order
within ten business days from the date of receipt of a purchase order and shall
supply the Product within a maximum of 30 days from the date of acceptance of a
purchase order, or later if so specified in the purchase order. Failure of ABI
to confirm any purchase order shall not relieve ABI of its obligation to supply
Product ordered by Atrix in conformity with this Agreement.

         SECTION 7.05. DELIVERY. Delivery terms for Product shall be FOB ABI's
or its subcontractor's facility, which is currently located in Mississauga,
Ontario, Canada, or such other location as Atrix may agree to in writing. ABI
shall ship Product in accordance with Atrix's purchase order form or as
otherwise directed by Atrix in writing. Title to any Product purchased by Atrix
shall pass to Atrix upon the earlier of (a) a common carrier accepting
possession or control of such Product, or (b) passage of such Product from the
loading dock of ABI's or its subcontractor's facilities to Atrix or its agent.

         SECTION 7.06.  FORECASTS AND ORDERS.

                  (a) Not later than six months following submission of the NDA
         for a Product or other applicable regulatory filing on a
         country-by-country basis, Atrix will provide ABI with a 12 month
         forecast of Atrix's requirement of each Product, which forecast will
         include designation of whether such Product shall be provided in bulk
         or Unit form, for which an NDA, or other applicable regulatory filing,
         has been submitted, on a Product-by-Product basis, as follows:

                           (i) During the period commencing six months following
                  submission of an NDA, or other applicable regulatory filing,
                  for a Product through the end of the fourth full calendar
                  quarter following the First Commercial Sale of that Product,
                  the forecasts shall be provided quarterly, no less than 45
                  days prior to the beginning of each quarter. Said requirements
                  will be based on standard production planning parameters,
                  including sales forecasts, sales demand forecasts, promotional
                  forecasts, inventory requirements, and the like. The first two
                  quarters of the 12 month forecast will be stated in monthly
                  requirements. The second two quarters of the 12 month forecast
                  will be total requirement by stock keeping unit and will be
                  stated as quarterly requirements. The first three months of
                  the 12 month forecast will be firm orders to purchase. The
                  second three months will be allowed to be flexed from the
                  previous



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                  forecast by plus or minus 25% per month until fixed by the
                  subsequent forecast; provided that the aggregate adjustment
                  from the quantity set forth in the previous forecast for such
                  three month period shall not exceed 50% in aggregate during
                  that three month period. For example, if Atrix's forecast for
                  the first three months was for 100 Units and its forecast for
                  the second three months was for 200 Units, the maximum number
                  of Units Atrix could order at the time the second three month
                  period becomes fixed would be 300 Units (i.e., 50% of 200
                  Units plus the 200 Units originally forecast). The last two
                  quarters of any 12 month forecast will be an estimate and not
                  binding.

                           (ii) Following the end of the fourth full calendar
                  quarter following the First Commercial Sale of a Product,
                  Atrix will provide to ABI a rolling 12 month forecast for each
                  Product with the first three months of the rolling 12 month
                  forecast a firm order to purchase. Each forecast under this
                  subsection (ii) shall be provided monthly, no less than 20
                  days prior to the beginning of each month. All orders will be
                  for full batch quantities.

                  (b) It is understood that ABI will not maintain Product
         inventory in excess of the applicable forecast, but will produce
         Product upon receipt of that portion of Atrix's forecasts that
         constitute firm orders to purchase.

                  (c) Atrix agrees to purchase a sufficient amount of Product to
         enable Atrix to carry sufficient inventory to allow for fluctuations in
         sales demand so as to allow ABI reasonable lead time to meet increased
         demand. ABI will use commercially reasonable efforts to meet any
         increase in demand in excess of the allowed adjustment, but will not be
         obligated to do so. All forecasts will be made by Atrix to ABI in good
         faith based upon standard commercial parameters. From time to time
         after the Effective Date, the Parties shall consider whether, in light
         of market demand, manufacturing capacity, inventory levels and other
         pertinent factors, to revise the schedule for delivery of forecasts
         and, if appropriate, negotiate in good faith to revise such schedule.

                                  ARTICLE VIII

                       WARRANTY, REJECTION AND INSPECTIONS

         SECTION 8.01. ABI WARRANTY. ABI represents and warrants to Atrix that
the Products delivered pursuant to this Agreement (a) shall comply with the
Specifications and this Agreement and conform to the certificate of analysis for
each such Product; (b) are not adulterated or misbranded under Applicable Laws;
and (c) at the time of Manufacture and Shipment to Atrix, will be and are free
from any failure or defects.

         EXCEPT AS OTHERWISE SET FORTH HEREIN, ABI MAKES NO OTHER WARRANTIES OF
ANY OTHER KIND, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR
FITNESS OF THE PRODUCT FOR ANY PURPOSE, AND ABI EXPRESSLY DISCLAIMS ANY SUCH
OTHER WARRANTIES WITH RESPECT TO THE PRODUCT, EITHER EXPRESSED OR IMPLIED.




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         SECTION 8.02. REJECTION OF PRODUCT FOR FAILURE TO CONFORM TO
SPECIFICATIONS. Atrix shall have 45 days after the receipt of any Shipment to
determine conformity of the Shipment to the Specifications and/or Applicable
Laws, except for hidden defects. A "hidden defect" shall mean a defect in the
Product not discovered by Atrix during its testing of the Product in accordance
with generally accepted industry testing procedures and which would not be a
defect normally expected to be discovered in accordance with such testing. If
testing of such Shipment shows a failure of the Shipment to meet the
Specifications and/or Applicable Laws, Atrix may return the entire Shipment, or
any portion thereof, to ABI at ABI's expense within a reasonable time following
the above described testing, provided that notice of non-conformity is received
by ABI from Atrix within 45 days of Atrix's receipt of said Shipment. Atrix
shall have the right to request that ABI provide to Atrix, within 30 days after
such notice is received by it, Product that meet the Specifications and
Applicable Laws or to promptly provide Atrix with full credit for the Purchase
Price paid by Atrix for the returned Product. In the case of a hidden defect,
Atrix shall have the right to request that ABI provide to Atrix, within thirty
(30) days after a notice concerning a hidden defect is received by Atrix,
Product that meets the Specifications and Applicable Laws or to promptly provide
Atrix with full credit for the Purchase Price paid by Atrix for the returned
Product. In either case, the cost of freight and handling to return or replace
Product or shall be at the expense of ABI. If Atrix does not notify ABI of the
non-conformity of the Product within 45 days of receipt of said Shipment, the
Product shall be deemed to meet the Specifications (including those related to
packaging of the Products) and Applicable Laws, except with respect to hidden
defects. Notwithstanding anything in this Agreement to the contrary, the Parties
may agree to a return of the Product or an adjustment in the Purchase Price in
the event of any failure or defect in the Product. Should there be a discrepancy
between Atrix's test results and the results of testing performed by ABI, such
discrepancies shall be finally resolved by testing performed by an independent
Third Party mutually agreed upon by Atrix and ABI. The costs of such testing
shall be borne by the Party against whom the discrepancy is resolved. In the
event Product have been previously returned to ABI and such independent Third
Party determines that the Product meets the Specifications, Atrix shall be
responsible for all costs associated with the return.

         SECTION 8.03. ATRIX INSPECTIONS. ABI shall, and shall cause HBL or
other subcontractors of ABI used to Manufacture the Product to, upon reasonable
(but not less than ten days) prior written notice by Atrix and during normal
business hours, allow Atrix to inspect and audit ABI's facilities and the
facilities of HBL or other subcontractors of ABI used to Manufacture the
Product, twice annually, to confirm that the such facilities and the equipment,
personnel and operating and testing procedures used by ABI or such
subcontractors in the Manufacture, testing, storage and distribution of the
Product are in compliance with Applicable Laws and the Governmental Approvals;
provided that such inspection does not interfere with ABI's or such
subcontractor's normal operations or cause ABI or such subcontractor's to
violate or be in breach of any confidentiality agreements with any Third
Parties.




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                                   ARTICLE IX

                              REGULATORY COMPLIANCE

         SECTION 9.01 MAINTENANCE OF MARKETING AUTHORIZATIONS. Atrix will own
all Marketing Authorizations. Atrix agrees, at its sole cost and expense, to
maintain the Marketing Authorizations including obtaining any variations or
renewals thereof, including all fees and licenses, including user fees, related
to the Manufacture of the Product by Atrix. Each Party agrees that neither it
nor its Affiliates or permitted sublicensees will do anything to adversely
affect a Marketing Authorization.

         SECTION 9.02.  ADVERSE DRUG EVENT REPORTING AND PHASE IV SURVEILLANCE.

                  (a) Each Party, including its permitted sublicensees, shall
         advise the other Party, by telephone or facsimile, immediately but in
         no event later than 24 hours after a Party, or its sublicensees,
         becomes aware of any potentially serious or unexpected adverse event
         (including adverse drug experiences, as defined in Applicable Laws)
         involving the Product (each, an "ADE"). Such advising Party shall
         provide the other Party with a written report delivered by confirmed
         facsimile of any adverse reaction, stating the full facts known to such
         Party, including customer name, address, telephone number, batch, lot
         and serial numbers, and other information as required by Applicable
         Laws. During the Term, Atrix shall have full responsibility for (i)
         monitoring such adverse reactions; and (ii) data collection activities
         that occur between Atrix and the patient or medical professional, as
         appropriate, including any follow-up inquiries which Atrix deems
         necessary or appropriate.

                  (b) In the event either Party requires information regarding
         adverse drug events with respect to reports required to be filed by it
         in order to comply with Applicable Laws, including obligations to
         report ADEs to the Governmental Authorities, each Party agrees to
         provide such information to the other on a timely basis.

                  (c) The Parties agree to follow Atrix's standard operating
         procedure for reporting and identifying adverse drug reactions (the
         "SOP") in effect from time to time, a copy of which Atrix will provide
         to ABI. In the event the SOP is modified or amended during the Term,
         Atrix shall provide ABI with copies of any such modification or
         amendment to the SOP for ABI's prior approval, which will not be
         unreasonably withheld, conditioned or delayed, at least five business
         days prior to such amendment taking effect. Atrix shall designate a
         qualified person under Applicable Laws to be responsible for ADE
         reporting in each country in the Territory.

                  (d) If the report of an ADE causes a Governmental Authority to
         request a labeling revision as a result of an ADE or that a Phase IV
         surveillance program be conducted, then the Parties shall promptly
         enter into discussions and shall mutually agree on all of the material
         terms and conditions of such labeling revision or Phase IV surveillance
         program; provided, however the costs of such labeling revision or Phase
         IV surveillance program shall be paid by Atrix. Atrix shall have the
         authority to make the final decision with regard to any labeling
         revisions provided that Atrix will consider, in making its decision,
         the effect any such labeling revisions will have on the marketing and
         sale of the Product outside the Territory. Atrix agrees that should
         Applicable Laws require that any such interim data and results from
         such Phase IV surveillance programs be prepared in written form, Atrix
         shall comply with such requirements and provide all such information in
         writing to ABI and the Governmental


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         Authorities in accordance with Applicable Laws. Atrix further agrees
         that ABI shall have the right to incorporate, refer to and
         cross-reference such results and underlying data in any regulatory
         filing or any other filing or requirement ABI is required to undertake
         with respect to the Product, if any.

         SECTION 9.03. COMMERCIAL SALE TESTING AND REPORTING. If, after the date
of First Commercial Sale in any country in the Territory, a Governmental
Authority requires (a) additional testing, modification or communication related
to approved indications of the Product or (b) Atrix to conduct a Phase IV study
as a condition to receiving a Marketing Authorization, then Atrix shall design
and implement any such testing, modification or communication and the costs
shall be paid by Atrix.

         SECTION 9.04. ASSISTANCE. Each Party shall provide reasonable
assistance to the other at the other's request, in connection with their
obligations pursuant to this Article IX, subject to reimbursement of all of its
out-of-pocket costs by the requesting Party.

         SECTION 9.05. COMPLIANCE. Atrix shall be responsible for compliance
with Applicable Laws and the Governmental Approvals relating to the design,
possession, promotion, marketing, sale, advertising and distribution of the
Products and Units, including obtaining all necessary permits, licenses and any
other requirements relating to the import, sale and distribution of the
Products. ABI shall be responsible for compliance with Applicable Laws and
Governmental Approvals relating to the Manufacture of the Products, as
applicable, and with cGMP relating to the Manufacture and testing of the
Products, as applicable. Atrix and ABI shall comply with all Applicable Laws
within the Territory as set forth in this Agreement, including the provision of
information by Atrix and ABI to each other necessary for ABI and Atrix to comply
with any applicable reporting requirements. Each Party shall promptly notify the
other Party of any comments, responses or notices received from, or inspections
by, the FDA, or other Governmental Authority, which relate to or may impact the
Product or the Manufacture of the Product or the sales and marketing of the
Product, and shall promptly inform the other Party of any responses to such
comments, responses, notices or inspections and the resolution of any issue
raised by the FDA or other Governmental Authority.

                                   ARTICLE X

                                    PATENTS

         SECTION 10.01. MAINTENANCE OF PATENTS. ABI shall, at ABI's expense,
maintain and protect the ABI Patent Rights in the Territory during the Term;
provided however, that upon written request by ABI, Atrix shall, at no cost or
expense to Atrix, provide such assistance as may be necessary to enable ABI to
comply with the administrative formalities necessary to maintain any ABI Patent
Rights.

         SECTION 10.02 COOPERATION. Atrix shall, at no cost or expense to Atrix,
make available to ABI or its authorized attorneys, agents or representatives,
its employees, agents or consultants necessary or appropriate to enable ABI to
file, prosecute and maintain patent applications for a period of time sufficient
for ABI to obtain the assistance it needs from such personnel.


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         SECTION 10.03. ABI TO PROSECUTE INFRINGEMENT. During the Term, each
Party shall give prompt notice to the other of any Third Party act that may
infringe the ABI Patent Rights and shall cooperate with each other to terminate
such infringement without litigation. ABI shall, at its sole expense, prosecute
the judicial or administrative proceedings against such Third Party
infringement. Atrix shall provide such assistance and cooperation to ABI as may
be necessary to successfully prosecute any action against Third Party
infringement at ABI's expense and may deduct the expenses thereof from any
amounts payable to ABI under this Agreement.

         In the event ABI fails to institute proceedings and terminate any Third
Party infringement of the ABI Patent Rights within 45 days after the later of
(i) receiving notice from Atrix of any such infringement or (ii) sending notice
to Atrix of such infringement, Atrix may take (but shall have no obligation to
do so) such action as it deems appropriate, including without limitation, the
filing of a lawsuit against such Third Party. In such event ABI will provide
such assistance and cooperation to Atrix as may be necessary, at ABI's expense,
and Atrix may deduct all costs and expenses incurred in connection with such
action, not otherwise recovered in connection with such action or paid or
reimbursed to Atrix, from any amount payable to ABI under this Agreement and
retain all amounts awarded in such action. Atrix may settle any such claim so
long as the terms of such settlement do not impair ABI's rights hereunder or
ABI's rights in the ABI Technology.

         SECTION 10.04. INFRINGEMENT CLAIMED BY THIRD PARTIES. In the event a
Third Party commences, or threatens to commence, a judicial or administrative
proceeding against a Party to this Agreement and such proceeding claims that the
ABI Technology infringes such Third Party's intellectual property rights, the
Party against whom such proceeding is threatened or commenced shall give prompt
notice to the other Party. ABI shall, at its sole expense, defend such claims or
proceedings and Atrix shall provide such assistance and cooperation to ABI as
may be necessary to successfully defend any such claim or proceeding at ABI's
expense. ABI may settle any such claim so long as the terms of such settlement
contains a complete release of Atrix and do not impair Atrix's rights hereunder,
increase the costs to Atrix hereunder or require any relief other than monetary
damages. Notwithstanding the above, if such claim or proceeding relates to or
arises from the actions, activities or omissions of Atrix other than the use by
Atrix of the ABI Technology, then Atrix shall defend such claims or proceedings,
at Atrix's sole expense, and Atrix shall indemnify ABI for any liabilities,
costs and expenses, including, without limitation, attorneys' fees, incurred
with respect to such claim or proceeding.

         SECTION 10.05. THIRD PARTY LICENSES. If the Manufacture, marketing,
advertising, promotion, distribution, use, sale, offer for sale or import by
Atrix of a Product in any country in the Territory would, in the reasonable
opinion of Atrix, after consultation with ABI, infringe a patent owned by a
Third Party and Atrix has obtained or will obtain a license under such patent,
**** of any payments made by Atrix to such Third Party shall be deductible from
royalty or other payments due from Atrix to ABI pursuant to this Agreement.


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                                   ARTICLE XI

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

         SECTION 11.01. CORPORATE POWER. Each Party hereby represents and
warrants that such Party is duly organized and validly existing under the laws
of the state of its incorporation and has full corporate power and authority to
enter into this Agreement and to carry out the provisions hereof.

         SECTION 11.02. DUE AUTHORIZATION. Each Party hereby represents and
warrants that such Party is duly authorized to execute and deliver this
Agreement and to perform its obligations hereunder.

         SECTION 11.03. BINDING OBLIGATION. Each Party hereby represents and
warrants that this Agreement is a legal and valid obligation binding upon it and
is enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by such Party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having authority over it.

         SECTION 11.04. OWNERSHIP OF ABI PATENT RIGHTS. As of the Effective
Date, ABI represents and warrants that (a) it has all right, title and interest
in and to HBL IFN and the ABI Technology necessary to grant Atrix the licenses
hereunder, (b) except for those rights granted to Existing Licensees under the
Existing Licenses and except with respect to Atrix, it has not granted any
license to any Third Party under the ABI Technology (or any component thereof)
and is under no obligation to grant any such license, (c) there are no
outstanding liens, encumbrances, agreements or understanding of any kind, either
written, oral or implied, regarding either the ABI Technology, any component
thereof or the rights of ABI in and to HBL IFN pursuant to the HBL Agreement.

         SECTION 11.05  MATERIAL AGREEMENTS. ABI represents and warrants that:

                  (a) each Material Agreement is valid, binding, and enforceable
         in accordance with its terms against ABI and, to the knowledge of ABI,
         each other party thereto, and is in full force and effect;

                  (b) ABI has performed in all material respects all obligations
         imposed on it under each Material Agreement and neither ABI nor to the
         knowledge of ABI, any other party to a Material Agreement is in
         material default under any Material Agreement nor is there any event
         that with notice or lapse of time, or both, would constitute a material
         default by ABI, or, to the knowledge of ABI, any other party
         thereunder;

                  (c) true and complete copies of each Material Agreement,
         including any amendments thereto, have been delivered to Atrix or its
         counsel by ABI;

                  (d) each of the HBL Agreement, the TAMU Agreement and the
         Hoffman-La Roche Agreement were duly and validly executed in accordance
         with Applicable Law and no Person is materially renegotiating any
         amount paid or payable under either agreement or any material term or
         provision of the HBL Agreement, the TAMU Agreement or the Hoffman-La
         Roche Agreement, except for the amendment to the HBL Agreement
         described in subsection (g) below;



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                  (e) ABI has complied with the terms and conditions of each of
         the HBL Agreement, the TAMU Agreement and the Hoffman-La Roche
         Agreement and has made all necessary payments required to maintain such
         agreements in full force and effect;

                  (f) ABI has no knowledge of the existence of any facts or
         circumstances that could result in either the HBL Agreement, the TAMU
         Agreement or the Hoffman-La Roche Agreement being revoked, adversely
         modified, suspended or terminated, and there is no litigation pending,
         or to ABI's knowledge threatened, by any Governmental Authority or any
         other Person with respect to such agreements;

                  (g) as of the date hereof each of HBL and ABI have entered
         into a written agreement that shall, among other things, prevent the
         termination of the HBL Agreement by either party thereto prior to March
         13, 2005 except upon HBL's or ABI's exercise of its rights of
         termination upon an uncured default of the other party to the HBL
         Agreement as such rights are described in Sections 7.3 and 7.4 of the
         HBL Agreement; and

                  (h) ABI has met the "significant development effort"
         requirements as described in Section 3.3 of the HBL Agreement for each
         of the Licensed Indications.

         SECTION 11.06. ORPHAN DRUG DESIGNATIONS. ABI has provided to Atrix all
information submitted to the FDA in connection with its request for the Orphan
Drug Designations and all materials received from the FDA in relation thereto.
Such materials did not contain an untrue statement of material fact or omit any
material information required by 21 CFR Section 316 et seq. In addition, with
respect to each Orphan Drug Designation: (a) ABI has no reason to believe that
(i) an amendment to the Orphan Drug Designations will be required, (ii) the
Product was not at the time of the application eligible for orphan-drug
designation, or (iii) the Product currently is not eligible for orphan-drug
designation; (b) ABI owns all right, title and interest in and to the Orphan
Drug Designations; (c) (i) ABI can assign the Orphan Drug Designations to Atrix
as contemplated by this Agreement, (ii) either no consents of any Third Party
are required in connection with such assignment or all such required consents
have been obtained as of the Effective Date and (iii) upon the assignment of the
Orphan Drug Designations to Atrix as contemplated by this Agreement, all right,
title and interest in and to the Orphan Drug Designations shall vest in Atrix;
(d) ABI has no actual knowledge of any Third Party that is preparing clinical
documentation with respect to either Orphan Drug Designation; and (e) ABI has
filed all annual updates to the Orphan Drug Designation in accordance with the
applicable letter from the FDA granting such designation.

         SECTION 11.07. PATENT PROCEEDINGS. ABI represents and warrants that (a)
no patent application within the ABI Patent Rights is the subject of any pending
interference, opposition, cancellation or other protest proceeding, and (b) the
ABI Technology does not infringe the intellectual property rights of any Third
Party.

         SECTION 11.08. ADVERSE PROPERTIES. ABI represents and warrants that it
knows of no adverse effects or other properties that may raise objections from
the FDA or other Governmental Authorities or may affect the use, effectiveness
or merchantability of the Products.



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                                       32
<PAGE>   33




         SECTION 11.09. PRESERVATION OF NAME AND REPUTATION. During the Term,
each of the Parties shall endeavor to preserve the good name and reputation of
the other Party and shall conduct itself in a manner as to maintain the good
name and reputation of the other Party.

         SECTION 11.10. DEBARMENT. During the Term, neither of the Parties shall
utilize any employee, representative, agent, assistant or associate who has been
debarred pursuant to the Act in connection with any of the activities to be
carried out under this Agreement.

         SECTION 11. LIMITATION ON WARRANTIES. Neither Party makes any
warranties, express or implied, concerning the success or commercial utility of
the Products.

         SECTION 11.12. LIMITATION OF LIABILITY. EXCEPT FOR WILLFUL MISCONDUCT,
GROSS NEGLIGENCE, BREACHES BY A PARTY OF SECTION 15.01 OR INFRINGEMENT OF THIRD
PARTY PROPRIETARY RIGHTS, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE
OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN
CONNECTION WITH THIS AGREEMENT OR ANY LICENSE GRANTED HEREUNDER.

                                  ARTICLE XII

                           COVENANTS OF ATRIX AND ABI

         SECTION 12.01. COVENANT NOT TO LAUNCH COMPETING PRODUCT. Subject to and
excluding any rights granted to Existing Licensees pursuant to the Existing
Licenses, and excluding any product that ABI provides to any natural person
without charge for the personal use of such person pursuant to applicable
Regulations prior to the earlier of (i) such time as Atrix notifies ABI that
Atrix will provide Products to such persons pursuant to such Regulations or (ii)
the First Commercial Sale of a Product, ABI hereby covenants and agrees not to
and shall cause its Affiliates to agree not to develop, in-license, Manufacture,
import, export, market, sell, distribute, promote or have developed, have
marketed, have sold, have distributed, have promoted, have exported, have
imported or have Manufactured any Competing Product in the Territory during the
Term without the prior written approval of Atrix. If Atrix gives ABI notice that
a given product is, in Atrix's reasonable opinion, a Competing Product, ABI, in
consultation with Atrix, shall use reasonable efforts to determine changes to
the alleged Competing Product so as to diminish the likelihood of such product
constituting a Competing Product, provided that such changes shall not impact
Atrix's rights with respect to a breach of this Section 12.01 by ABI.

         SECTION 12.02. ACCESS TO BOOKS AND RECORDS. Atrix shall permit ABI, at
ABI's expense and during normal business hours, to exercise the inspection
rights granted to ABI by Atrix under Section 4.05.

         SECTION 12.03 FURTHER ACTIONS. Upon the terms and subject to the
conditions hereof, each of the Parties hereto shall use its commercially
reasonable efforts to (a) take, or cause to be taken, all appropriate action and
do, or cause to be done, all things necessary, proper or advisable under
Applicable Law or otherwise to consummate and make effective the transactions
contemplated by this Agreement, (b) obtain from Governmental Authorities any
consents, licenses, permits, waivers,



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                                       33
<PAGE>   34

approvals, authorizations or orders required to be obtained or made by the
Parties in connection with the authorization, execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement and (c) make all necessary filings, and thereafter make any other
required submissions, with respect to this transaction under (i) the Securities
Exchange Act of 1934, as amended and the Securities Act of 1933, as amended, and
the rules and regulations thereunder and any other applicable federal or state
securities laws and (ii) any other Applicable Law. The Parties hereto shall
cooperate with each other in connection with the making of all such filings,
including by providing copies of all such documents to the other Party's counsel
(subject to appropriate confidentiality restrictions) prior to filing and, if
requested, by accepting all reasonable additions, deletions or changes suggested
in connection therewith. Without limiting the generality of the foregoing, each
Party shall take or omit to take such action as the other Party shall reasonably
request to cause the Parties to obtain any material Governmental Approvals
and/or the expiration of applicable waiting periods, provided that the foregoing
shall not obligate either Party to take or to omit to take any action
(including, without limitation, the expenditure of funds or any holding separate
and agreeing to sell or otherwise dispose of assets, categories of assets or
businesses) as in the good faith opinion of such Party, would cause a material
adverse effect on a Party.

         SECTION 12.04. EQUITABLE RELIEF. The Parties understand and agree that
because of the difficulty of measuring economic losses to the non-breaching
Party as a result of a breach of the covenants set forth in this Article XII or
Section 15.01, and because of the immediate and irreparable damage that may be
caused to the non-breaching Party for which monetary damages would not be a
sufficient remedy, the Parties agree that the non-breaching Party will be
entitled to seek specific performance, temporary and permanent injunctive
relief, and such other equitable remedies to which it may then be entitled
against the breaching Party. This Section 12.04 shall not limit any other legal
or equitable remedies that the non-breaching Party may have against the
breaching Party for violation of the covenants set forth in this Article XII or
Section 15.01. The Parties agree that the non-breaching Party shall have the
right to seek relief for any violation or threatened violation of this Article
XII or Section 15.01 by the breaching Party from any court of competent
jurisdiction in any jurisdiction authorized to grant the relief necessary to
prohibit the violation or threatened violation of this Article XII or Section
15.01. This Article XII shall apply with equal force to the breaching Party's
Affiliates.

                                  ARTICLE XIII

                          INDEMNIFICATION AND INSURANCE


         SECTION 13.01. ATRIX INDEMNIFIED BY ABI. ABI shall indemnify and hold
Atrix harmless from and against any liabilities or obligations, damages, losses,
claims, encumbrances, costs or expenses (including attorneys' fees) (any or all
of the foregoing herein referred to as "Loss") insofar as a Loss or actions in
respect thereof, whether existing or occurring prior to, on or subsequent to the
Effective Date, arises out of or is based upon (a) any misrepresentation or
breach of any of the warranties, covenants or agreements made by ABI in this
Agreement; (b) the Manufacture of any Product that is identifiable as having
been Manufactured by or on behalf of ABI; (c) any claims that a Product (as a
result of the use of the ABI



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<PAGE>   35


Technology therein) or its Manufacture (as a result of the use of ABI Technology
therein), use or sale infringes the patent, trademark or other intellectual
property right of a Third Party.

         SECTION 13.02. ABI INDEMNIFIED BY ATRIX. Atrix shall indemnify and hold
harmless ABI from and against any Loss insofar as such Loss or actions in
respect thereof occurs subsequent to the Effective Date, whether existing or
occurring prior to, on or subsequent to the date hereof, arises out of or is
based upon (a) any misrepresentation or breach of any of the warranties,
covenants or agreements made by Atrix in this Agreement or (b) Atrix's material
violation of any Applicable Law.

         SECTION 13.03. PROMPT NOTICE REQUIRED. No claim for indemnification
hereunder shall be valid unless notice of the matter which may give rise to such
claim is given in writing by the (the "Indemnitee") to the persons against whom
indemnification may be sought (the "Indemnitor") as soon as reasonably
practicable after such Indemnitee becomes aware of such claim; provided that the
failure to notify the Indemnitor shall not relieve it from any liability which
it may have to the Indemnitee otherwise than under this Article XIII. Such
notice shall state that the Indemnitor is required to indemnify the Indemnitee
for a Loss and shall specify the amount of Loss and relevant details thereof.
The Indemnitor shall notify Indemnitee no later than 60 days from such notice of
its intention to assume the defense of any such claim. In the event the
Indemnitor fails to give such notice within that time the Indemnitor shall no
longer be entitled to assume such defense.

         SECTION 13.04. INDEMNITOR MAY SETTLE. The Indemnitor shall at its
expense, have the right to settle and defend, through counsel reasonably
satisfactory to the Indemnitee, any action which may be brought in connection
with all matters for which indemnification is available. In such event the
Indemnitee of the Loss in question and any successor thereto shall permit the
Indemnitor full and free access to its books and records and otherwise fully
cooperate with the Indemnitor in connection with such action; provided that this
Indemnitee shall have the right fully to participate in such defense at its own
expense. The defense by the Indemnitor of any such actions shall not be deemed a
waiver by the Indemnitor of its right to assert a claim with respect to the
responsibility of the Indemnitor with respect to the Loss in question. The
Indemnitor shall have the right to settle or compromise any claim against the
Indemnitee without the consent of the Indemnitee provided that the terms
thereof: (a) provide for the unconditional release of the Indemnitee; (b)
require the payment of compensatory monetary damages by Indemnitor only; and (c)
expressly state that neither the fact of settlement nor the settlement agreement
shall constitute, or be construed or interpreted as, an admission by the
Indemnitee of any issue, fact, allegation or any other aspect of the claim being
settled. No Indemnitee shall pay or voluntarily permit the determination of any
liability which is subject to any such action while the Indemnitor is
negotiating the settlement thereof or contesting the matter, except with the
prior written consent of the Indemnitor, which consent shall not be unreasonably
withheld or delayed. If the Indemnitor fails to give Indemnitee notice of its
intention to defend any such action as provided herein, the Indemnitee involved
shall have the right to assume the defense thereof with counsel of its choice,
at the Indemnitor's expense, and defend, settle or otherwise dispose of such
action. With respect to any such action which the Indemnitor shall fail to
promptly defend, the Indemnitor shall not thereafter question the liability of
the Indemnitor hereunder to the Indemnitee for any Loss (including counsel fees
and other expenses of defense).


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                                       35
<PAGE>   36


         SECTION 13.05. INSURANCE. At all times during the Term, each Party
shall, at its sole cost and expense, obtain and keep in force comprehensive
general liability insurance, including any applicable self-insurance coverage,
with bodily injury, death and property damage limits in a commercially
reasonable amount, based on insurance coverage in the pharmaceutical industry
generally and the activities of the Parties pursuant to this Agreement,
including contractual liability and, following the receipt by ABI of notice as
set forth below, product liability coverage. At least 60 days prior to Atrix's
planned first commercial sale of a Product, Atrix shall give ABI notice of
Atrix's intent to launch a Product and each Party shall, prior to the date of
the planned first commercial sale, obtain the product liability insurance
referenced above, which requirement, in the case of ABI, may be satisfied by
coverage satisfying the requirements set forth above maintained by HBL
designating ABI as a named insured. Upon execution of this Agreement and within
10 days following amending, updating, modifying or replacing any such insurance,
each Party shall furnish the other with a certificate of insurance signed by an
authorized representative of such Party's insurance underwriter evidencing the
insurance coverage required by this Agreement and providing for at least 30 days
prior written notice to the other Party of any cancellation, termination or
reduction of such insurance coverage.

                                  ARTICLE XIV

                               DISPUTE RESOLUTION

         SECTION 14.01. DISPUTES. The Parties recognize that disputes as to
certain matters may from time to time arise during the Term, which relate to
either Party's rights and/or obligations hereunder. It is the objective of the
Parties to establish procedures to facilitate the resolution of disputes arising
under this Agreement in an expedient manner by mutual cooperation and without
resort to litigation. To accomplish this objective, the Parties agree to follow
the procedures set forth in this Article XIV if and when a dispute arises under
this Agreement.

         Unless otherwise specifically recited in this Agreement, disputes among
the Parties will be resolved as recited in this Article XIV. Disputes among the
Parties first shall be presented to the chief executive officers of ABI and
Atrix, or their respective designees, for resolution. In the event that the
chief executive officers of ABI and Atrix, or their respective designees, cannot
resolve the dispute within ten days of being requested by a Party to resolve a
dispute, either Party may, by written notice to the other, invoke the provisions
of Section 14.02.

         SECTION 14.02. TRIAL WITHOUT JURY. If the Parties fail to resolve the
dispute through negotiation in accordance with Section 14.01, each Party shall
have the right to pursue any of the remedies legally available to resolve the
dispute; provided, however, that the Parties expressly waive any right to a jury
trial in any legal proceedings under this Section 14.02.

         SECTION 14.03. PERFORMANCE TO CONTINUE. Each Party shall continue to
perform its obligations under this Agreement pending final resolution of any
dispute arising out of or related to this Agreement; provided, however, that a
Party may suspend performance of its obligations during any period in which the
other Party fails or refuses to perform its obligations.


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                                       36
<PAGE>   37


         SECTION 14.04. PROVISIONAL REMEDIES. Although the procedures specified
in this Article XIV are the sole and exclusive procedures for the resolution of
disputes arising out of or related to this Agreement, either Party may seek a
preliminary injunction or other provisional equitable relief, if, in its
reasonable judgment, such action is necessary to avoid irreparable harm to
itself or to preserve its rights under this Agreement.

         SECTION 14.05. DETERMINATION OF PATENTS AND OTHER INTELLECTUAL
PROPERTY. Notwithstanding the foregoing, any dispute relating to the
determination of validity of claims, infringement or claim interpretation
relating to a Party's patents shall be submitted exclusively to federal court.

                                   ARTICLE XV

                                 CONFIDENTIALITY

         SECTION 15.01. CONFIDENTIALITY. During the Term and for a period of
five years thereafter, each Party shall maintain all Confidential Information of
the other Party as confidential and shall not disclose any such Confidential
Information to any Third Party or use any such Confidential Information for any
purpose, except (a) as expressly authorized by this Agreement, (b) as required
by law, rule, regulation or court order (provided that the disclosing Party
shall first notify the other Party and shall use commercially reasonable efforts
to obtain confidential treatment of any such information required to be
disclosed), or (c) to its Affiliates and its employees, agents, consultants and
other representatives ("Representatives") to accomplish the purposes of this
Agreement, so long as such persons are under an obligation of confidentiality no
less stringent than as set forth herein. Each Party may use such Confidential
Information only to the extent required to accomplish the purposes of this
Agreement. Each Party shall use at least the same standard of care as it uses to
protect its own Confidential Information to ensure that it and its Affiliates
and Representatives do not disclose or make any unauthorized use of the other
Party's Confidential Information. Each Party shall be responsible for any breach
of this Agreement by its Representatives. Each Party shall promptly notify the
other Party upon discovery of any unauthorized use or disclosure of the other
Party's Confidential Information.

         SECTION 15.02. PUBLICITY REVIEW. The Parties agree that the public
announcement of the execution of this Agreement shall be in the form of press
releases issued by each of the Parties to be agreed upon on or before the
Effective Date and thereafter each Party shall be entitled to make or publish
any public statement consistent with the contents thereof. Thereafter, the
Parties will jointly discuss and agree, based on the principles of this Section
15.02, on any statement to the public regarding this Agreement or any aspect of
this Agreement, and the results of clinical studies conducted hereunder, subject
in each case to disclosure otherwise required by law or regulation as determined
in good faith by each Party. When a Party elects to make any such statement it
will give the other Party at least three days notice to review and comment on
such statement. In the event of a public disclosure required by law prior to the
end of such three day period, the Party required to make such disclosure, if it
legally may, shall give the other Party at least two business days to review and
comment on such disclosure. If a Party was not legally able to give notice under
the previous sentence, it will furnish the other Party with a copy of its
disclosure as soon as practicable after the making thereof. The Parties
acknowledge the importance of supporting each other's efforts to publicly



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<PAGE>   38




disclose results and significant developments regarding the Products. The
principles to be observed by ABI and Atrix in such public disclosures will be:
accuracy, the requirements for confidentiality under Section 15.01, compliance
with FDA regulations and other FDA guidance documents and other Applicable Laws,
the advantage a competitor of ABI or Atrix may gain from any public statements
under this Section 15.02, and the standards and customs in the biotechnology and
pharmaceutical industries for such disclosures by companies comparable to ABI
and Atrix. The terms of this Agreement may also be disclosed by a Party to: (a)
government agencies where required by law, including filings required to be made
by law with the United States Securities and Exchange Commission ("SEC"),
national securities exchanges or the Nasdaq Stock Market, (b) Third Parties with
the prior written consent of the other Party, which consent shall not be
unreasonably withheld, or (c) lenders, investment bankers and other financial
institutions solely for purposes of financing the business operations of such
Party, so long as such disclosure in (b) and (c) above is made under an
agreement of confidentiality at least as restrictive as the confidentiality
provisions in Section 15.01, to the extent possible highly sensitive terms and
conditions such as financial terms are extracted from the Agreement (including
in any disclosure required by law or the SEC) or deleted upon the request of the
other Party, and as the disclosing Party gives reasonable advance notice of the
disclosure under the circumstances requiring the disclosure.

                                   ARTICLE XVI

                                  MISCELLANEOUS

         SECTION 16.01. NO SOLICITATION. Neither Party nor its Affiliates
(collectively, the "Initiating Group") shall, directly or through its
representatives, solicit for employment any officer, director, employee or
consultant of the other Party or its subsidiaries or controlled affiliates
(collectively, the "Other Group") with whom the Initiating Group has had contact
in connection with, or who otherwise participates in, the transactions
contemplated by this Agreement. The Initiating Group shall not be precluded from
hiring any such person who has been terminated by the Other Group at least 90
days prior to commencement of employment discussions between such person and the
Initiating Group or its representatives. "Solicitation" shall not include any
generalized public advertisement or any other solicitation by the Initiating
Group or its representatives that is not specifically directed toward any such
employee of the Other Group or toward any group of such employees of the Other
Group.

         SECTION 16.02. COMMERCIALLY REASONABLE EFFORTS. Each Party shall use
commercially reasonable and diligent efforts to perform its responsibilities
under this Agreement. As used herein, the term "commercially reasonable and
diligent efforts" means, unless the Parties agree otherwise, those efforts
consistent with the exercise of prudent scientific and business judgment, as
applied to other products of similar scientific and commercial potential within
the relevant product lines of the Parties.

         SECTION 16.03. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing and shall be deemed to have been
given if delivered personally, mailed by certified mail (return receipt
requested) or sent by cable, telegram or recognized overnight delivery


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<PAGE>   39


service to the parties at the following addresses or at such other addresses as,
specified by the parties by like notice:

         If to ABI :       Dr. Joseph M. Cummins, Chairman & CEO
                           Amarillo Biosciences, Inc.
                           800 W. 9th
                           Amarillo, TX 79101
                           Facsimile: (806) 3769301

         With a copy to:   Edward L. Morris, Legal Counsel
                           Sprouse, Smith & Rowley, PC
                           P.O. Box 15008
                           Amarillo, TX 79105
                           Facsimile: (806) 3733454

         If to Atrix:      Senior Vice President, Corporate Development
                           Atrix Laboratories, Inc.
                           2579 Midpoint Drive
                           Fort Collins, Colorado 805254417
                           Facsimile: (970) 4829735
                           Telephone: (970)4825868

         With a copy to:   Morrison & Foerster LLP
                           370 Seventeenth Street, Suite 5200
                           Denver, Colorado 80202
                           Facsimile: (303) 5921510
                           Telephone: (303) 5921500
                           Attention: Warren L. Troupe, Esq.

         Notice so given shall be deemed given and received (i) if by mail on
the fourth day after posting; (ii) by cable, telegram, telex or personal
delivery on the date of actual transmission, with evidence of transmission
acceptance, or (as the case may be) personal or other delivery; and (iii) if by
overnight delivery courier, on the next business day following the day such
notice is delivered to the courier service.

         SECTION 16.04. SEVERABILITY. Whenever possible, each clause, subclause,
provision or condition of this Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any clause, subclause,
provision or condition of this Agreement should be prohibited or invalid under
applicable law, such clause, subclause, provision or condition shall be
considered separate and severable from this Agreement to the extent of such
prohibition or invalidity without invalidating the remaining clauses,
subclauses, provisions and conditions of this Agreement.

         SECTION 16.05. ENTIRE AGREEMENT/MERGER. This Agreement sets forth the
entire agreement between the Parties hereto pertaining to the subject matter
hereof and supersedes all negotiations, preliminary agreements, memoranda or
letters of proposal or intent, discussions and understandings


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<PAGE>   40



of the Parties hereto in connection with the subject matter hereof. All
discussions between the Parties have been merged into this Agreement, and
neither Party shall be bound by any definition, condition, understanding,
representation, warranty, covenant or provision other than as expressly stated
in or contemplated by this Agreement or as subsequently shall be set forth in
writing and executed by a duly authorized representative of the Party to be
bound thereby.

         SECTION 16.06. AMENDMENT. No amendment, change or modification of any
of the terms, provisions or conditions of this Agreement shall be effective
unless made in writing and signed on behalf of the Parties hereto by their duly
authorized representatives.

         SECTION 16.07. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original document, but
all such separate counterparts shall constitute only one and the same
instrument. This Agreement may be signed and delivered to the other Party by
facsimile signature; such transmission shall be deemed a valid signature.

         SECTION 16.08. NO WAIVER OF RIGHTS. No waiver of any term, provision,
or condition of this Agreement, whether by conduct or otherwise, in any one or
more instances, shall be deemed to be or construed as a further or continuing
waiver of any such term, provision, or condition of this Agreement.

         SECTION 16.09. FORCE MAJEURE. Neither Party shall be liable hereunder
to the other Party nor shall be in breach for failure to deliver, provided
failure to deliver is no greater than the delay in time caused by circumstances
beyond the control for either Party, including acts of God, fires, floods,
riots, wars, civil disturbances, sabotage, accidents, labor disputes, shortages,
government actions (including priorities, requisitions, allocations and price
adjustment restrictions) and inability to obtain material, equipment, labor or
transportation (collectively, "Force Majeure").

         SECTION 16.10. FURTHER ASSURANCES. The Parties hereto shall each
perform such acts, execute and deliver such instruments and documents and do all
such other things as may be reasonably necessary to accomplish the transactions
contemplated in this Agreement.

         SECTION 16.11. ASSIGNMENT AND SUBLICENSE. Neither this Agreement nor
any of the rights, interests, options or obligations hereunder may be assigned,
sublicensed or delegated by either of the Parties without the prior written
consent of the other Party, provided, however, that either Atrix or ABI may,
without such consent, assign this Agreement and its rights and obligations
hereunder in connection with the transfer or sale of all or substantially all of
its business pertaining to this Agreement, or in the event of its merger or
consolidation or change in control or similar transaction. Any permitted
assignee shall assume all obligations of its assignor under this Agreement.
Further, a Party may assign or sublicense any and all of its rights, interests,
options, and delegate all obligations hereunder, to any Affiliate of such Party
(and such Affiliate may further assign or sublicense this Agreement to such
Party or any other Affiliate of such Party) without the consent of the other
Party. In the event of an assignment or sublicense to an Affiliate, the
assigning Party shall guarantee the performance of such assignee or sublicensee.
The assignment or sublicense to an Affiliate shall not operate to discharge the
assignor or sublicensor from any obligation under this Agreement. Any assignment
which contravenes this Section 16.11 shall be void ab initio.


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                                       40
<PAGE>   41



         SECTION 16.12. EXPENSES. The Parties hereto shall each bear their own
costs and expenses (including attorneys' fees) incurred in connection with the
negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby.

         SECTION 16.13. BINDING EFFECT. This Agreement, and all of the terms,
provisions and conditions hereof, shall be binding upon and shall inure to the
benefit of the Parties hereto and their respective permitted successors and
assigns.

         SECTION 16.14. GOVERNING LAW. This Agreement shall be construed and
interpreted accordance with the laws of the State of Delaware.

         SECTION 16.15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
statements contained herein, or in any schedule hereto, shall be considered a
representation, warranty or covenant of the Party making such statement. All
representations, warranties, covenants contained herein, or in any schedule
hereto, shall survive the closing of this transaction.

         SECTION 16.16. NO STRICT CONSTRUCTION. This Agreement has been prepared
jointly and shall not be strictly construed against either Party.

         SECTION 16.17. INDEPENDENT CONTRACTORS. The status of the Parties under
this Agreement shall be that of independent contractor. No Party shall have the
right to enter into any agreements on behalf of the other Party nor shall it
represent to any Person that it has such right or authority.

                            [Signature Page Follows]



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                                       41
<PAGE>   42




         IN WITNESS WHEREOF the Parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the Effective Date.


                                            AMARILLO BIOSCIENCES, INC.


                                            By:
                                               --------------------------------
                                               Joseph M. Cummins, President
                                               and Chief Executive Officer


                                            ATRIX LABORATORIES, INC.


                                            By:
                                               --------------------------------
                                               David R. Bethune, Chairman
                                               and Chief Executive Officer



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                                       42
<PAGE>   43


                                    EXHIBIT A

                                ABI PATENT RIGHTS













                    [Exhibit A has been completely omitted.]





                                       A-1
<PAGE>   44





                                    EXHIBIT B

                                 SPECIFICATIONS








                    [Exhibit B has been completely omitted.]






                                       B-2
<PAGE>   45





                                    EXHIBIT C

                        FORM OF CERTIFICATE OF COMPLIANCE


Issue Date:
            --------------------------------

                            CERTIFICATE OF COMPLIANCE

FOR
    --------------------------------------------------------------------------
CUSTOMER
        ----------------------------------------------------------------------
        LOT NUMBER
                  ------------------------------------------------------------
FILL DATE                                    PREP/EX DATE
         ------------------------------------            ---------------------
DOSAGE
      ------------------------------------------------------------------------
QUANTITY
        ----------------------------------------------------------------------

The batch production record for this Product has been reviewed for accuracy,
completeness, and compliance with the Specifications set forth in the License
Agreement between Amarillo Biosciences, Inc. and Atrix Laboratories, Inc. dated
September 7, 2001 (the "Agreement") and the Agreement, and in accordance with
cGMP requirements. Any deviations/abnormal occurrences from the aforementioned
requirements have been appropriately documented, reviewed, and approved.


Reviewed By:
            -----------------------------------------------------------
                  Batch Record Auditor

Date:
     ------------------------------------------------------------------

Amarillo Biosciences, Inc.


Approved By:
             ----------------------------------------------------------
                  Acting Supervisor Manager, Documentation

Date:
     ------------------------------------------------------------------

cc: All Customers


                                       C-1