Exhibit-10.1
March 6, 2007
Mr. Lawrence A. Gyenes
16 Benedict Crescent
Basking Ridge, NJ 07920
     Re:      Employment with Zila, Inc.
Dear Larry:
     I am pleased to extend an employment offer to you on behalf Zila, Inc. (the
“Company”) on the following terms:
     1. Title. Your title will be Chief Financial Officer (CFO).
     2. Start Date. Your target start date is March 12, 2007. (Your actual first
day of employment with the Company, whether March 12, 2007 or some other date,
is referred to herein as the “Start Date.”)
     3. Reporting Structure. You will report directly to me in my capacity as
CEO of the Company.
     4. Responsibilities. Your responsibilities will be those consistent with
the above-described position and/or as they may be assigned to you by the
Company.
     5. Base Salary. Your initial base salary will be paid at the rate of three
hundred thousand dollars ($300,000.00) per year, less applicable withholdings as
may be required by law, in accordance with the Company’s regular payroll
practices (currently bi-weekly).
     6. Auto allowance. You will receive an auto allowance as may approximately
be commensurate with those provided other executive-level employees. Initially,
this will be $800 per month, subject to Internal Revenue Service regulations and
paid in accordance with the Company’s regular payroll practices.
     7. Special Bonus. No later than the first regular Company payroll date on
or after sixty (60) says from the Start Date, you will receive a one-time
special bonus in the amount of twenty-five thousand dollars ($25,000.00), less
applicable withholdings as may be required by law. You must still be employed by
the Company on such payroll date to receive this bonus. If you voluntarily
terminate your employment with the Company within six (6) months of the Start
Date, you will repay the Company 100% of this bonus.

 

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Mr. Lawrence A. Gyenes
March 6, 2007
Page 2
     8. Eligibility for Performance Bonuses. You will be eligible to participate
in whatever incentive bonus plan(s) the Company maintains, or successor plans as
may be applicable. Currently, the Company’s incentive bonus plan provides you
with an opportunity to receive a cash performance bonus of up to fifty percent
(50%) of your base salary, less applicable withholdings as may be required by
law. You will be eligible to participate in such incentive bonus plan for fiscal
year 2007 (ending July 31, 2007) on a pro rata basis based on time actually
employed during this fiscal year.
     9. Stock Options. Subject to approval of the Company’s Board of Directors
or its Compensation Committee, you will receive the following stock option
grants to purchase the Company’s common stock under the Zila, Inc. 1997 Stock
Option Award Plan, as amended and restated December 5, 2002 (the “Stock Option
Plan”), or such amended or restated stock option plan as may then be in effect:
A total of 200,000 options, effective on the Start Date and vesting in three
equal installments on the first, second and third anniversaries of the Start
Date (66,667 on the first and second anniversaries, respectively, and 66,666 on
the third anniversary). You will also be eligible for additional stock option
grants based on individual performance and/or as may be commensurate with grants
to other executive-level employees. All stock option grants shall be governed in
all respects by the Stock Option Plan or such amended or restated stock option
plan as may then be in effect.
     10. Restricted Stock. Subject to approval of the Company’s Board of
Directors or its Compensation Committee, you will be granted 50,000 shares of
restricted stock. The restrictions on the shares will be removed in equal
amounts on the first, second and third anniversaries of the Start Date,
respectively.
     11. Insurance. You will receive insurance benefits as provided to other
executive-level employees. Currently, these consist of medical, dental and
vision coverage for you and your dependents, life insurance and short-term
disability coverage for you, and directors and officers’ liability insurance.
     12. Paid Time Off. You will receive paid time off (“PTO”) in accordance
with the Company’s regular PTO policy except your initial allotment of PTO will
be 20 days rather than the 18 recited in the policy. Otherwise, all aspects of
the Company’s regular PTO policy will apply to you. You will also receive paid
holidays in accordance with the Company’s regular holiday policies.
     13. Other Benefits. You will receive other benefits as may be commensurate
with those provided to other executive-level employees. Currently, these include
participation in a 401(k) plan, an employee stock purchase plan, a flexible
spending program/Section 125, and employee recognition programs.

 

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Mr. Lawrence A. Gyenes
March 6, 2007
Page 3
     14. Term. The term of this Agreement shall be for three (3) years from the
Start Date. The term shall automatically be extended for successive one-year
terms starting on the third anniversary of the Start Date, and continuing each
anniversary thereafter, unless the Company gives you a minimum of 120 days
advance written notice of nonextension before any such anniversary.
     15. Relocation Benefits. The Company will reimburse you for the following
actual, documented expenses in connection with your relocation to Arizona:
(i) Reasonable out-of-pocket expenses related to trips between New Jersey and
Arizona for you and/or your fiancé to transition living arrangements, not to
exceed a total of $10,000; (ii) costs associated with the move to Arizona of
your possessions from your current principal residence and up to two vehicles at
actual professional van line costs based on the lowest bid from three separate
companies; (iii) reasonable out-of-pocket expenses related to transporting (by
airplane or automobile) you and your fiancé for your move from New Jersey to
Arizona; (iv) temporary housing in the Phoenix area for up to six months at a
maximum of $3,000 per month; and (v) realtor fees and other traditional closing
costs that are your responsibility on any sale of your current principal
residence within one year of the Start Date, and on any purchase of a home in
the Phoenix area within one year of the Start Date, the total of which closing
costs may not exceed the sum of $50,000 (collectively, “Relocation Benefits”).
Relocation Benefits will be paid in accordance with Internal Revenue Service
regulations.
     15.1 Repayment of Relocation Benefits. If you voluntarily terminate your
employment with the Company on or before 15 months from the Start Date, you will
repay the Company 100% of all Relocation Benefits you actually received pursuant
to this Agreement. If you voluntarily terminate your employment with the Company
later than 15 months from the Start Date and on or before 18 months from the
Start Date, you will repay the Company 75% of all such Relocation Benefits. If
you voluntarily terminate your employment with the Company later than 18 months
from the Start Date and on or before 21 months from the Start Date, you will
repay the Company 50% of all such Relocation Benefits. If you voluntarily
terminate your employment with the Company later than 21 months from the Start
Date and on or before 24 months from the Start Date, you will repay the Company
25% of all such Relocation Benefits. If you voluntarily terminate your
employment later than 24 months from the Start Date, you will have no repayment
obligation. You agree that the Company may withhold from any compensation that
may be due you upon termination of your employment any sum you may owe the
Company pursuant to this provision, and that if you are not due sufficient funds
to cover what you owe the Company, the Company may withhold all compensation due
you and you will pay the balance owing the Company within thirty (30) calendar
days of your last day of employment.
     16. At-Will Employment. Your employment with the Company is at will,
meaning that it lawfully can be terminated at any time by either you or the
Company, with or without cause or notice. Nothing contained in this Agreement
changes the at-will nature of your employment.

 

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Mr. Lawrence A. Gyenes
March 6, 2007
Page 4
     17. Severance Benefits. If the Company terminates your employment, you
shall be eligible to receive severance benefits (“Severance Benefits”) in
accordance with the following:
          17.1 Change in Control. If your employment is terminated 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 eighteen (18) 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 eighteen
(18) 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 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 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.
          17.2 Termination Without Cause. If the Company terminates your
employment for any reason that is unrelated to (i) a Change in Control,
(ii) your conduct or job performance, and (iii) your inability to perform your
job (e.g., due to incapacity or death) (hereafter a termination “Without
Cause”), you shall be entitled to receive severance pay in an amount equivalent
to eighteen (18) months of your annual base salary in effect on the date your
employment is terminated.
          17.3 Stock Options and Restricted Stock. If your employment is
terminated because of a Change in Control or Without Cause, and upon expiration
of any revocation period contained in the release required by subpart 17.4
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”).
          17.4 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. If you fail to execute the release
within thirty (30) days

 

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Mr. Lawrence A. Gyenes
March 6, 2007
Page 5
of your receipt of same, your right to execute the release, and your
corresponding right to Severance Benefits, will be extinguished.
          17.5 No Other Right to Severance Benefits. Severance Benefits will not
be provided and/or take effect if you voluntarily resign from your employment,
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.
          17.6 Timing of Severance Pay. All sums payable to you pursuant to
subparts 17.1 or 17.2 above shall be paid in a lump sum within six (6) months
plus five (5) business days after termination of your employment (the “Payment
Date”). However, if you are a “Specified Employee” of the Company for purposes
of Internal Revenue Code Section 409A (“Code Section 409A”) at the time of any
event that triggers a payment obligation on the part of the Company pursuant to
subpart 17.1 or 17.2, then the required payment shall be made to you by the
Company on the first day such payment may be made without incurring excise taxes
under Code Section 409A (without regard to whether that shortens or lengthens
the time period set forth in the first sentence of this subpart 17.6) (the “409A
Payment Date”). Should this 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.
          17.7 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; (ii) you
commence employment or other engagement with any person or entity that competes
with the Company or its affiliated companies; or (iii) you solicit, induce, or
attempt to influence any employee of the Company or its affiliated companies to
terminate his or her employment.
     18. Cooperation in Dispute Resolution. During your employment and
thereafter (including following termination of your employment for any reason),
you will make yourself reasonably available to consult with the Company or any
of its affiliated companies with regard to any potential or actual dispute the
Company or any of its affiliated companies may have with any third party
concerning matters about which you have personal knowledge, and to testify about
any such matter should such testimony be required, so long as doing so does not
unreasonably interfere with your then-current professional activities.
     19. Applicable Law. You hereby consent to application of Arizona law to
this Agreement without regard to choice-of-law or conflict-of-law rules.
However, in recognition of

 

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Mr. Lawrence A. Gyenes
March 6, 2007
Page 6
the fact that the Severance Benefits set forth above are not items of ordinary
compensation, and as an inducement for the Company to agree to those provisions,
we have specifically agreed that Arizona Revised Statute § 23-355 (which
provides for the possibility of treble damages for unpaid wages) shall not apply
to Paragraph 17 of this Agreement (or its subparts), or to any payment(s)
arguably due under Paragraph 17 of this Agreement (or its subparts), or to any
dispute arising under Paragraph 17 of this Agreement (or its subparts). This
does not affect your right to Severance Benefits, but means that if we have a
dispute about whether Severance Benefits are owed, you cannot seek three times
the amount of such Severance Benefits in a legal action.
     20. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall remain in
full force and effect to the fullest extent permitted by law.
     21. Other agreements. As a condition of your employment with the Company,
you must also execute the enclosed Employee Confidentiality and Intellectual
Property Agreement. Like all Company employees, you may in the future be
required, in the Company’s reasonable discretion, to execute agreements relating
to other Company policies or substantive matters.
     As with all our offers to prospective executive-level employees, this offer
is contingent upon satisfactory completion of those portions of our standard due
diligence (including background and reference checks) as may be applicable to
your prospective employment.
     We believe you will be a valuable addition to the Company and we hope you
will accept this offer. If you wish to do so, please sign where indicated below
and return this Agreement. Please let us know if you have any questions.

     
 
  Sincerely,
 
   
 
   
 
  /s/ Douglas D. Burkett
 
   
 
  Douglas D. Burkett, Ph.D.
 
  CEO and President

 

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Mr. Lawrence A. Gyenes
March 6, 2007
Page 7
Statement of Acceptance:
     I have read the foregoing and agree to accept employment with the Company
on the terms stated in this Agreement.

                Dated: March 7, 2007  /s/ Lawrence A. Gyenes       Lawrence A.
Gyenes