Exhibit 10.1


COLLAGENEX PHARMACEUTICALS, INC.


Restructuring and Exchange Agreement


This Restructuring and Exchange Agreement (this “Agreement”) is dated
as of December 15, 2005, by and among CollaGenex Pharmaceuticals, Inc., a
Delaware corporation (the “Company”) and the holders of outstanding Series D
Cumulative Convertible Preferred Stock, $0.01 par value per share (the “Series
D Preferred Stock”) of the Company set forth on the signature pages hereto
(each a “Series D Holder” and collectively the “Series D Holders”).


W
I T N E S S E T H:


WHEREAS, as of the date hereof, there are
outstanding 200,000 shares of Series D Preferred Stock held by the Series D
Holders; and


WHEREAS, the Series D Holders have agreed to,
among other things, waive certain voting rights pursuant to the terms and
conditions more fully set forth in this Agreement, and in consideration
therefor, the Company has agreed to, among other things, reduce the conversion
price of the shares of preferred stock of the Company held by such Holders from
$9.89 to $8.50; and


WHEREAS, in order to achieve the foregoing, each
Series D Holder has been granted the right by the Company to surrender for
exchange his, her or its Series D Preferred for the Company’s Series D-1
Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Series
D-1 Preferred”) on the terms set forth herein; and


WHEREAS, reference is hereby made to that
certain Stockholders and Registration Rights Agreement, dated as of March 19,
1999, as amended, by and among the Company, OCM Principal Opportunities Fund,
L.P. (“OCM”) and the purchasers named therein (the “Stockholders Agreement”);
and


WHEREAS, reference is hereby made to that
certain Stock Purchase Agreement, dated as of March 19, 1999, by and among the
Company, OCM and the purchasers named therein (the “Stock Purchase Agreement”);
and


WHEREAS, pursuant to Section 10 of the
Stockholders Agreement (i) any terms and provisions of the Stockholders
Agreement may be modified, amended or waived with the written consent of the
holders of at least sixty-six and 67/100 percent (66.67%) of the shares of
Series D Preferred Stock, and (ii) any rights under the Stockholders Agreement
applicable to OCM may be waived without the consent of the Company, the other
Series D Holders or any other stockholders of the Company; and


WHEREAS, on September 15, 2005, the Company
filed a Registration Statement on Form S-3 (the “Shelf Registration Statement”)
with the Securities and Exchange Commission (the “Commission”) with respect to
a total dollar amount of $50.0 million of common stock, $.01 par value per
share (the “Common Stock”), of the Company (the “Shares”).


NOW,
THEREFORE, in
consideration of the conditions and mutual covenants set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, the Company, the Series D Holders,
and OCM individually, where applicable, agree as follows:


1.             Agreement to
Exchange Shares.  Pursuant to the terms and conditions set
forth in this Agreement, at the Closing (as defined in Section 3.1 below), each
Series D Holder agrees to surrender to the Company certificates representing
the number of shares of Series D Preferred set forth opposite such Holder’s
name on the attached Schedule I,
and the Company agrees to accept such certificates and, in exchange therefor,
issue to each such Series D Holder that number of shares of Series D-1
Preferred set forth opposite such Holder’s name on the attached Schedule
I.


2.             Series D-1
Preferred. 
The terms, limitations and relative rights, privileges and preferences
of the Series D-1 Preferred issued in connection with the transactions
contemplated by Section 1 are set forth in the Certificate of Designation,
Preferences and Rights of the Series D-1 Cumulative Convertible Preferred
Stock, the form of which is attached hereto as Exhibit A.


3.             Closing,
Delivery.


3.1           Closing.  Subject to the terms and conditions hereof,
the closing of the transactions contemplated by Section 1 above (the “Closing”)
shall be made at the offices of Wilmer Cutler Pickering Hale and Dorr, LLP, 60
State Street, Boston, MA  02109 (or at
such other place as shall be agreed upon by the Series D Holders and the
Company), at 


 





















 


10:00 A.M., New York City
time, on December 21, 2005 (unless another time shall be agreed to by the
Series D Holders and the Company).


3.2           Delivery.  At the Closing, subject to the terms and
conditions hereof, each Series D Holder shall deliver to the Company the
certificate(s) evidencing the ownership of the shares of Series D Preferred to
be surrendered by such Holder at the Closing as set forth opposite such Holder’s
name on Schedule I attached
hereto and, only in exchange therefor, the Company shall deliver to each such
Holder the certificate(s) evidencing ownership of the number of shares of
Series D-1 Preferred to be issued to each such Holder at such Closing as set
forth opposite such Holder’s name on Schedule
I attached hereto.  In the
event that any Series D Holder that is a party to this Agreement does not
deliver to the Company at the Closing certificate(s) evidencing ownership of
the Series D Preferred, the Company shall cancel any such certificates on the
Company’s books and records and the Company shall withhold delivery to any such
Holder any certificates evidencing ownership of the number of shares of Series
D-1 Preferred to be issued to such Holder at the Closing until such time as any
such Holder delivers the certificates for the Series D Preferred to the
Company.


3.3           Retirement.  All certificates evidencing Series D
Preferred shall, once surrendered to the Company for exchange in accordance
with this Agreement, be forthwith retired and canceled and shall not be
reissued, and, except as contemplated hereby, no other securities of the
Company shall be issued in place thereof, but the Company may, nevertheless,
from time to time thereafter increase its capital stock in the manner and to
the extent permitted by law and by the Company’s Amended and Restated
Certificate of Incorporation, as amended.


4.             OCM Waiver of
Certain Provisions of the Stockholder Agreement.  Subject to the terms and
conditions hereof, OCM agrees: (i) to waive its right of first refusal under
Section 4 of the Stockholders Agreement, if any, with respect to the sale by
the Company of the Shares; and (ii) to waive any breach by the Company prior to
the date hereof, if any, under Sections 2 and 3 of the Stockholders
Agreement.  OCM further agrees, if
requested, to execute an amendment to the Stockholders Agreement to reflect the
provisions of this Section 4.


5.             Waiver of
Registration Rights.  Subject to the terms and conditions hereof,
each Series D Holder waives those provisions of the Stockholders Agreement with
respect to the undersigned’s right, if any, to register shares of the Company’s
capital stock held by each such Series D Holder under the Shelf Registration
Statement or in connection with the sale of the Shares.


6.             Registration
of Shares of Common Stock Underlying Series D-1 Preferred Stock.  The Company shall use commercially reasonable
efforts to prepare and file with the Commission a registration statement (the “Registration
Statement”) within 100 days of the date hereof covering the resale of all of
the shares of Common Stock issuable upon conversion of the Series D-1 Preferred
Stock (collectively, the “Conversion Shares”) and shares of Common Stock issued
to the Series D Holders in connection with certain dividends for the period May
12, 1999 through June 30, 1999 (the “Dividend Shares”).  The Registration Statement required hereunder
shall be on Form S-3 (except if the Company is not then eligible to register
the Conversion Shares and the Dividend Shares on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith).  In addition, the Company shall prepare,
execute and file with the Commission such amendments (including pre-effective
and post-effective amendments) and supplements to the Registration Statement,
as may be required under the Securities Act of 1933, as amended (the “Securities
Act”).  The Company shall use its
commercially reasonable efforts to keep the Registration Statement effective in
order to permit the prospectus included therein to be lawfully delivered by the
Series D Holders until the expiration of the holding period set forth in clause
(k) of Rule 144 promulgated under the Securities Act or such shorter period if
all such Conversion Shares and Dividend Shares have been sold pursuant to the
Registration Statement.   It is
understood and agreed by the parties hereto that upon effectiveness of the
aforementioned registration statement that the Company shall immediately
withdraw the Company’s Registration Statement on Form S-3 (Reg. No. 333-88697).


7.             Amendment to
Stock Purchase Agreement and Stockholders Agreement.  All references to “Series D
Preferred Stock” contained in the Stock Purchase Agreement and the Stockholders
Agreement, where applicable, shall hereafter instead mean the Series D-1
Preferred Stock.  On and after the date
hereof, each reference to “Stock Purchase Agreement” or the “Stockholders
Agreement,” as the case may be, shall mean and be a reference to those
agreements as amended hereby.  No
reference to this Section 7 need be made in any instrument or document at any
time referring to the Stock Purchase Agreement or the Stockholders Agreement, a
reference to the Stock Purchase Agreement or the Stockholders Agreement, as
applicable, in any of such instrument or document to be deemed to be a
reference to the Stock Purchase Agreement and the Stockholders Agreement as
amended hereby.  Except as expressly
amended by this Section 7, the provisions of the Stock Purchase Agreement and
the Stockholders Agreement shall remain in full force and effect.


 


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8.             Reservation of
Shares of Common Stock.  The Company shall at all times take
appropriate steps to reserve and keep available out of its authorized but
unissued shares of Common Stock, shares of Common Stock for the purpose of
effecting the conversion of the shares of Series D-1 into the Conversion
Shares.  If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the shares of Series D-1 Preferred Stock, the Company
shall forthwith take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes. 
Notwithstanding the foregoing, the Company agrees to seek an increase in
the number of authorized shares of Common Stock available for issuance under
its Amended and Restated Certificate of Incorporation, as amended, at the
Company’s Annual Meeting of Stockholders to be held in fiscal year 2006.  Each Series D Holder agrees to vote, whether
in person or by proxy, in favor of such proposal when presented at the Company’s
Annual Meeting of Stockholders to be held in fiscal year 2006.


9.             Representations
and Warranties of the Company.


9.1           Authorization.  The Company has all requisite corporate power
and authority to execute and deliver this Agreement and any and all instruments
necessary or appropriate in order to effectuate fully the terms and conditions
contained herein and all related transactions and to perform its obligations
hereunder.  This Agreement has been duly
authorized by all necessary action on the part of the Company, has been duly
executed and delivered by the Company and constitutes the valid and legally
binding obligation of the Company enforceable in accordance with its terms and
conditions.  The authorization, issuance,
exchange and delivery of the Series D-1 Preferred issued hereunder, the
reservation of the Conversion Shares and the Dividend Shares have been duly authorized by all requisite
corporate action on the part of the Company.


9.2           Valid
Issuance of the Series D-1 Preferred.  The shares of Series D-1 Preferred, when
issued in accordance with the terms of this Agreement, will be duly and validly
issued, fully paid and nonassessable and, assuming the accuracy of the Series D
Holders’ representations in this Agreement at the time of each such issuance,
issued in compliance with all applicable federal and state securities laws.


10.           Representations
and Warranties of the Series D Holders.  Each Series D Holder, severally but not
jointly, hereby represents and warrants to the Company as follows:


10.1         Enforceability.  This Agreement and any and all agreements to
be executed by each such Series D Holder pursuant to this Agreement and the
transactions contemplated hereby, when executed and delivered by each such
Series D Holder, will constitute the valid, binding and enforceable obligation
of each Series D Holder.


10.2         Authorization;
No Contravention.  The
execution, delivery and performance of the obligations of each Series D Holder
hereunder (i) has been duly authorized by all necessary action of each Series D
Holder, (ii) does not violate, conflict with or result in any breach or
contravention of, or the creation of any lien under, any material contractual
obligation of each Series D Holder or any requirement of law applicable to such
Series D Holder, and (iii) does not violate any orders of any governmental
authority against, or binding upon, such Series D Holder.


10.3         Governmental
Authorization; Third Party Consents.  No approval, consent, compliance, exemption,
authorization or other action by, or notice to, or filing with, any
governmental authority or any other person, and no lapse of a waiting period
under any requirement of law, is necessary or required in connection with the
execution by, delivery or performance by, or enforcement against, the Series D
Holders of this Agreement and each of the other documents to which they are
parties or the transactions contemplated hereby and thereby.


10.4         Ownership.  Each Series D Holder is the lawful record
owner of the shares of Series D Preferred Stock held by such Series D Holder
subject to this Agreement, and of all rights thereto, free and clear of all
liens, claims, charges, encumbrances, restrictions, rights, options to
purchase, proxies, voting trust and other voting agreements, calls or
commitments of every kind, except as contemplated hereby.


10.5         Investment.  Each Series D Holder is acquiring the Series
D-1 Preferred and the Conversion Shares for his, her or its own account for investment
and not with a view to, or for sale in connection with, any distribution
thereof, nor with any present intention of distributing or selling the same.


10.6         Accredited
Investor.  Such Series D
Holder is an “accredited investor” within the meaning of Regulation D under the
Securities Act.


 


3





















 


10.7         Legends.  It is understood that the certificates
evidencing the Series D-1 Preferred issued hereunder shall bear a legend
substantially in the following form and such other legends that may be required
under the laws of any applicable jurisdiction:


“These securities have
not been registered under the Securities Act of 1933.  They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act.”


10.8         Acknowledgements.


(a)   The Series D Holders are fully aware of the
Company’s business, operations and financial condition and has received or have
had full access to all of the information, including the Company’s financial
statements, they consider necessary or appropriate to make an informed decision
with respect to the transactions discussed above.


(b)   The Series D Holders have had the opportunity
to ask questions of and receive answers from the Company and its executive
officers and financial and legal advisors concerning the Company and have been
furnished with all documents and other information about the Company that they
have requested.  The Series D Holders
believe that they have been fully apprised of all facts and circumstances
necessary to permit them to make an informed decision relating to the
transactions contemplated hereby, that they have sufficient knowledge and
experience in business and financial matters, are capable of evaluating the
merits and risks of the transactions contemplated hereby and have the capacity
to protect their own interests in connection with the transactions contemplated
hereby.


11.           Conditions to
Closing.


11.1         Conditions
to each Series D Holder’s Obligations at the Closing.  Each Series D Holder’s obligations to surrender shares
of Series D Preferred to be exchanged for shares of Series D-1 Preferred are
subject to the satisfaction, at or prior to the Closing, of the following
conditions:


(a)   Representations
and Warranties.  The
representations and warranties made by the Company in Section 9 hereof shall be
true and correct in all material respects as of the date of Closing.


(b)   Filing
of Certificate Of Designation. 
The Certificate of Designation, Preferences and Rights of the Series D-1
Cumulative Convertible Preferred Stock shall have been filed with the Secretary
of State of the State of Delaware and shall be in full force and effect and
shall not have been modified in any manner.


11.2         Conditions
to Obligations of the Company at the Closing.  The Company’s obligation (i) to accept the
shares of Series D Preferred surrendered at the Closing by the Series D Holders
hereunder and (ii) to issue shares of the Series D-1 Preferred to the Series D
Holders, in exchange therefor, is subject to the satisfaction, on or prior to
the Closing, of the following conditions:


(a)   Representations
and Warranties.  The
representations and warranties made by each Series D Holder in Section 10
hereof shall be true and correct in all material respects as of the date
of  the Closing.


(b)   Filing
of Certificate Of Designation. 
The Certificate of Designation, Preferences and Rights of the Series D-1
Cumulative Convertible Preferred Stock shall have been filed with the Secretary
of State of the State of Delaware and shall be in full force and effect and
shall not have been modified in any manner.


12.           Miscellaneous.


12.1         Governing Law; Jurisdiction.  This Agreement shall be governed by and
construed according to the laws of the State of Delaware, without regard to the
conflict of laws provisions thereof.  Any
dispute arising under or in relation to this Agreement shall be resolved in a
competent court in the State of Delaware, and each of the parties hereby
submits irrevocably to the exclusive jurisdiction of such court.


12.2         Successors
and Assigns; Assignment. 
Except as otherwise expressly limited herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors, and administrators of the 


 


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parties hereto.  None of the rights, privileges, or
obligations set forth in, arising under, or created by this Agreement may be
assigned by a Series D Holder without the prior consent in writing of the
Company.


12.3         Entire
Agreement.  This Agreement
and all exhibits hereto, contain the entire understanding of the parties
hereto, shall be binding on the parties hereto, their parents, subsidiaries,
affiliates, heirs, executors, administrators and assigns.  It is the only agreement between the parties
with respect to the subject matter hereof and shall not be modified or varied
by oral understandings.  Any term of this
Agreement may be amended and the observance of any term hereof may be waived
only with the written consent of the Company.


12.4         Notices, etc.  All notices and other communications required
or permitted hereunder to be given to a party to this Agreement shall be in
writing and shall be faxed or mailed by registered or certified mail, postage
prepaid, or otherwise delivered by hand or by messenger, addressed to such
party’s address as set forth below or at such other address as the party shall
have furnished to each other party in writing in accordance with this
provision:


if to a Series D Holder:                                                                            To the address or facsimile number set
forth on the signature page hereto


if to the Company:                                                                                           CollaGenex Pharmaceuticals, Inc.


41 University Drive


Newtown, PA 18940


Facsimile:  (215) 579-7388


Attn:  Andrew
K.W. Powell


with a copy to:


Tod Reichert, Esq.


Wilmer Cutler Pickering Hale and
Dorr LLP


60 State Street


Boston, MA 02109


Facsimile: 
(617) 526-5000


or such other address
with respect to a party as such party shall notify each other party in writing
as above provided.  Any notice sent in
accordance with this Section 12.4 shall be effective (i) if mailed, five (5)
business days after mailing, (ii) if sent by messenger, one (1) business day
after delivery, and (iii) if sent via facsimile, one (1) business day after
transmission and electronic confirmation of receipt or (if transmitted and
received on a non-business day) on the second business day following
transmission and electronic confirmation of receipt (provided, however,
that any notice of change of address shall only be valid upon receipt).


12.5         Delays
or Omissions.  No delay or
omission to exercise any right, power, or remedy accruing to any party upon any
breach or default under this Agreement, shall be deemed a waiver of any other
breach or default theretofore or thereafter occurring.  Any waiver, permit, consent, or approval of
any kind or character on the part of any party of any breach or default under
this Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing.  All remedies, either under this Agreement or
by law or otherwise afforded to any of the parties, shall be cumulative and not
alternative.


12.6         Severability.  If any provision of this Agreement is held by
a court of competent jurisdiction to be unenforceable under applicable law,
then such provision shall be excluded from this Agreement and the remainder of
this Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms; provided, however,
that in such event this Agreement shall be interpreted so as to give effect, to
the greatest extent consistent with and permitted by applicable law, to the
meaning and intention of the excluded provision as determined by such court of
competent jurisdiction.


12.7         Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and enforceable
against the parties actually executing such counterpart, and all of which
together shall constitute one and the same instrument.


*****


 


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IN WITNESS WHEREOF, the parties have executed this
Restructuring and Exchange Agreement as of the date first herein above set
forth.


 


COLLAGENEX
PHARMACEUTICALS, INC.


	
  By:

  	
  /s/ Nancy C. Broadbent

  	
   

  
	
  Name: Nancy C.
  Broadbent

  
	
  Title: CFO

  



 


 


 


 


HOLDERS
OF SERIES D PREFERRED STOCK:


 


	
  OCM Principal Opportunities Fund, L.P.

  	
   

  	
  Pebblebrook Partners Ltd.

  
	
  By:

  	
  Oaktree Capital Management, LLC, its general partner

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/  Stuart Schube

  
	
   

  	
   

  	
   

  	
   

  	
  Name: Stuart Schube

  
	
  By:

  	
  /s/  Stephen A. Kaplan

  	
   

  	
   

  	
  Title:  General Partner

  
	
   

  	
  Name:   Stephen A. Kaplan

  	
   

  	
   

  	
  Date:

  
	
   

  	
  Title: Principal

  	
   

  	
   

  	
  Facsimile:

  
	
   

  	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/  Vincent J. Cebula

  	
   

  	
   

  	
   

  
	
   

  	
  Name:   Vincent J. Cebula

  	
   

  	
   

  	
   

  
	
   

  	
  Title: Managing Director

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MVP II Affiliates Fund, L.P.

  	
   

  	
  Marquette Venture Partners II, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Lloyd Ruth

  	
   

  	
  By:

  	
  /s/ Lloyd Ruth

  
	
   

  	
  Name:   Lloyd Ruth

  	
   

  	
   

  	
  Name:  Lloyd Ruth

  
	
   

  	
  Title: General Partner

  	
   

  	
   

  	
  Title: General Partner

  
	
   

  	
  Date:

  	
   

  	
   

  	
  Date:

  
	
   

  	
  Facsimile:

  	
   

  	
   

  	
  Facsimile:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/  Robert J. Easton

  	
   

  	
  /s/  Richard A. Horstmann

  
	
  Robert J. Easton

  	
   

  	
  Richard A. Horstmann

  
	
  Date:

  	
   

  	
  Date:

  
	
  Facsimile:

  	
   

  	
  Facsimile:

  



 





















 


Schedule I


 


 


 


	
  Name and Address of Series D
  Holders

  	
   

  	
  No. of Shares of

  Series D Preferred

  Surrendered

  	
   

  	
  No. of Shares of

  Series D-1 Preferred

  Issued in Exchange

  for Series D

  Preferred

  	
   

  
	
  OCM
  Principal Opportunities Fund, L.P.

  c/o
  Oaktree Capital Management, LLC

  	
   

  	
  177,000

  	
   

  	
  177,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pebblebrook
  Partners Ltd.

  c/o
  Stuart Schube

  	
   

  	
  1,000

  	
   

  	
  1,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MVP
  II Affiliates Fund, L.P.

  Marquette
  Venture Partners

  	
   

  	
  278

  	
   

  	
  278

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Marquette
  Venture Partners II, L.P.

  Marquette
  Venture Partners

  	
   

  	
  9,722

  	
   

  	
  9,722

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Robert
  J. Easton

  	
   

  	
  2,000

  	
   

  	
  2,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Richard
  A. Horstmann

  	
   

  	
  10,000

  	
   

  	
  10,000