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                                  EXHIBIT 10.1



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                                LICENSE AGREEMENT



      This LICENSE AGREEMENT dated as of July 18, 1996, by and between
COLLAGENEX PHARMACEUTICALS, INC., a Delaware corporation ("CollaGenex"), and
BOEHRINGER MANNHEIM ITALIA, a company organized under the laws of Italy ("BMI").

                              W I T N E S S E T H :

      WHEREAS, CollaGenex has developed the Products and desires to license BMI
to make and sell Products on the terms set forth herein; and

      WHEREAS, BMI desires to license the Products from CollaGenex for purposes
of making the Products and marketing the Products in the Territory;

      NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter contained, the parties hereto, intending to be
legally bound, hereby agree as follows:

      1. DEFINITIONS.

            1.1 "Affiliate" shall mean any entity in which the party has a
direct or indirect ownership interest of at least fifty percent (50%), or any
entity which directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the party.

            1.2 "BMI Improvements" shall mean all inventions, improvements,
enhancements, modifications, discoveries, claims, formulae, processes,
apparatuses, Technical Information, Patents, trade secrets, technologies and
know-how, whether or not covered by claims of proprietary rights, related to the
Products and created or made by BMI, its agents or its Affiliates during the
manufacture of Products hereunder.

            1.3 "CollaGenex Improvements" shall mean all inventions,
improvements, enhancements, modifications, discoveries, claims, formulae,
processes, apparatuses, Technical Information, Patents, trade secrets,
technologies and know-how, whether or not covered by claims of proprietary
rights, related to the Products and created or made by CollaGenex, its agents or
its Affiliates during the term of this Agreement.

            1.4 "Commercial Sale" shall mean any sale which transfers title to
any Product to a third party. Transfers of title to an Affiliate of BMI shall
not constitute a Commercial Sale unless such Affiliate is the intended end user
of the Product.

            1.5 "Confidential Information" shall mean any and all information or
portion thereof disclosed to or otherwise acquired or observed by either party
or its 
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employees, agents or Affiliates (each individually referred to as a "recipient")
either directly or indirectly from the other party, including but not limited to
the Products and/or Improvements, as well as any other information regarding
either party's inventions, improvements, enhancements, modifications,
discoveries, claims, formulae, processes, apparatuses, research, development,
Patents, Technical Information, know-how, trade secrets, knowledge, designs,
drawings, specifications, concepts, data, reports, methods, documentation,
methodology, pricing, marketing plans, customer lists, salaries or business
affairs, and any other information or knowledge owned or developed by either
party, except for information which the recipient can demonstrate:

                  (i) was at the time of disclosure to such recipient part of
the public domain or thereafter becomes part of the public domain through no act
or omission by such recipient; or

                  (ii) was lawfully in such recipient's possession as shown in
written records prior to disclosure by the disclosing party and without
obligation of confidentiality; or

                  (iii) was lawfully received by such recipient after disclosure
from a third party without obligation of confidentiality and without violation
by said third party of an obligation of confidentiality to another; or

                  (iv) was required to be disclosed by law or court order.


            1.6 "Net Sales" of Products shall mean the gross invoice price
received and attributable to the Commercial Sale of Products by BMI or an
Affiliate of BMI, less returns, promotional allowances, freight, transportation
insurance, charges for returnable containers, import or export taxes, any tax or
government charge levied on the sale, transportation or delivery of such
Products and borne by the seller thereof, commissions to third parties, and
customary trade discounts actually taken.

            1.7 "Patents" shall mean any current or future patent or patent
application in any country, including any extensions or future extension
mechanisms, including Supplementary Protection Certificates or the equivalent
thereof, renewals, continuations, continuations-in-part, divisions,
patents-of-additions, and/or reissues thereof, which contains one or more claims
covering any part of the Products, Technical Information or Improvements.

            1.8 "Products" shall mean Periostat, the doxycycline product
developed by CollaGenex as a therapy for periodontal disease.

            1.9 "Technical Information" shall mean unpublished research and
development information, unpatented inventions, know-how, trade secrets,
techniques, practices and technical data in the possession of CollaGenex which
are needed to produce Products and which CollaGenex has the right to provide to
BMI.

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                  1.10 "Territory" shall mean the country of Italy, San Marino
and the Vatican City.

         2. LICENSES AND OTHER RIGHTS.

                  2.1 Grant of Licenses. Subject to the limitations described
below, CollaGenex hereby grants to BMI (i) an exclusive right and license to
use, distribute and sell Products in the Territory, (ii) a non-exclusive right
and license to make, manufacture and use Technical Information to make Products,
(iii) an exclusive right and license under Patents applicable to the Territory,
if any, to use, distribute and sell Products in the Territory, and iv) a
non-exclusive right and license under Patents applicable to the Territory, if
any, to make and manufacture Products in the Territory. BMI shall have no right
to sublicense its rights hereunder to any third party, other than Affiliates of
BMI, for any purpose, including, without limitation, third party manufacturing
of Products, without the express written permission of CollaGenex, which will
not be unreasonably withheld.

                  2.2 Exclusivity of License; Title. All exclusive licenses
granted to BMI hereunder will be exclusive as to CollaGenex and all others.
CollaGenex shall retain title to, and be the owner of, any and all (i) Patents,
(ii) Technical Information, (iii) BMI Improvements and (iv) CollaGenex
Improvements. BMI agrees to notify CollaGenex of any BMI improvements. To the
extent any BMI Improvements are covered by Patents and should BMI not be
permitted by applicable law to assign such BMI Improvements to CollaGenex, then
BMI agrees to grant to CollaGenex a perpetual, exclusive (except for BMI's use
in the manufacturing and marketing of Products), irrevocable, royalty free
license to such BMI Improvements. In the event BMI decides not to seek patent
protection for a particular BMI Improvement, CollaGenex shall have the right,
but not the obligation, to seek patent protection for such BMI Improvement. BMI
agrees to execute such documents as reasonably required by CollaGenex to
document, record and otherwise perfect its interests in the Technical
Information, Patents and BMI Improvements. CollaGenex agrees to advise BMI of
any CollaGenex Improvements and, to the extent that it is able, CollaGenex
agrees to grant BMI a license to make, manufacture, use, distribute and sell
Products in the Territory using CollaGenex Improvements. If such CollaGenex
Improvements are the subject of a licensing agreement with a third party, then
BMI agrees to abide by the terms of such licensing agreement, except that it is
understood that BMI shall not be obligated to pay any royalty, licensing fee or
other amount to such third party. BMI understands that the rights granted to
them BMI to CollaGenex Improvements may not be as broad as those rights granted
under Section 2.1 hereof.

                  2.3 Prohibited Transfers. CollaGenex agrees that, without
BMI's prior express written consent, CollaGenex will not assign, sell, convey,
lease, license, transfer, hypothecate, encumber or suffer imposition of any lien
on, grant any right or interest in, or disclose to any third party any
Confidential Information concerning, the Products in the Territory. BMI shall
not disclose any unpublished Technical Information furnished by CollaGenex
pursuant to Section 2.1 hereof to third parties during the term hereof, or at
any time thereafter; provided, however, that disclosure may be made of any such
Technical Information to the extent necessary to market Products to 

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purchasers, provided that such purchasers agree to be bound by a similar
non-disclosure agreement. BMI shall not use any Technical Information furnished
by CollaGenex other than in the manufacture and marketing of Products and only
during the term of this Agreement.

                  2.4 Manufacturing Rights. During the term hereof, BMI may
either (i) manufacture Products itself or have Products manufactured by
Affiliates or Third Parties (as set forth in Section 2.1) and/or (ii) purchase
Products for resale by BMI in the Territory from contract manufacturers in the
United States licensed and authorized by CollaGenex to perform such contract
manufacturing on terms and conditions agreed upon by BMI and such third party
manufacturers. In the event BMI or any of its Affiliates develops its own
manufacturing capability for Products, each of BMI and such Affiliate agrees to
manufacture such Products in accordance with (A) any specifications set by any
applicable regulatory authorities and (B) any applicable rules and regulations
relating to quality controls.

                  2.5 Supply of Other European Licensees. In the event BMI or
any of its Affiliates develops its own manufacturing capability for the
Products, BMI and such Affiliates agree to manufacture and supply Products to
any other licensees of Products in Europe who have not established their own
manufacturing capability of Products. Such agreements to supply Product will be
reached on a case-by-case basis, based on the availability of manufacturing
capacity, and, in the event that sufficient manufacturing capacity does not
exist to supply such licensees, BMI agrees to notify CollaGenex as soon as
possible and to facilitate the establishment of an alternative source of supply.
In case BMI supplies Product to a licensee of CollaGenex, such Products shall be
supplied by BMI at a price which does not exceed BMI's direct costs plus a 50%
mark-up. In supplying Products to such other licensees, BMI and its Affiliates
agree to comply with all applicable laws and regulations relating to the control
of exports or the transfer of pharmaceutical compounds, drugs and/or
technologies, including, without limitation, Products. It is understood that the
sale of Products by BMI or its affiliates to other licensees of CollaGenex does
not represent Net Sales.

                  2.6 Government Submissions. As soon as reasonably practicable
after delivery by CollaGenex to BMI of all relevant sections of the New Drug
Application (the "NDA") filed with the United States Food and Drug
Administration ("FDA") with respect to the Product, BMI shall prepare and make
all necessary regulatory filings with all applicable regulatory authorities in
the Territory with respect to the Product. CollaGenex shall provide such
relevant sections of the NDA to BMI on a prompt basis. BMI shall use diligent
efforts to obtain the approval of all necessary regulatory authorities in the
Territory with respect to the Product. BMI shall be the owner and party of
record sponsoring all submissions to regulatory authorities in the Territory
with respect to the Product. The labeling will be agreed upon between the
Parties and prepared in accordance with Regulatory requirements in the
Territory. In the event that BMI is unable to obtain the approval of all
necessary regulatory authorities in the Territory with respect to the Product
within two and one-half (2.5) years from the date CollaGenex supplies to BMI all
relevant sections of the NDA, all rights and licenses granted to BMI by
CollaGenex hereunder shall terminate and such termination shall be

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subject to the provisions of Section 8.6 and 8.7 hereof, unless BMI can provide
written evidence that the delays incurred were beyond its control: in such case
the Parties will agree about a new reasonable term for obtaining the approval.

         3. LICENSING FEES AND ROYALTY PAYMENTS.

                  3.1 Royalty Payments. In consideration of the license granted
under this Agreement, BMI agrees to pay to CollaGenex the following licensing
fees:

                           (i)      $400,000 upon the execution of this
                                    Agreement;

                           (ii)     $ *** upon the *** anniversary of the
                                    delivery by CollaGenex to BMI of all NDA
                                    Documentation, unless BMI can provide
                                    written evidence that additional studies are
                                    required for the submission of a regulatory
                                    filing to the Italian authorities, in which
                                    case the payment will be made at the time of
                                    submission of the filing;

                           (iii)    $ *** upon the regulatory approval of the
                                    Products in Italy.

In addition, a running royalty will be paid according to the following terms:

                           (a)      *** percent ( *** %) of the applicable Net
                                    Sales of Products for the first ***
                                    following first Commercial Sale in the
                                    Territory;

                           (b)      *** percent ( *** %) of the applicable Net
                                    Sales of Products for *** following first
                                    Commercial Sale in the Territory;

                           (c)      *** percent ( *** %) thereafter.

If at any time during the term of this Agreement it can be demonstrated by way
of a recognized market audit (e.g. IMS) that an equivalent competitive Product
has captured at least *** % of the total market for such Products, measured by
volume of sales units, then the royalty rate applicable under (a) and (b) above
will be reduced to *** %.


                  3.2 Reports and Payments. Payments pursuant to clauses (i-iii)
of Section 3.1 hereof will be paid to CollaGenex within forty five (45) days
after the triggering event. Payments pursuant to clauses (a-c) of Section 3.1
hereof will be paid to CollaGenex within sixty (60) days after the end of each
calendar quarter during the term hereof with respect to applicable Net Sales
paid to BMI and/or any Affiliate of BMI during such calendar quarter. With each
such quarterly payment, BMI will provide CollaGenex with a written report
stating the respective Net Sales actually paid to BMI

----------
***Confidential information has been omitted and filed separately with the
   Securities and Exchange Commission

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and/or any Affiliate of BMI during such prior calendar quarter and the amount of
royalties earned by CollaGenex thereon pursuant to this Section 3.

                  3.3 Recording and Inspection. BMI agrees that for a period of
three (3) years after delivery of each report referred to in Section 3.2, it
shall keep at its principal place of business complete records of applicable Net
Sales received by BMI and/or any Affiliate of BMI and other information
necessary to permit BMI to confirm the accuracy of the calculations of Net
Sales, and to make regular entries in such records at its earliest business
convenience for the purpose of determining the Net Sales hereunder. For the sole
purpose of verifying BMI's performance of its obligation to make payments
hereunder, CollaGenex, solely through its independent certified public
accountant or other independent third party designee, will have the right to
examine BMI's records reflecting such Net Sales and other information, provided,
that such examination is made within three (3) years after the close of the
calendar year in respect of which BMI's records are being examined, conducted
during BMI's normal business hours, made after thirty (30) days' advance written
notice to BMI and limited to no more than one examination in any calendar year.
The results of such examination shall be made available to both parties.
CollaGenex shall bear the full cost of the performance of any such examination,
unless such examination discloses a variance of more than two percent (2%) from
the amount of the original report or payment calculation. In such case, BMI
shall bear the full cost of the performance of such examination. BMI shall
promptly pay to CollaGenex any variance disclosed in any such examination.

                  3.4 Mode of Payment. All payments shall be paid in U.S.
dollars. Payments due on currencies received other than United States Dollars
shall be translated at the rate of exchange at which United States Dollars are
listed in the Wall Street Journal for Italian Lira on the last business day of
the calendar quarter in which such revenues are received by BMI and/or an
Affiliate of BMI.

         4. PATENT AND TRADEMARK MATTERS.

                  4.1 Patents. CollaGenex shall have the sole right, but not the
obligation, to file, prosecute and maintain all Patents that are the property of
CollaGenex. CollaGenex shall have the sole right to determine whether or not,
and where, to file Patents, to abandon the prosecution of any Patents or to
discontinue the maintenance of any Patents. BMI shall execute such documents as
are reasonably necessary to file, prosecute and maintain all Patents.

                  4.2 Recordation. If either BMI or CollaGenex so requests in
writing, the parties will promptly file and record with any applicable patent
office or authority, a copy or memorandum of this Agreement and any other
agreement granting BMI rights in the Products and Technical Information.

                  4.3 Patent Enforcement. BMI shall notify CollaGenex of any
suspected infringement of Patents, if any, in the Territory. CollaGenex shall
have the sole right to institute patent infringement actions against third
parties based on any suspected

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infringement of Patents in the Territory. BMI shall execute all necessary and
proper documents and take such actions as shall be appropriate, including,
without limitation, making available employees of BMI for testimony and making
available any records, papers, information and other materials, to assist
CollaGenex in instituting and prosecuting such infringement actions. Any award
paid by third parties as a result of such an infringement action (whether by way
of settlement or otherwise), shall be retained by CollaGenex. During the term
hereof, BMI shall notify CollaGenex of any prior art or other information known
to BMI which is relevant to the patentability or validity of any of the Patents
or which might cause a court to deem any of the Patents wholly or partly
inoperative or invalid.

                  4.4 Trademarks. BMI will use the trademarks of CollaGenex, if
such trademarks are registrable, in advertising and selling the Products in the
Territory and only in accordance with approved method of use of such trademarks.
This Agreement does not give BMI any rights to changing the trademark or trade
names of any Product.

                  5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES.

                  5.1 Representations and Warranties of CollaGenex. CollaGenex
hereby represents and warrants to BMI that:

                           (i) it is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to own its properties and to conduct the
businesses in which it is now engaged;

                           (ii) it has full corporate power and authority to
execute and deliver this Agreement and to perform all of its obligations
hereunder, and no consent or approval of any other person or governmental
authority is required therefor. The execution and delivery of this Agreement by
CollaGenex, the performance by CollaGenex of its covenants and agreements
hereunder and the consummation by CollaGenex of the transactions contemplated
hereby have been duly authorized by all necessary corporate action. This
Agreement constitutes a valid and legally binding obligation of CollaGenex,
enforceable against it in accordance with its terms;

                           (iii) neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
violates any provision of the Certificate of Incorporation or By-Laws of
CollaGenex or any law, statute, ordinance, regulation, order, judgment or decree
of any court or governmental agency, or conflicts with or results in any breach
of any of the terms of or constitutes a default under or results in the
termination of or the creation of any lien pursuant to the terms of any contract
or agreement to which CollaGenex is a party or by which any of the assets of
CollaGenex is bound; and

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                           (iv) CollaGenex has no knowledge of, and has received
no notice of, any claim of ownership or other adverse interest of any third
party with respect to the Products or Technical Information.

                  5.2 Representations and Warranties of BMI. BMI hereby
represents and warrants to CollaGenex that:

                           (i) it is a corporation duly organized, validly
existing and in good standing under the laws of Italy and has full corporate
power and authority to own its properties and to conduct the businesses in which
it is now engaged;

                           (ii) it has full corporate power and authority to
execute and deliver this Agreement and to perform all of its obligations
hereunder, and no consent or approval of any other person or governmental
authority is required therefor. The execution and delivery of this Agreement by
BMI, the performance by BMI of its covenants and agreements hereunder and the
consummation by BMI of the transactions contemplated hereby have been duly
authorized by all necessary corporate action. This Agreement constitutes a valid
and legally binding obligation of BMI, enforceable against it in accordance with
its terms; and

                           (iii) neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
violates any provision of the organizational or governing documents of BMI or
any law, statute, ordinance, regulation, order, judgment or decree of any court
or governmental agency, or conflicts with or results in any breach of any of the
terms of or constitutes a default under or results in the termination of or the
creation of any lien pursuant to the terms of any contract or agreement to which
BMI is a party or by which any of the assets of BMI is bound.

         6. INDEMNIFICATION.

                  6.1 Indemnification by the Parties. Each of the parties will
indemnify the other party from and against any and all losses, claims, demands,
obligations, liabilities, costs, expenses, or damages of any kind or nature
(collectively "Damages"), including but not limited to reasonable fees of
attorneys, accountants, and other professionals, incurred by the indemnified
party as a result of any claim or proceeding brought against the indemnified
party by any person not a party to this Agreement, to the extent that such claim
or proceeding is based on any of the representations or warranties contained in
this Agreement being untrue or upon the breach of any of the provisions of this
Agreement; provided that the indemnified party promptly notifies the
indemnifying party of any such claim or proceeding in writing and gives the
indemnifying party the opportunity to defend or settle such claim or proceeding.
The indemnified party agrees to cooperate with the indemnifying party, at the
indemnifying party's expense, in defending or settling any such claim or
proceeding.

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                  6.2 Product Indemnification. BMI agrees to defend, indemnify
and hold harmless CollaGenex from any and all Damages arising from injury or
damage to persons or property resulting directly or indirectly from BMI's use,
manufacture, sale or other disposition of any Products in the Territory. BMI
will utilize its best efforts to obtain liability insurance covering the
manufacture and sale of Products on terms and in amounts as are customary for
the pharmaceutical industry.

                  6.3 Limitation on Damages. In no event shall the liability of
CollaGenex under this Agreement exceed the aggregate amount of the licensing
fees and royalty payments paid by BMI to CollaGenex pursuant to Section 3.1
hereof.

                  6.4 Limitation on Warranties. NOTHING IN THIS AGREEMENT SHALL
BE DEEMED TO BE A REPRESENTATION OR WARRANTY BY COLLAGENEX OF (A) THE VALIDITY
OF ANY OF THE PATENTS OR (B) THE SAFETY OR USEFULNESS FOR ANY PURPOSE OF ANY OF
THE TECHNICAL INFORMATION AT ANY TIME MADE AVAILABLE BY COLLAGENEX OR (C) THAT
THE PRODUCTS PRODUCED IN ACCORDANCE WITH SUCH TECHNICAL INFORMATION WILL BE FREE
FROM CLAIMS OF INFRINGEMENT OF PATENTS OF ANY THIRD PARTY. COLLAGENEX SHALL HAVE
NO LIABILITY WHATSOEVER TO BMI OR ANY AFFILIATE THEREOF FOR OR ON ACCOUNT OF ANY
DAMAGES ASSESSED OR ASSERTED AGAINST, OR ANY OTHER LIABILITY INCURRED BY OR
IMPOSED UPON BMI OR ANY AFFILIATE THEREOF, ARISING OUT OF OR IN CONNECTION WITH
OR RESULTING FROM (1) THE PRODUCTION, USE OR SALE OF ANY PRODUCTS IN THE
TERRITORY, OR THE PRACTICE OF THE PATENTS EXCEPT FOR THE INFRINGEMENT OF
PROPRIETARY RIGHTS, (2) THE USE OF ANY TECHNICAL INFORMATION DISCLOSED BY
COLLAGENEX OR (3) ANY ADVERTISING OR OTHER PROMOTIONAL ACTIVITIES WITH RESPECT
TO ANY OF THE FOREGOING.

         7. CONFIDENTIALITY.

                  7.1 Confidentiality. Except to the extent expressly authorized
by this Agreement or otherwise agreed in writing, the parties agree that, for
the term of this Agreement and for five (5) years thereafter, the recipient
shall keep completely confidential and shall not publish or otherwise disclose
and shall not use for any purpose any Confidential Information furnished to it
by the other party or developed pursuant to this Agreement; provided, however,
that after the expiration or termination of this Agreement, either party shall
be free to exploit commercially in any manner any proprietary information and
technology which belongs solely or jointly to it.

                  7.2 Authorized Disclosure. Each party may disclose
Confidential Information of the other party to its employees, agents or
Affiliates (i) who are required to know such information in connection with the
permitted use of such information hereunder and (ii) who are bound by customary
non-use and confidentiality obligations as set forth in this Section 7.

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                  7.3 Business Terms. The parties acknowledge and agree that the
financial terms contained in Section 3.1 of this Agreement shall be considered
Confidential Information hereunder.

         8. TERMINATION AND REVERSION OF TECHNOLOGY.

                  8.1 Mutual Termination. The parties hereto may terminate this
Agreement by mutual consent. Such termination shall be effective 60 days after
such a determination or upon such other date as the parties may mutually agree.

                  8.2 Termination of Licenses Without Cause. BMI may terminate
and revert its licenses and all right to make, use or sell under this Agreement
at any time upon *** prior written notice. Such reversion shall be free of any
continuing lien on, or grant of any right or interest in, the Products or
Technical Information. In the event of such termination, no further payments
relating to the Products shall accrue or be due under this Agreement subsequent
to the effective date of such termination; provided, however, that BMI shall pay
to CollaGenex any royalties accrued on sales prior to the effective date of the
termination of the license.

                  8.3 Breach of Material Obligations. Failure by either party to
comply with any of the material obligations contained in this Agreement shall
entitle the other party to give to the party in default notice specifying the
nature of the default and requiring such party to cure such default. If the
party receiving such notice disagrees with the existence, extent or nature of
the default, the issue shall be referred to arbitration pursuant to Section 9.10
for a decision regarding the existence, extent or nature of the default, cure
and remedy therefor. If such default is not cured within 60 days or after the
determination pursuant to arbitration (or, if such default cannot be cured
within such 60 day period and the party in default does not commence and
diligently continue actions to cure such default), the notifying party shall be
entitled, without prejudice to any of its other rights conferred on it by this
Agreement, to all remedies available to it by law or in equity, including
without limitation, the termination of this Agreement.

                  8.4 Insolvency or Bankruptcy. Either party may, in addition to
any other remedies available to it by law or in equity, terminate this Agreement
by written notice to the other party in the event the other party shall have
become insolvent or bankrupt, or shall have made an assignment for the benefit
of its creditors, or there shall have been appointed a trustee or receiver of
the other party or for all or a substantial part of its property, or any case or
proceeding shall have been commenced or other action taken by or against the
other party in bankruptcy or seeking reorganization, liquidation, dissolution,
winding-up arrangement, composition or readjustment of its debts or any other
relief under any bankruptcy, insolvency, reorganization or other similar act or
law of any jurisdiction now or hereafter in effect, or there shall have been
issued a warrant of attachment, execution, distraint or similar

--------

   ***   Confidential information has been omitted and filed separately with the
         Securities and Exchange Commission.

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process against any substantial part of the property of the other party, and any
such event shall have continued for sixty (60) days undismissed, unbonded and
undischarged.

                  8.5 Right to Sell Stock on Hand. Upon the termination of the
licenses granted hereunder for any reason other than a failure to cure a
material breach of this Agreement by BMI, BMI shall have the right to complete
all work in progress and for one year (or such longer period as the parties may
reasonably agree) to dispose of all Products or substantially completed Products
then on hand, and royalties shall be paid to CollaGenex with respect to such
Products as though such license had not terminated or expired.

                  8.6 Effect of Termination. In the event of any termination of
this Agreement, except as otherwise provided herein, all rights to the Products
and Technical Information shall revert to CollaGenex who shall be free to
develop, license or otherwise exploit the Products and Technical Information in
the Territory as it deems appropriate and BMI shall (i) take whatever steps are
reasonably necessary and appropriate to effect reversion to CollaGenex of all
rights to the Products and Technical Information, (ii) return to CollaGenex all
information relating to the Products and Technical, (iii) make no further use of
any Technical Information and (iv) take whatever steps are reasonably necessary
and appropriate to transfer to CollaGenex or its designees all submissions to
regulatory authorities (or any part thereof) in the Territory.

         Notwithstanding the foregoing paragraph, in the event that, after BMI
has paid to CollaGenex all amounts under sections 3.1(i), (ii), and (iii)
hereof, CollaGenex shall become insolvent or bankrupt under applicable U.S.
bankruptcy laws, or shall make an assignment for the benefit of its creditors,
or there shall be appointed a trustee or receiver of CollaGenex or for all or a
substantial part of its property, or any case or proceeding shall have been
commenced or other action taken by or against CollaGenex in bankruptcy or
seeking reorganization, liquidation, dissolution, winding-up arrangement,
composition or readjustment of its debts or any other relief under bankruptcy,
insolvency, reorganization or other similar act or law of any jurisdiction now
or hereafter in effect, or there shall have been issued a warrant of attachment,
execution, distraint or similar process against any substantial part of the
property of CollaGenex, and any such event shall have continued for sixty (60)
days undismissed, unbonded and undischarged (each such event being a "Bankruptcy
Event"), then all amounts thereafter paid by BMI to CollaGenex pursuant to
Section 3.1(a), (b) or (c) hereof shall be used exclusively by CollaGenex to pay
its royalty payment obligations to The Research Foundation of the State
University of New York ("SUNY") or its successors or assigns.

         Notwithstanding the first paragraph of this Section 8.6, in the event
that, after BMI has paid to CollaGenex all amounts under Sections 3.1(i), (ii)
and (iii) hereof, an arbitrator determines that CollaGenex has breached its
material obligations hereunder (as determined in accordance with Section 8.3
hereof and excluding any Bankruptcy Event), then BMI may, as part of its remedy,
upon sixty (60) days notice to CollaGenex (provided that CollaGenex does not
cure or take reasonable steps to cure such breach)

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and upon the written consent of SUNY, (i) retain the right to manufacture and
sell the Products in the Territory, (ii) retain the right to use in the
Territory any trademark licensed pursuant to Section 4.4 hereof under which the
Products were sold or marketed, (iii) terminate the obligations to pay royalties
to CollaGenex pursuant to Sections 3.1(a), (b) or (c) hereof, and (iv) pay to
SUNY directly amounts equal to the royalties that would otherwise be payable by
CollaGenex to SUNY pursuant to the agreement between CollaGenex and SUNY, as
amended: provided, however, that such royalties will not exceed the royalties
pursuant to the agreement between CollaGenex and BMI.


         9. MISCELLANEOUS.

                  9.1 Further Assurances. The parties hereto agree to execute
and deliver such other documents, instruments and agreements and to take such
other action as may be necessary, proper or appropriate to carry out the terms
of this Agreement.

                  9.2 Notices. All notices required or permitted under this
Agreement shall be in writing and delivered by any method providing for proof of
delivery. Any notice shall be deemed to have been given on the date of receipt.
Notices shall be delivered to the parties at the following addresses until a
different address has been designated by notice to the other party:

                  If to CollaGenex:

                  CollaGenex, Inc.
                  301 South State Street
                  Newtown, Pennsylvania 18940
                  Attention: Brian M. Gallagher, Ph.D.,
                       President and Chief Executive Officer
                  with a copy to:

                  Buchanan Ingersoll
                  College Center
                  500 College Road East
                  Princeton, New Jersey  08540
                  Attention:  David J. Sorin, Esq.

                  If to BMI:

                  Boehringer Mannheim Italia
                  Via S. Uguzzone, 5
                  1-20126
                  Italy
                  Attention: Licensing Department

                                      -12-
<PAGE>   14
                  9.3 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.

                  9.4 Entire Agreement; Modifications. This Agreement contains
the entire agreement among the parties hereto with respect to the subject matter
hereof, and no modification, amendment, change or supplement shall be effective
unless in writing and signed by the party against which it is sought to be
enforced. This Agreement supersedes all prior understandings, negotiations and
agreements relating to the subject matter hereof.

                  9.5 Waiver. The waiver by either party of a breach or default
of any provisions contained herein shall be in writing and shall not be
construed as a waiver of any succeeding breach or default or of the provision
itself.

                  9.6 Expenses. Except as otherwise provided for under this
Agreement, each of the parties hereto shall bear such party's own expenses in
connection with this Agreement and the transaction contemplated hereby.

                  9.7 Governing Law. This Agreement shall be governed by the
construed in accordance with the laws of Switzerland.

                  9.8 Headings. The headings in this Agreement are solely for
convenience of reference and shall not affect the interpretation of any of the
provisions hereof.

                  9.9 Severability. If any provision herein contained shall be
held to be illegal or unenforceable, such holding shall not affect the validity
or enforceability of the other provisions of this Agreement.

                  9.10 Arbitration. All disputes, other than requests for
injunctions or preliminary relief or patent-related matters, related to this
Agreement, or its formation, interpretation, enforcement or breach, shall be
settled by arbitration in the International Chamber of Commerce in Zurich,
Switzerland. The arbitration award shall be final and binding regardless of
whether one of the parties fails or refuses to participate in the arbitration
and shall be enforceable by any court having jurisdiction there over. The
arbitrator is empowered to hear and determine all such disputes between the
parties concerning the subject matter of this Agreement, and the arbitrator may
award monetary damages, including interest, restitution and costs. The
arbitration shall be subject to an overall time limitation of not more than 120
days.

                  9.11 Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of each of CollaGenex and BMI and each of
their respective successors and assigns. BMI may not assign its rights and
obligations hereunder without the prior written consent of CollaGenex.

                                      -13-
<PAGE>   15
                  9.12 Independent Contractors. Nothing in this Agreement shall
create any association, partnership or joint venture between the parties hereto,
it being understood and agreed that the parties are independent contractors and
neither party shall have the power or authority to obligate the other in any
way. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

                                       BOEHRINGER MANNHEIM ITALIA


                                       By  /s/Dr. Giancarlo Bolognesi
                                           -------------------------------
                                           Dr. Giancarlo Bolognesi,
                                           Licensing Director





                                       COLLAGENEX PHARMACEUTICALS, INC.


                                       By  /s/Robert A. Ashley
                                           -------------------------------
                                           Robert A. Ashley, Vice President
                                           Commercial Development




                                      -14-