Exhibit 10.1

FIFTH LOAN MODIFICATION AGREEMENT

This Fifth Loan Modification Agreement (this “Loan Modification Agreement”) is
entered into as of May 31, 2006, by and between SILICON VALLEY BANK, a
California-chartered bank, with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054 and with a loan production office located
at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts 02462, doing business under the name “Silicon Valley East”
(“Bank”) and COLLAGENEX PHARMACEUTICALS, INC., a Delaware corporation with its
chief executive office located at 41 University Drive, Newtown, Pennsylvania
18940 (“Borrower”).

1.                                       DESCRIPTION OF EXISTING INDEBTEDNESS
AND OBLIGATIONS. AMONG OTHER INDEBTEDNESS AND OBLIGATIONS WHICH MAY BE OWING BY
BORROWER TO BANK, BORROWER IS INDEBTED TO BANK PURSUANT TO A LOAN ARRANGEMENT
DATED AS OF MARCH 19, 2001, EVIDENCED BY, AMONG OTHER DOCUMENTS,  A CERTAIN LOAN
AND SECURITY AGREEMENT DATED AS OF MARCH 19, 2001, BETWEEN BORROWER AND BANK, AS
AMENDED (THE “LOAN AGREEMENT”). CAPITALIZED TERMS USED BUT NOT OTHERWISE DEFINED
HEREIN SHALL HAVE THE SAME MEANING AS IN THE LOAN AGREEMENT.

Hereinafter, all indebtedness and obligations owing by Borrower to Bank shall be
referred to as the “Obligations”.

2.                                       DESCRIPTION OF COLLATERAL. REPAYMENT OF
THE OBLIGATIONS IS SECURED BY THE COLLATERAL AS DESCRIBED IN THE LOAN AGREEMENT
AND THE INTELLECTUAL PROPERTY COLLATERAL, AS DESCRIBED IN THE INTELLECTUAL
PROPERTY SECURITY AGREEMENT DATED AS OF MARCH 19, 2001, BETWEEN THE BORROWER AND
THE BANK (TOGETHER WITH ANY OTHER COLLATERAL SECURITY GRANTED TO BANK, THE
“SECURITY DOCUMENTS”).

Hereinafter, the Security Documents, together with all other documents
evidencing, securing or otherwise executed in connection with the Obligations
shall be referred to as the “Existing Loan Documents”.

3.                                       DESCRIPTION OF CHANGE IN TERMS.

Modifications to Loan Agreement. From and after the execution of this Loan
Modification Agreement, the Loan Agreement shall be amended as follows:

i.

 

By deleting the following text appearing in the “Unused Line Fee” subsection of
Section 3 of the Schedule to the Loan Agreement:

 

 

 

 

 

 

 

“0.375% per annum.”

 

 

 

 

 

 

 

and inserting the following in lieu thereof:

 

 

 

 

 

 

 

“0.25% per annum.”

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ii.

 

By deleting the “Maturity Date” set forth in Section 4 of the Schedule to the
Loan Agreement in its entirety and inserting the following in lieu thereof:

 

 

 

 

 

 

 

“May 31, 2007.”

 

 

 

 

 

iii.

 

By deleting the Minimum Tangible Net Worth covenant in Section 5a. of the
Schedule to the Loan Agreement in its entirety and inserting the following in
lieu thereof:

 

 

 

 

 

 

 

“a. Minimum Tangible Net Worth:

 

 

 

 

 

 

 

Borrower shall at all times maintain a Tangible Net Worth, tested quarterly, of
not less than the sum of (i) plus (ii) plus (iii) below:

 

 

 

 

 

 

 

(i)

(a) as of March 31, 2006, $35,000,000;

 

 

 

 

(b) as of June 30, 2006, $25,000,000;

 

 

 

 

(c) as of September 30, 2006, $15,000,000;

 

 

 

 

(d) as of December 31, 2006 and each quarter end thereafter, $10,000,000;

 

 

 

 

 

 

 

plus

 

 

 

 

 

 

 

(ii)   50% of Borrower’s quarterly net income (if positive) in fiscal year 2007;

 

 

 

 

 

 

 

plus

 

 

 

 

 

 

 

(iii)   50% of all consideration received after the date hereof from proceeds
from the issuance of any equity securities of the Borrower and/or subordinated
debt incurred by the Borrower.

 

 

 

 

 

 

 

In no event shall the required amount of this Minimum Tangible Net Worth
covenant be decreased.”

 

 

 

 

 

iv.

 

By deleting Section 5b. and Section 5c. of the Schedule to Loan Agreement.

 

 

 

 

 

v.

 

By deleting EXHIBIT B thereto in its entirety and inserting in lieu thereof
EXHIBIT B attached hereto.

 

4.                                       RATIFICATION OF INTELLECTUAL PROPERTY
SECURITY AGREEMENT. BORROWER HEREBY RATIFIES, CONFIRMS AND REAFFIRMS, ALL AND
SINGULAR, THE TERMS AND CONDITIONS OF A CERTAIN INTELLECTUAL PROPERTY SECURITY
AGREEMENT DATED AS OF MARCH 19, 2001 BETWEEN BORROWER AND BANK, AND
ACKNOWLEDGES, CONFIRMS AND AGREES THAT, EXCEPT AS PREVIOUSLY DISCLOSED IN
WRITING TO BANK, SAID INTELLECTUAL PROPERTY SECURITY AGREEMENT

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                                                CONTAINS AN ACCURATE AND
COMPLETE LISTING OF ALL INTELLECTUAL PROPERTY COLLATERAL (AS DEFINED IN SAID
INTELLECTUAL PROPERTY SECURITY AGREEMENT) AND SHALL REMAIN IN FULL FORCE AND
EFFECT.

5.                                       RATIFICATION OF PERFECTION CERTIFICATE.
BORROWER HEREBY RATIFIES, CONFIRMS, AND REAFFIRMS, ALL AND SINGULAR, THE TERMS
AND DISCLOSURES CONTAINED IN A CERTAIN PERFECTION CERTIFICATE DELIVERED TO THE
BANK ON OR ABOUT JUNE 7, 2004, AND ACKNOWLEDGES, CONFIRMS AND AGREES THE
DISCLOSURES AND INFORMATION PROVIDED THEREIN HAS NOT CHANGED, AS OF THE DATE
HEREOF.

6.                                       ADDITIONAL COVENANTS. BORROWER SHALL
NOT, WITHOUT PROVIDING THE BANK WITH THIRTY (30) DAYS PRIOR WRITTEN NOTICE:
(I) RELOCATE ITS PRINCIPAL EXECUTIVE OFFICE OR ADD ANY NEW OFFICES OR BUSINESS
LOCATIONS OR KEEP ANY COLLATERAL IN ANY ADDITIONAL LOCATIONS, OR (II) CHANGE ITS
JURISDICTION OF ORGANIZATION, OR (III) CHANGE ITS ORGANIZATIONAL STRUCTURE OR
TYPE, (IV) CHANGE ITS LEGAL NAME, OR (V) CHANGE ANY ORGANIZATIONAL NUMBER (IF
ANY) ASSIGNED BY ITS JURISDICTION OF ORGANIZATION. IN ADDITION, THE BORROWER
HEREBY CERTIFIES THAT NO COLLATERAL IS IN THE POSSESSION OF ANY THIRD PARTY
BAILEE OTHER THAN CORD LOGISTICS (SUCH AS AT A WAREHOUSE). IN THE EVENT THAT
BORROWER, AFTER THE DATE HEREOF, INTENDS TO STORE OR OTHERWISE DELIVER THE
COLLATERAL TO SUCH A BAILEE, THEN BORROWER SHALL FIRST RECEIVE, THE PRIOR
WRITTEN CONSENT OF BANK AND SUCH BAILEE MUST ACKNOWLEDGE IN WRITING THAT THE
BAILEE IS HOLDING SUCH COLLATERAL FOR THE BENEFIT OF BANK.

7.                                       AUTHORIZATION TO FILE. BORROWER HEREBY
AUTHORIZES BANK TO FILE FINANCING STATEMENTS WITHOUT NOTICE TO BORROWER, WITH
ALL APPROPRIATE JURISDICTIONS, AS BANK DEEMS APPROPRIATE, IN ORDER TO FURTHER
PERFECT OR PROTECT BANK’S INTEREST IN THE COLLATERAL.

8.                                       CONSISTENT CHANGES. THE EXISTING LOAN
DOCUMENTS ARE HEREBY AMENDED WHEREVER NECESSARY TO REFLECT THE CHANGES DESCRIBED
ABOVE.

9.                                       RATIFICATION OF LOAN DOCUMENTS.
BORROWER HEREBY RATIFIES, CONFIRMS, AND REAFFIRMS ALL TERMS AND CONDITIONS OF
THE EXISTING LOAN DOCUMENTS AND ALL SECURITY OR OTHER COLLATERAL GRANTED TO THE
BANK, AND CONFIRMS THAT THE INDEBTEDNESS SECURED THEREBY INCLUDES, WITHOUT
LIMITATION, THE OBLIGATIONS.

10.                                 NO DEFENSES OF BORROWER. THE BORROWER HEREBY
ACKNOWLEDGES AND AGREES THAT THE BORROWER HAS NO OFFSETS, DEFENSES, CLAIMS, OR
COUNTERCLAIMS AGAINST THE BANK OR THE BANK’S OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, REPRESENTATIVES, PREDECESSORS, AFFILIATES, SUBSIDIARIES, PARENTS,
SUCCESSORS, AND ASSIGNS WITH RESPECT TO THE OBLIGATIONS, AND/OR THE EXISTING
LOAN DOCUMENTS, AND THAT IF THE BORROWER NOW HAS, OR EVER DID HAVE, ANY OFFSETS,
DEFENSES, CLAIMS, OR COUNTERCLAIMS AGAINST THE BANK OR THE BANK’S OFFICERS,
DIRECTORS, EMPLOYEES, ATTORNEYS, REPRESENTATIVES, PREDECESSORS, AFFILIATES,
SUBSIDIARIES, PARENTS, SUCCESSORS, AND ASSIGNS, WHETHER KNOWN OR UNKNOWN, AT LAW
OR IN EQUITY, FROM THE BEGINNING OF THE WORLD THROUGH THIS DATE AND THROUGH THE
TIME OF EXECUTION OF THIS LOAN MODIFICATION AGREEMENT, WITH RESPECT TO THE
OBLIGATIONS AND/OR THE EXISTING LOAN DOCUMENTS, ALL OF THEM ARE HEREBY EXPRESSLY
WAIVED, AND THE BORROWER HEREBY

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                                                RELEASES THE BANK AND THE BANK’S
OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, REPRESENTATIVES, PREDECESSORS,
SUCCESSORS, AND ASSIGNS FROM ANY LIABILITY THEREFOR.

11.                                 FEES. UPON OR PRIOR TO THE EXECUTION OF THIS
LOAN MODIFICATION AGREEMENT, BORROWER SHALL PAY TO BANK A FEE IN THE AMOUNT OF
$12,500.00, WHICH FEE SHALL BE RETAINED BY BANK AND NOT APPLIED IN REDUCTION OF
THE OBLIGATIONS. IN ADDITION, THE BORROWER SHALL REIMBURSE BANK FOR ALL LEGAL
FEES AND EXPENSES INCURRED IN CONNECTION WITH THIS AMENDMENT TO THE EXISTING
LOAN DOCUMENTS.

12.                                 CONTINUING VALIDITY. BORROWER UNDERSTANDS
AND AGREES THAT IN MODIFYING THE EXISTING OBLIGATIONS, BANK IS RELYING UPON
BORROWER’S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THE
EXISTING LOAN DOCUMENTS. EXCEPT AS EXPRESSLY MODIFIED PURSUANT TO THIS LOAN
MODIFICATION AGREEMENT, THE TERMS OF THE EXISTING LOAN DOCUMENTS REMAIN
UNCHANGED AND IN FULL FORCE AND EFFECT. BANK’S AGREEMENT TO MODIFY THE EXISTING
OBLIGATIONS PURSUANT TO THIS LOAN MODIFICATION AGREEMENT IN NO WAY SHALL
OBLIGATE BANK TO MAKE ANY FUTURE MODIFICATIONS TO THE OBLIGATIONS. NOTHING IN
THIS LOAN MODIFICATION AGREEMENT SHALL CONSTITUTE A SATISFACTION OF THE
OBLIGATIONS. IT IS THE INTENTION OF BANK AND BORROWER TO RETAIN AS LIABLE
PARTIES ALL MAKERS OF EXISTING LOAN DOCUMENTS, UNLESS THE PARTY IS EXPRESSLY
RELEASED BY BANK IN WRITING. NO MAKER WILL BE RELEASED BY VIRTUE OF THIS LOAN
MODIFICATION AGREEMENT.

13.                                 JURISDICTION/VENUE. BORROWER ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND
AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS LOAN MODIFICATION AGREEMENT;
PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF THE COURTS
OF THE COMMONWEALTH OF MASSACHUSETTS, THEN VENUE SHALL LIE IN SANTA CLARA
COUNTY, CALIFORNIA. NOTWITHSTANDING THE FOREGOING,  THE BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE
BANK’S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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This Loan Modification Agreement is executed as a sealed instrument under the
laws of the Commonwealth of Massachusetts as of the date first written above.

BORROWER:

 

 

BANK:

 

 

 

 

COLLAGENEX PHARMACEUTICALS, INC.

 

 

SILICON VALLEY BANK

 

 

 

 

By:

/s/ NANCY C. BROADBENT

 

 

By:

/s/ THOMAS F. GORDON

Name: Nancy C. Broadbent

 

 

Name: Thomas F. Gordon

Title: SVP & CFO

 

 

Title: Relationship Manager

 

The undersigned ratifies, confirms and reaffirms, all and singular, the terms
and conditions of a certain Unconditional Guaranty dated March 19, 2001 (the
“Guaranty”) and a certain Security Agreement dated March 19, 2001 (the “Security
Agreement”) and acknowledges, confirms and agrees that the Guaranty and the
Security Agreement shall remain in full force and effect and shall in no way be
limited by the execution of this Loan Modification Agreement, or any other
documents, instruments and/or agreements executed and/or delivered in connection
herewith.

MMP, INC.

By:

/s/ FRANK RUFFO

 

Name: Frank Ruffo

 

Title: Secretary

 

 

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EXHIBIT B

COMPLIANCE CERTIFICATE

TO:         SILICON VALLEY BANK

FROM:   COLLAGENEX PHARMACEUTICALS, INC.

The undersigned authorized officer of CollaGenex Pharmaceuticals, Inc. certifies
that under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the “Agreement”), (i) Borrower is in complete compliance for
the period ending _______________ with all required covenants except as noted
below and (ii) all representations and warranties in the Agreement are true and
correct in all material respects on this date. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.

Please indicate compliance status by circling Yes/No under “Complies” column.

Reporting Covenant

 

Required

 

Complies

 

 

 

 

 

Interim financial statements with CC

 

Monthly within 30 days

 

Yes    No

Quarterly and Annual financial statements (CPA Audited)

 

Within 5 days of filing with SEC

 

Yes    No

BBC A/R Agings, and deferred revenue schedule

 

Monthly within 30 days

 

Yes    No

 

 

 

 

 

 

Financial Covenant

 

Required

 

Actual

 

Complies

 

 

 

 

 

 

 

Maintain:

 

 

 

 

 

 

Minimum Quarterly Tangible Net Worth

 

$________*

 

$_______

 

Yes    No

 

*Tangible Net Worth requirement will be increased by (i) 50% of Borrower’s net
income (if positive) for fiscal year 2007 and, (ii) 50% of all consideration
received from the proceeds of the issuance of any equity securities of Borrower
and/or subordinated debt incurred by Borrower

Comments Regarding Exceptions: See Attached.
Sincerely,
_____________________________
SIGNATURE
_____________________________
TITLE

_____________________________
DATE

 

BANK USE ONLY
Received by: _____________________
                       AUTHORIZED SIGNER

Date:_________________________

Verified: ________________________
                      AUTHORIZED SIGNER

Date:_________________________

Compliance Status:              Yes     No

 

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