Exhibit 10.2
June 8, 2009
Mr. Gary V. Klinefelter
16430 N. Scottsdale
Road, Suite 450
Scottsdale, AZ 85254
     Re: First Amendment to Employment Agreement
Dear Gary:
     By letter dated March 30, 2007, you entered into a letter agreement with
Zila, Inc. (the “Company”) with respect to your employment (the “Agreement”)
pursuant to which you are entitled to a payment if the Company terminates your
employment in certain limited circumstances. The Company has decided to provide
you with limited additional protection in the event that certain material
adverse changes are made to the terms of your employment with the Company. The
Company proposes to amend the Agreement as follows effective as of June 8, 2009:
     Section 13 (Severance Benefits) of the Agreement is hereby amended and
restated in its entirety to read as follows:
13. Severance Benefits. If the Company terminates your employment or if you
terminate your employment for “Good Reason” (as defined below), you shall be
eligible to receive severance benefits in accordance with the following:
     13.1 Change in Control. If your employment is terminated (with or Without
Cause) by the Company or if you terminate your employment for Good Reason
because of a change in control of the Company (“Change in Control”), you shall
be entitled to receive severance pay in (i) an amount equivalent to twenty-four
(24) months of your annual base salary in effect on the date your employment is
terminated; and (ii) an amount equivalent to the maximum cash bonus(es)
(expressed as a percentage of your annual base salary in effect on the date your
employment is terminated) for which you would have been eligible during the
twenty-four (24) months following termination of your employment had your
employment not terminated and had you stayed in the position you occupied as of
termination of your employment, under any employee incentive bonus plan(s) in
effect on the date your employment is terminated. For purposes of this

 

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Mr. Gary V. Klinefelter
June 8, 2009
Page 2
Agreement, “Change in Control” shall be defined and governed by the definition
of “change in control” contained in the Stock Option Plan, or such amended or
restated stock option plan as may then be in effect or, in the absence of such
plan, in the last such plan that was in effect. If the Company terminates your
employment or you terminate your employment for Good Reason within eighteen (18)
months of a Change in Control, a presumption shall arise that the termination
was because of a Change in Control. This presumption, however, shall be rebutted
if a preponderance of the evidence shows that the reason for your termination
was something other than a Change in Control.
     13.2 Termination Without Cause. If, for a reason other than a Change in
Control, the Company terminates your employment without cause (“Without Cause”)
or you terminate your employment for Good Reason, you shall be entitled be
entitled to receive severance pay in an amount equivalent to twenty-four
(24) months of your annual base salary in effect on the date your employment is
terminated by the Company or you terminate your employment for Good Reason. For
purposes of this Agreement, “Cause” shall mean (i) your failure to correct a
specific conduct or job-performance issue or issues about which you have been
informed in writing and given an opportunity to correct; or (ii) conduct or job
performance that the Company believes is sufficiently willful and/or egregious
that providing you with written notice and an opportunity to correct is an
inadvisable business practice; or (iii) your inability to perform your job
(e.g., due to incapacity or death). If your employment terminates for any other
reason (with the exception of a termination because of a Change in Control),
such termination shall be deemed Without Cause and this subpart 13.2 shall
apply.
     13.3 Definition of Good Reason. For purposes of this Agreement, “Good
Reason” means a termination of employment within twelve (12) months following
the occurrence of one or more of the following circumstances without your
express consent: (i) a material diminution in your base compensation after
June 8, 2009; (ii) a material diminution in your authority, duties or
responsibilities; (iii) a material change in the geographic location of your
principal office; or (iv) any other action or inaction that constitutes a
material breach by the Company of this Agreement.

 

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Mr. Gary V. Klinefelter
June 8, 2009
Page 3
You must provide written notice to the Company of the existence of the Good
Reason condition described in clauses (i)-(iv) above within ninety (90) days of
the initial existence of the condition. Notwithstanding anything to the
contrary, an event described in clauses (i)-(iv) above will not constitute Good
Reason if, within thirty (30) days after you give the Company notice of the
occurrence or existence of an event that you believe constitutes Good Reason,
the Company has fully corrected such event.
     13.4 Stock Options and Restricted Stock. If your employment is terminated
because of a Change in Control or Without Cause or you terminate your employment
for Good Reason, and upon expiration of any revocation period contained in the
release required by subpart 13.5 below, (i) any stock options granted prior to
termination of your employment shall be deemed immediately vested and
exercisable according to their terms; and (ii) all restrictions applicable to
any restricted stock awarded prior to termination shall be deemed immediately
lifted. (Together, the severance pay set forth above and these stock benefits
are the “Severance Benefits”).
     13.5 Release Required. Severance Benefits will be provided and/or take
effect only if you provide the Company and its affiliated entities and persons
with a written release, in a form acceptable to the Company, from legal
liability. In no event will any Severance Benefits be provided or take effect
until such release is executed and its revocation period (if any) under
applicable law has expired unexercised. You will receive the release within ten
(10) days of the date on which your employment terminates. If you fail to
execute the release within thirty (30) days of your receipt of same, your right
to execute the release, and your corresponding right to Severance Benefits, will
be extinguished.
     13.6 No Other Right to Severance Benefits. Severance Benefits will not be
provided and/or take effect if you voluntarily resign from your employment
(other than for Good Reason), or your employment terminates for a reason other
than a Change in Control or Without Cause, or you do not qualify for Severance
Benefits pursuant to this Agreement for any other reason.
     13.7 Timing of Severance Pay. Any amounts payable to you pursuant to
subparts 13.1 or 13.2 of this Agreement that are

 

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Mr. Gary V. Klinefelter
June 8, 2009
Page 4
not subject to Section 409A of the Internal Revenue Code (the “Code”) shall be
paid in a lump sum six (6) months plus one (1) business day after termination of
your employment (the “Payment Date”). Since (and as long as) you are a
“Specified Employee” as defined in Treasury Regulation Section 1.409A-1(i), any
amounts payable to you pursuant to subparts 13.1 or 13.2 of this Agreement that
are subject to Section 409A of the Code must be delayed for a period of six
(6) months following your “Separation from Service” as defined in Treasury
Regulation Section 1.409A-1(h). Accordingly, any amounts payable to you pursuant
to subparts 13.1 or 13.2 of this Agreement that are subject to Section 409A of
the Code shall be paid in a lump sum six (6) months plus one (1) business day
after your Separation from Service (the “409A Payment Date”). Should the rule
described in the preceding sentence result in a delay of payments to you beyond
the Payment Date, then the Company shall also pay you interest accrued from the
Payment Date to the 409A Payment Date at the rate of interest announced by Bank
of America, Arizona from time to time as its prime rate. For purposes of this
provision, the term Specified Employee shall have the meaning set forth in
Section 409A(2)(B)(i) of the Internal Revenue Code of 1986, as amended, or any
successor provision and the Treasury Regulations and rulings issued thereunder.
     13.8 Termination of Your Right to Severance Benefits. Your right to receive
Severance Benefits shall immediately terminate if (i) you breach any contractual
obligation you owe the Company or violate any other promise or commitment you
have made to the Company or duty you owe the Company, or (ii) you solicit,
induce, or attempt to influence any employee of the Company or its affiliated
companies to terminate his or her employment.
     This First Amendment amends only the provisions of the Agreement as set
forth herein, and those provisions not expressly amended by this First Amendment
shall continue in full force and effect. Notwithstanding the foregoing, this
First Amendment shall supersede the provisions of the Agreement to the extent
those provisions are inconsistent with the provisions and the intent of this
First Amendment.

 

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Mr. Gary V. Klinefelter
June 8, 2009
Page 5
     If you are in agreement with the terms of this First Amendment, please so
indicate by signing and returning to me the enclosed copy of this letter, which
will constitute our binding agreement.

            Very truly yours,

ZILA, INC.
      By:   /s/ David R. Bethune         David R. Bethune        Chairman and
CEO     

AGREED:

     
/s/ Gary V. Klinefelter
  Date: June 9, 2009
 
   
Gary V. Klinefelter