Subscription, Joint Development & Operations

EXHIBIT 99.5


SUBSCRIPTION, JOINT DEVELOPMENT AND OPERATING AGREEMENT


ELAN PHARMA INTERNATIONAL LIMITED


ELAN INTERNATIONAL SERVICES, LTD.


AND


ATRIX LABORATORIES, INC.


AND


ATRIX NEWCO, LIMITED


2


INDEX


CLAUSE 1 DEFINITIONS


CLAUSE 2 NEWCO'S BUSINESS


CLAUSE 3 REPRESENTATIONS AND WARRANTIES


CLAUSE 4 AUTHORIZATION AND CLOSING


CLAUSE 5 DIRECTORS; MANAGEMENT AND R&D COMMITTEES


CLAUSE 6 THE BUSINESS PLAN AND REVIEWS


CLAUSE 7 RESEARCH AND DEVELOPMENT


CLAUSE 8 COMMERCIALIZATION


CLAUSE 9 OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS


CLAUSE 10 INTELLECTUAL PROPERTY RIGHTS


CLAUSE 11 CROSS LICENSING/EXPLOITATION OF PRODUCTS OUTSIDE FIELD


CLAUSE 12 REGULATORY


CLAUSE 13 MANUFACTURING


CLAUSE 14 TECHNICAL SERVICES AND ASSISTANCE


CLAUSE 15 AUDITORS, BANKERS,
ACCOUNTING REFERENCE DATE; SECRETARY


CLAUSE 16 TRANSFER OF SHARES; RIGHTS OF FIRST OFFER; TAG ALONG RIGHTS


CLAUSE 17 MATTERS REQUIRING STOCKHOLDERS' APPROVAL


CLAUSE 18 DISPUTES


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CLAUSE 19 TERMINATION


CLAUSE 20 SHARE RIGHTS


CLAUSE 21 CONFIDENTIALITY


CLAUSE 22 COSTS


CLAUSE 23 GENERAL


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THIS SUBSCRIPTION, JOINT DEVELOPMENT AND OPERATING AGREEMENT made this 18 day of July, 2000


BETWEEN:


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


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


(3) ATRIX LABORATORIES, INC., a corporation duly incorporated and validly
existing under the laws of State of Delaware and having its principal
place of business at 2579 Midpoint Drive, Fort Collins, CO 80525-4417,
United States of America.


(4) ATRIX NEWCO, LIMITED a Bermuda exempted limited liability company
incorporated under the laws of Bermuda, and having its registered
office at Clarendon House, 2 Church St., Hamilton, Bermuda ("NEWCO").


RECITALS:


A. Newco desires to issue and sell to the Stockholders (as defined below),
and the Stockholders desire to purchase from Newco, for aggregate
consideration of $15,000,000, apportioned between them as set forth
herein, (i) 6,000 ordinary shares of Newco's common stock, par value
$1.00 per share (the "COMMON STOCK"), allocated to Atrix, and (ii)
6,000 shares of Newco's preferred stock, par value $1.00 per share (the
"PREFERRED STOCK"), allocated 3,612 Shares to Atrix and 2,388 Shares to
EIS.


B. As of the Closing Date, EPIL, has entered into a license agreement with
Newco, and Atrix has entered into a license agreement with Newco, in
connection with the license to Newco of the Elan Intellectual Property
and the Atrix Intellectual Property, respectively (each as defined
below).


C. Elan and Atrix have agreed to co-operate in the research, development
and commercialization of the Products (as defined below) based on their
respective technologies.


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D. Elan and Atrix have agreed to enter into this Agreement for the purpose
of recording the terms and conditions regulating their relationship
with each other, with respect to the Licensed Technologies and with
Newco.


NOW IT IS HEREBY AGREED AS FOLLOWS:


CLAUSE 1


DEFINITIONS


1.1 In this Agreement, the following terms shall, where not inconsistent
with the context, have the following meanings respectively.


"AFFILIATE" of any Person (in the case of a legal entity) shall mean
any other Person controlling, controlled or under the common control of
such first Person, as the case may be. For the purposes of this
definition, "control" shall mean direct or indirect ownership of fifty
percent (50%) or more of the stock or shares entitled to vote for the
election of directors and "controlling" and "controlled" shall be
construed accordingly. Newco is not an Affiliate of Elan or EIS.


"AGREEMENT" shall mean this agreement (which expression shall be deemed
to include the Recitals and the Schedules hereto).


"ATRIGEL(R)TECHNOLOGY" shall mean Atrix's proprietary [**].


"ATRIX DIRECTORS" has the meaning set forth in Clause 5.


"ATRIX IMPROVEMENTS" has the meaning assigned thereto in the Atrix
License Agreement.


"ATRIX INTELLECTUAL PROPERTY" has the meaning assigned thereto in the
Atrix License Agreement.


"ATRIX KNOW-HOW" has the meaning assigned thereto in the Atrix License
Agreement.


"ATRIX LICENSE AGREEMENT" shall mean the license agreement between
Atrix and Newco, of even date herewith, attached hereto in Schedule 2.


"ATRIX PATENTS" has the meaning assigned thereto in the Atrix License
Agreement.


"ATRIX SECURITIES PURCHASE AGREEMENT" shall mean that certain
Securities Purchase Agreement, of even date herewith, by and between
Atrix and EIS.


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"BEMA(TM)TECHNOLOGY" shall mean Atrix's proprietary [**]


"BOARD" shall mean the board of directors of Newco.


"BUSINESS" shall mean the business specified in the Business Plan.


"BUSINESS PLAN" shall mean the business plan and program of development
to be agreed by Elan and Atrix pursuant to Clause 6, with respect to
the research, development, and commercialization of the Products that
shall contain, among other things, to the extent practicable, the
research and development objectives, desired Product specifications,
clinical indications, preliminary clinical trial designs (Phase I/II),
development timelines, budgeted costs and the relative responsibilities
of Atrix and Elan as it relates to the implementation of the R&D Plan.


"CERTIFICATE OF DESIGNATIONS" shall mean that certain certificate of
designations, preferences and rights of Series A Preferred Stock of
Atrix issued on the Closing Date.


"CLOSING DATE" shall mean the date upon which the Definitive Documents
are executed and delivered by the Parties and the transactions effected
thereby are closed.


"COMMON STOCK EQUIVALENTS" shall mean any options, warrants, rights or
any other securities convertible, exercisable or exchangeable, in whole
or in part, for or into Common Stock.


"COMPOUNDS" shall mean the compounds, up to a maximum of three, which
shall be nominated and approved by the Management Committee in
accordance with Clause 2 of this Agreement.


"CONVERTIBLE NOTE" shall mean that certain convertible promissory note,
of even date herewith, by and between Atrix and EIS.


"DEFINITIVE DOCUMENTS" shall mean this Agreement, the Elan License
Agreement, the Atrix License Agreement, the Convertible Note, the Atrix
Securities Purchase Agreement, the Registration Rights Agreements, the
Certificate of Designations and associated documentation of even date
herewith, by and between Atrix, Elan, EIS and Newco, as applicable.


"DIRECTORS" shall mean, at any time, the directors of Newco.


"EIS DIRECTOR" has the meaning set forth in Clause 5.


"ELAN" shall mean EPIL and Affiliates and subsidiaries of Elan
Corporation, plc. within the division of Elan Corporation, plc.
carrying on business as Elan


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Pharmaceutical Technologies but shall not include The Liposome Company,
Inc. and its subsidiaries, Axogen Limited and Neuralab Limited and
Affiliates and subsidiaries (present or future) of Elan Corporation
plc. within the division of Elan Pharmaceuticals which incorporates,
inter alia, EPIL (to the extent that EPIL is the owner of patents,
know-how or other intellectual property or technology invented and/or
developed within the division of Elan Corporation, plc carrying on
business as Elan Pharmaceuticals), Athena Neurosciences, Inc., Elan
Pharmaceuticals, Inc. and Elan Europe Limited.


"ELAN IMPROVEMENTS" has the meaning assigned thereto in the Elan
License Agreement.


"ELAN INTELLECTUAL PROPERTY" has the meaning assigned thereto in the
Elan License Agreement.


"ELAN KNOW-HOW" has the meaning assigned thereto in the Elan License
Agreement.


"ELAN LICENSE AGREEMENT" shall mean the license agreement between Elan
and Newco, of even date herewith, attached hereto in Schedule 1.


"ELAN PATENT RIGHTS" shall mean has the meaning assigned thereto in the
Elan License Agreement.


"ENCUMBRANCE" shall mean any liens, charges, encumbrances, equities,
claims, options, proxies, pledges, security interests, or other similar
rights of any nature.


"EXCHANGE RIGHT" has the meaning assigned to such term in the
Certificate of Designations in effect on the Closing Date.


"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.


"FDA" shall mean the United States Food and Drug Administration or any
other successor agency in the USA.


"FIELD" shall mean the administration of the Products for pain
management or oncology indications.


"FINANCIAL YEAR" shall mean each year commencing on January 1 (or in
the case of the first Financial Year, the Closing Date) and expiring on
December 31 of each year.


"FULLY DILUTED COMMON STOCK" shall mean all of the issued and
outstanding Common Stock, assuming the conversion, exercise or exchange
of all outstanding Common Stock Equivalents.


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"LICENSE AGREEMENTS" shall mean the Elan License Agreement and the
Atrix License Agreement.


"LICENSED TECHNOLOGIES" shall mean, collectively, the Elan Intellectual
Property and the Atrix Intellectual Property.


"NEWCO INTELLECTUAL PROPERTY" shall mean all rights to patents,
know-how and other intellectual property arising during and as a direct
result of the conduct of the Project by any person, including any
technology acquired by Newco from a third party, that does not
constitute either Elan Intellectual Property or Atrix Intellectual
Property. For the avoidance of doubt, patents, know-how and other
intellectual property, including all pre-clinical and clinical trial,
on the Products, and all correspondence with and submissions to
government agencies for marketing or other regulatory approval of the
Products shall be deemed Newco Intellectual Property.


"NEWCO BYE-LAWS" shall mean the Memorandum of Association and Bye-Laws
of Newco.


"PARTICIPANT" shall mean Atrix or Elan, as the case may be, and
"PARTICIPANTS" shall mean both of the Participants together;


"PARTY" shall mean Elan, Atrix, or Newco, as the case may be, and
"PARTIES" shall mean all such parties together;


"PERSON" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental entity or
authority or other entity of whatever nature.


"PERMITTED TRANSFEREE" shall mean any Affiliate or subsidiary of Elan,
EIS or Atrix, to whom this Agreement may be assigned, in whole or in
part, pursuant to the terms hereof or in the case of Elan, EPIL, EIS, a
special purpose financing entity created by Elan or EIS.


"PRODUCTS" shall mean formulations of the Compounds utilizing, in no
particular order, (i) the Atrigel(R) Technology or BEMA(TM) Technology,
(ii) the NanoCrystal(TM) Technology and the BEMA(TM) Technology, or
(iii) the NanoCrystal(TM) Technology and the Atrigel(R) Technology, as
developed by or on behalf of Newco pursuant to the Project.


"PROJECT" shall mean all activities as undertaken by Elan, Atrix and
Newco in order to develop the Products.


"REGISTRATION RIGHTS AGREEMENTS" shall mean the Registration Rights
Agreements of even date herewith relating to Newco and Atrix,
respectively.


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"REGULATORY APPLICATION" shall mean any regulatory application or any
other application for marketing approval for a Product, which Newco
will file in any country of the Territory, including any supplements or
amendments thereto.


"REGULATORY APPROVAL" shall mean the final approval to market a Product
in any country of the Territory, and any other approval which is
required to launch the Product in the normal course of business.


"RESEARCH AND DEVELOPMENT TERM" shall mean the period of [**] months
immediately following the Closing Date.


"RHA" shall mean any relevant government health authority (or successor
agency thereof) in any country of the Territory whose approval is
necessary to market a Product in the relevant country of the Territory.


"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.


"SHARES" shall mean the shares of Common Stock and shares of Preferred
Stock of Newco.


"STOCKHOLDER" shall mean any of EIS, Atrix, any Permitted Transferee or
any other Person who subsequently becomes bound by this Agreement as a
holder of the Shares, and "STOCKHOLDERS" shall mean all of the
Stockholders together.


"TECHNOLOGICAL COMPETITOR OF ELAN" has the meaning assigned thereto in
the Elan License Agreement.


"TERM" shall mean the term of this Agreement.


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


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


"USA" shall mean the United States of America.


1.2 In addition, the following definitions have the meanings in the Clauses
corresponding thereto, as set forth below.


DEFINITION CLAUSE


"AAA" 18.4
"Buyout Option" 19.3
"Closing" 4.3
"Common Stock" Recital
"Confidential Information" 21.1


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"Co-sale Notice" 16.4
"Expert" 18.4
"Management Committee" 5.2.1
"Notice of Exercise" 16.3
"Notice of Intention" 16.3
"Offered Shares" 16.3
"Offer Price" 16.3
"Preferred Stock" Recital
"Proposing Participant" 19.3
"Proposing Participant Price: 19.5
"Purchase Price" 19.5
"R&D Committee" 5.2.3
"Recipient Participant" 19.3
"Recipient Participant Price" 19.5
"Remaining Stockholders" 16.4
"Relevant Event" 19.2
"Selling Stockholder" 16.3
"Tag-Along Right" 16.4
"Transaction Proposal" 16.3
"Transfer" 16.1
"Transferee Terms" 16.4
"Transferring Stockholder" 16.4


1.3 Words importing the singular shall include the plural and vice versa.


1.4 Unless the context otherwise requires, reference to a recital, article,
paragraph, provision, clause or schedule is to a recital, article,
paragraph, provision, clause or schedule of or to this Agreement.


1.5 Reference to a statute or statutory provision includes a reference to
it as from time to time amended, extended or re-enacted.


1.6 The headings in this Agreement are inserted for convenience only and do
not affect its construction.


1.7 Unless the context or subject otherwise requires, references to words
in one gender include references to the other genders.


1.8 Capitalized terms used but not defined herein shall have the meanings
ascribed in the Definitive Documents, if defined therein.


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CLAUSE 2


BUSINESS


2.1 The primary objective of the Agreement is to regulate the business of
the development, testing, registration, manufacture, commercialization
and licensing of Products in the Territory and to achieve the other
objectives set out in this Agreement. The focus of the Business will be
to develop the Products in the Field using the Elan Intellectual
Property, the Atrix Intellectual Property and the Newco Intellectual
Property to agreed-upon specifications and timelines.


2.2 The central management and control of Newco shall be exercised in
Bermuda and shall be vested in the Directors and such Persons as they
may delegate the exercise of their powers in accordance with the Newco
Bye-Laws. The Stockholders agree to conduct the Business in such a
manner as to ensure that Newco is liable to taxation in Bermuda and not
in any other jurisdiction. The Participants shall use their best
endeavours to ensure the sole residence of Newco in Bermuda, all
meetings of the Directors are held in Bermuda or other jurisdictions
outside the United States and generally to ensure that Newco is treated
as resident for taxation purposes in Bermuda.


2.3 The focus of the Agreement will be to develop three Products using, in
no particular order, (i) the Atrigel(R) Technology or BEMA(TM)
Technology, (ii) the BEMA(TM) Technology and the NanoCrystal(TM)
Technology, or (iii) the Atrigel(R) Technology and the NanoCrystal(TM)
Technology, all to agreed upon specifications and timelines. Subject to
the provisions of Clause 8, Newco shall be responsible for determining
the subsequent commercialization strategy to allow the Products to be
marketed in the Territory.


2.4 Within 60 days of the Effective Date or such period as may be agreed by
the Parties in writing, the Management Committee shall, by unanimous
agreement, nominate and agree upon up to a maximum of three Compounds
which should be developed by Newco. The Management Committee shall have
regard to the following criteria in agreeing upon Compounds for
development by Newco:-


2.4.1 market potential of the Compounds, as estimated by the
Management Committee;


2.4.2 development cost of the Compounds, as estimated by the
Management Committee; and


2.4.3 results of intellectual property due diligence primarily
focused on determining whether there are any third party
intellectual property issues which might impact the
development and marketing of any of the Compounds in the
Territory.


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2.5 The selection of the Compounds shall be subject to, inter alia, the
then existing contractual arrangements of Elan and Atrix and such
discussions as Elan or Atrix are having with one or more third parties
at the time of such selection. Nothing in this Clause 2 shall restrict
the ability of Elan or Atrix to pursue discussions or enter into
agreements with one or more third parties so long as mutual agreement
has not been reached regarding the Compounds.


2.6 Should any of the Compounds fail to meet agreed specifications or the
results of the review under Clause 2.4 or reveal third party
intellectual property issues which might materially impact the
development and marketing of a Product, the Management Committee shall
terminate the portion of the Project that relates to such Compound(s)
and shall review in good faith the nomination by Newco of additional
Compound(s). In such case, the Parties shall negotiate in good faith
such amendments as are required to the Definitive Documents, such as
amending the provisions regulating non-competition.


CLAUSE 3


REPRESENTATIONS AND WARRANTIES


3.1 REPRESENTATIONS AND WARRANTIES OF NEWCO: Newco hereby represents and
warrants to each of the Stockholders as follows, as of the Closing
Date:


3.1.1 ORGANIZATION: Newco is an exempted company duly organized,
validly existing and in good standing under the laws of
Bermuda, and has all the requisite corporate power and
authority to own and lease its properties, to carry on its
business as presently conducted and as proposed to be
conducted.


3.1.2 CAPITALIZATION: As of the Closing Date, the authorized capital
stock of Newco consists of 6,000 shares of Common Stock and
6,000 shares of Preferred Stock. Prior to the Closing Date, no
shares of capital stock of Newco have been issued.


3.1.3 AUTHORIZATION: The execution, delivery and performance by
Newco of this Agreement, including the issuance of the Shares,
have been duly authorized by all requisite corporate actions;
this Agreement has been duly executed and delivered by Newco
and is the valid and binding obligation of Newco, enforceable
against it in accordance with its terms except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the
enforcement of creditors' rights generally, and except as
enforcement of rights to indemnity and contribution hereunder
may be limited by United States federal or state securities
laws or principles of public policy. The Shares, when issued
as contemplated hereby, will be validly issued and


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outstanding, fully paid and non-assessable and not subject to
pre-emptive or any other similar rights of the Stockholders or
others.


3.1.4 NO CONFLICTS: The execution, delivery and performance by Newco
of this Agreement, the issuance, sale and delivery of the
Shares, and compliance with the provisions hereof by Newco,
will not:


(i) violate any provision of applicable law, statute,
rule or regulation applicable to Newco or any ruling,
writ, injunction, order, judgment or decree of any
court, arbitrator, administrative agency or other
governmental body applicable to Newco or any of its
properties or assets;


(ii) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute
(with notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation
or acceleration) under its charter or organizational
documents or any material contract to which Newco is
a party, except where such violation, conflict or
breach would not, individually or in the aggregate,
have a material adverse effect on Newco; or


(iii) result in the creation of, any Encumbrance upon any
of the properties or assets of Newco.


3.1.5 APPROVALS: As of the Closing Date, no permit, authorization,
consent or approval of or by, or any notification of or filing
with, any Person is required in connection with the execution,
...