EXHIBIT 10.1
FIFTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER
     This FIFTH AMENDMENT, dated as of September 25, 2006 (this “Amendment”), to
the Credit Agreement referred to below is by and among (a) ZILA, INC., a
Delaware corporation, ZILA NUTRACEUTICALS, INC. (formerly known as Oxycal
Laboratories Incorporated), an Arizona corporation, ZILA TECHNICAL, INC., an
Arizona corporation, ZILA BIOTECHNOLOGY, INC., an Arizona corporation, ZILA
PHARMACEUTICALS, INC., a Nevada corporation, and ZILA SWAB TECHNOLOGIES, INC.,
an Arizona corporation (collectively, the “Borrowers”), (b) BLACK DIAMOND
COMMERCIAL FINANCE, L.L.C., a Delaware corporation, as administrative agent for
Lenders (the “Administrative Agent”), and (c) the Required Lenders party to the
Credit Agreement from time to time.
W I T N E S S E T H
     WHEREAS, the Borrowers, the Lenders and the Administrative Agent are
parties to that certain Credit Agreement, dated as of March 24, 2006 (including
all annexes, exhibits and schedules thereto, and as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”); and
     WHEREAS, the Borrowers request that the Agent and Required Lenders amend
certain terms under the Credit Agreement and waive compliance with certain
covenants; and
     WHEREAS, the Administrative Agent and Required Lenders have agreed to the
requested waiver and amendments to the Credit Agreement, in the manner, and on
the terms and conditions, provided for herein.
     NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
     1. Definitions. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Credit Agreement.
     2. Amendments to Section 1 of the Credit Agreement. Section 1.1 of the
Credit Agreement, Definitions, is hereby amended by adding the following
definitions in the appropriate alphabetical order:
          “Fifth Amendment”: that certain Fifth Amendment to Credit Agreement
and Waiver dated as of September 25 2006, by and among Borrowers, Administrative
Agent and Required Lenders.
          “Fifth Amendment Effective Date”: the date on which all conditions
precedent to the Fifth Amendment have been satisfied or waived by the
Administrative Agent and Required Lenders.

 

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     3. Amendment to Section 7 Affirmative Covenants of the Credit Agreement.
Section 7 of the Credit Agreement is hereby amended by deleting
Section 7.1(d)(i) and replacing it with the following Section 7.1(d)(i):
     “(d) Financial Reporting:
     (i) no later than October 16, 2006, the unaudited consolidated and
consolidating balance sheets of Holdings and its subsidiaries and the related
unaudited consolidated and consolidating statements of income and the related
unaudited consolidated statements of cash flows for the month ending
September 30, 2006 and the portion of the fiscal year through such date, setting
forth, in each case in comparative form to the figures for the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments) and all documents and
other certifications required pursuant to Section 7.2(b) of the Credit
Agreement;”
     4. Amendment to Section 8 Negative Covenants of the Credit Agreement.
Section 8 of the Credit Agreement is hereby amended by deleting
Section 8.1(b)(iii) and replacing it with the following Section 8.1(b)(iii):
“(iii) Minimum Unrestricted Cash. The Borrowers shall have, at the end of each
week set forth below, unrestricted book balances of cash and Cash Equivalents
for such week ended in an amount not less than the amount set forth below
opposite such week:

          Week Ending   Minimum Unrestricted Cash  
September 22, 2006
    $2,750,000  
September 29, 2006 and each week ended thereafter
    $3,500,000  

     5. Limited Waiver. Subject to the fulfillment of the conditions precedent
to the effectiveness of this Amendment set forth below, the Administrative Agent
and the Required Lenders hereby waive Borrowers’ compliance with the Financial
Covenants set forth in Section 8.1(a)(i) (Minimum LTM EBITDA with respect to the
Nutraceuticals Business) and Section 8.1(b)(i) (Minimum LTM EBITDA with respect
to Borrowers) of the Credit Agreement for the fiscal month ended August 31,
2006.
     6. Representations and Warranties. To induce the Administrative Agent and
Lenders to enter into this Amendment, the Borrowers executing this Amendment
jointly and severally represent and warrant that:
     (a) Each Borrower has taken all necessary organizational action to
authorize the execution, delivery and performance of this Amendment. No consent
or authorization of, filing with, notice to or other act by or in respect of,
any Governmental Authority or any other Person is required in connection with
the execution, delivery,

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performance, validity or enforceability of this Amendment, except (i) consents,
authorizations, filings and notices described in Schedule 5.4, which consents,
authorizations, filings and notices have been obtained or made and are in full
force and effect and (ii) the filings and recordings referred to in
Section 5.19.
     (b) This Amendment has been duly executed and delivered by or on behalf of
each of the Borrowers.
     (c) This Amendment constitutes a legal, valid and binding obligation of
each Borrower, enforceable against each such Borrower in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
     (d) No Default or Event of Default has occurred and is continuing after
giving effect to this Amendment.
     (e) No litigation, investigation or proceeding of or before any arbitrator
or Governmental Authority is pending or, to the knowledge of any Borrower,
threatened by or against any Group Member or against any of their respective
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) that could reasonably be
expected to have a Material Adverse Effect.
     (f) The representations and warranties of each Borrower contained in the
Credit Agreement and each other Loan Document shall be true and correct on and
as of the Fifth Amendment Effective Date with the same effect as if such
representations and warranties had been made on and as of such date, except that
any such representation or warranty which is expressly made only as of a
specified date need be true only as of such date.
     7. No Other Amendments/Waivers. Except as expressly provided herein,
(a) the Credit Agreement shall be unmodified and shall continue to be in full
force and effect in accordance with its terms and (b) this Amendment shall not
be deemed a waiver of any term or condition of any Loan Document and shall not
be deemed to prejudice any right or rights which the Administrative Agent or any
Lender may now have or may have in the future under or in connection with any
Loan Document or any of the instruments or agreements referred to therein, as
the same may be amended from time to time.
     8. Outstanding Indebtedness; Waiver of Claims. Each Borrower hereby
acknowledges and agrees that as of September 25, 2006, the aggregate outstanding
principal amount of the Term Loan is $19,951,724.12 (collectively, the
“Outstanding Obligations”), and that such principal amounts are payable pursuant
to the Credit Agreement without defense, offset, withholding, counterclaim or
deduction of any kind. Each Borrower hereby waives, releases, remises and
forever discharges the Administrative Agent, Lenders and each other Indemnified
Person from any and all claims, suits, actions, investigations, proceedings or
demands arising out of or in connection with the Credit Agreement (collectively,
“Claims”), whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law of any kind or character,
known or unknown, which

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such Borrower ever had, now has or might hereafter have against the
Administrative Agent or Lenders which relates, directly or indirectly, to any
acts or omissions of the Administrative Agent, Lenders or any other Indemnified
Person on or prior to the date hereof, provided that, the Borrowers do not waive
any Claim solely to the extent such Claim relates to the Administrative Agent’s
or any Lender’s gross negligence or willful misconduct.
     9. Expenses. Each Borrower hereby reconfirms its obligations pursuant to
Sections 4.5 and 7.11 of the Credit Agreement to pay and reimburse the
Administrative Agent and Lenders for all reasonable costs and expenses
(including, without limitation, reasonable fees of counsel) incurred in
connection with the negotiation, preparation, execution and delivery of this
Amendment and all other documents and instruments delivered in connection
herewith.
     10. Effectiveness. This Amendment shall become effective as of the date
hereof only upon satisfaction in full in the judgment of the Administrative
Agent of each of the following conditions:
     (a) Amendment. The Administrative Agent shall have received four
(4) original copies of this Amendment duly executed and delivered by the
Administrative Agent, Required Lenders and each of the Borrowers.
     (b) Payment of Fees and Expenses. The Borrowers shall have paid to the
Administrative all costs, fees and expenses invoiced and owing in connection
with this Amendment and the other Loan Documents and due to the Administrative
Agent (including, without limitation, reasonable legal fees and expenses).
     (c) Amendment Fee. The Borrowers shall pay to the Administrative Agent, for
the benefit of the Administrative Agent, an amendment fee in the amount of
$50,000.
     (d) Warrant. The Borrowers shall have delivered an executed amended and
restated Warrant in form and substance acceptable to the Administrative Agent.
     (e) Representations and Warranties. The representations and warranties of
or on behalf of each Borrower in this Amendment shall be true and correct on and
as of the Fifth Amendment Effective Date.
     11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
     12. Counterparts. This Amendment may be executed by the parties hereto on
any number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
(SIGNATURE PAGE FOLLOWS)

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     IN WITNESS WHEREOF, this Amendment has been duly executed as of the date
first written above.

            BORROWERS:

ZILA, INC.
      By:   /s/ Andrew A. Stevens         Name:   Andrew A. Stevens       
Title:   VP and CFO     

            ZILA TECHNICAL, INC.
      By:   /s/ Andrew A. Stevens         Name:   Andrew A. Stevens       
Title:   VP and CFO     

            ZILA BIOTECHNOLOGY, INC.
      By:   /s/ Andrew A. Stevens         Name:   Andrew A. Stevens       
Title:   VP and CFO     

            ZILA NUTRACEUTICALS, INC.
      By:   /s/ Andrew A. Stevens         Name:   Andrew A. Stevens       
Title:   VP and CFO     

            ZILA PHARMACEUTICALS, INC.
      By:   /s/ Andrew A. Stevens         Name:   Andrew A. Stevens       
Title:   VP and CFO   

 

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            ADMINISTRATIVE AGENT:

BLACK DIAMOND COMMERCIAL FINANCE, L.L.C.
      By:   /s/ Stuart Armstrong         Name:   Stuart Armstrong       
Title:   President and CEO   

 

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                  LENDER:
 
                BDC FINANCE, LLC
 
                By:   Black Diamond Capital Management, L.L.C., its Investment
Manager
 
                By:   /s/ James J. Zenni          
 
      Name:   James J. Zenni, Jr.
 
      Title:   President & Managing Partner
 
          Black Diamond Capital
 
          Management, L.L.C.