Exhibit 10.1
SEVERANCE AGREEMENT AND RELEASE OF CLAIMS
     This Severance Agreement and Release of Claims (“Agreement”) is made and
entered into by and between Douglas D. Burkett, Ph.D. (“Executive”) and Zila,
Inc. and all of its affiliated companies and divisions (collectively referred to
as “Company”); and is intended by the parties hereto to settle and dispose of
all claims and liabilities that exist between Executive and Company as indicated
herein.
RECITALS
     A. Executive and the Company are parties to that certain Employment
Agreement originally to be effective as of July 24, 2002 and as subsequently
amended effective as of October 21, 2003 (the “Employment Agreement”).
     B. Executive’s last day of employment with Company will be June 13, 2007.
Executive will resign his positions of Chief Executive Officer and Director and
any other positions he holds with the Company and with each of Company’s
subsidiaries and affiliated entities on June 13, 2007; and
     C. By entering into this Agreement, the parties mutually and voluntarily
agree to be legally bound by the terms set forth below.
COVENANTS
     NOW, THEREFORE, for valuable consideration, the parties agree as follows:
I.
     A. The Company agrees to pay Executive the sum of ninety thousand dollars
($90,000) less all lawfully required withholdings (including the withholding
required for the grant of restricted stock referenced below). Payment shall be
made in accordance with the Company’s regular payroll, but will not begin until
the first regular Company payday following the expiration of the seven (7) day
revocation period set forth in Section VII, assuming that Executive has not
revoked his signature during that seven (7) day period. Payments to Executive
will be in the same amounts as prior to the date hereof (less applicable
withholdings) until the cumulative payments (and withholdings) reach the agreed
upon $90,000 at which time all payments will cease. The Company will promptly
pay Executive all appropriate expense reimbursement requests properly submitted
by Executive on or before June 30, 2007 in compliance with Company policy. Such
amount will not exceed $20,000. In addition, Executive will pay or provide
appropriate backup documentation for all outstanding charges on his American
Express card. The parties understand that all payments will be made by
August 15, 2007.
     B. The Company agrees to pay the entire cost of COBRA coverage for
Executive for a period of six (6) months following Executive’s resignation
assuming that Executive timely elects COBRA coverage.

 

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     C. The Company agrees to the following concerning outstanding grants of
stock options and restricted stock to Executive:

  •   Option grants (#542 and #543) for 200,000 shares survive Executive’s
resignation and remain exercisable for the two (2) year period following
Executive’s resignation of employment;     •   All restrictions on Restricted
Stock grant #717 are lifted and a stock certificate for all 100,000 shares will
be issued to Executive, effective on the date this Agreement takes effect (i.e.
after the expiration of the seven (7) day revocation period set forth in
Section VII, assuming Executive does not revoke his signature during that seven
day period);     •   Except as provided herein, Executive agrees that any option
to purchase Company stock or any other right to receive Company stock, whether
vested or unvested as of the date hereof, shall terminate as of the date hereof.

     D. The Company hereby waives and releases Executive and his successors and
assigns from any and all rights, claims, demands, causes of action, obligations,
damages, penalties, fees, costs, expenses, and liabilities to the extent known
to the Company and its independent counsel at the time of execution of this
agreement including without limitation all matters reported to the Company by
independent counsel in connection with its investigations prior to the date of
this agreement.
     E. The Company agrees to cooperate with Executive to allow him to retrieve
his personal property from the Company’s premises. Company also agrees to
provide Executive with records relating to Executive’s stock purchases, options
and other personal records of Executive in Company’s possession, including but
not limited to records and stock certificates evidencing Executive’s 2005, 2006
and 2007 ESPP purchases and Executive’s $50,000 open market purchase of stock in
December 2006.
     F. Executive acknowledges that upon receipt of the above, he is not owed
any further money or any further equity compensation by the Company.
     G. Executive hereby resigns his positions of Chief Executive Officer and
Director and any other positions he holds with the Company and with each of
Company’s subsidiaries and affiliated entities and the Company hereby accepts
the resignations. At the request of Company, Executive agrees to execute any
documents reasonably requested to effectuate or to facilitate his resignations.
Executive agrees he did not resign as a result of a disagreement of the type
referred to in Item 5.02(a)(1) of Form 8-K.

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II.
     In consideration of the covenants set forth in Paragraph I above and the
covenants herein:
     A. Executive, on behalf of himself, his marital community if any, and his
heirs or assigns, expressly releases Company and its parent, subsidiaries,
affiliated companies, directors, officers, all of their agents, employees, and
attorneys; and all their predecessors and successors (collectively the “Released
Entities”) from ANY AND ALL RIGHTS, CLAIMS, DEMANDS, CAUSES OF ACTION,
OBLIGATIONS, DAMAGES, PENALTIES, FEES, COSTS, EXPENSES, AND LIABILITIES OF ANY
NATURE WHATSOEVER WHICH EXECUTIVE HAS, HAD, OR MAY HAVE HAD AGAINST COMPANY OR
ANY OR ALL OF THE RELEASED ENTITIES IN CONNECTION WITH ANY CAUSE OR MATTER
WHATSOEVER, WHETHER KNOWN OR UNKNOWN TO THE PARTIES AT THE TIME OF EXECUTION OF
THIS AGREEMENT AND EXISTING FROM THE BEGINNING OF TIME TO THE DATE OF THE
EXECUTION OF THIS AGREEMENT AND INCLUDING, WITHOUT LIMITATION, ALL MATTERS
RELATED TO EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, THE EMPLOYMENT AGREEMENT AND
THE TERMINATION OF HIS EMPLOYMENT.
     By signing this Agreement, Executive agrees to FULLY WAIVE AND RELEASE ALL
CLAIMS without limitation, such as attorneys’ fees, and all rights and claims
arising out of, or relating to, his employment or termination from employment,
with the Company including, BUT NOT LIMITED TO, any claim or other proceeding
arising under:

•   The Civil Rights Act of 1866 (“Section 1981”);   •   Title VII of the Civil
Rights Act of 1964 as amended by the Civil Rights Act of 1991;   •   The
Americans with Disabilities Act (“ADA”);   •   The Age Discrimination in
Employment Act (“ADEA”);   •   The Labor Management Relations Act (“LMRA”);   •
  The National Labor Relations Act (“NLRA”);   •   The Fair Labor Standards Act
(“FLSA”);   •   The Family and Medical Leave Act of 1993 (“FMLA”);   •   The
Arizona Civil Rights Act;   •   The Arizona Employment Protection Act; and/or  
•   Any common law or statutory cause of action arising out of Executive’s
employment or termination of employment with the Company.

     This Agreement may be used to completely bar any action or suit before any
court, arbitral, or administrative body with respect to any claim under federal,
state, local or other law relating to this Agreement or to Executive’s
employment and/or termination of employment with Company or its subsidiaries,
affiliates, related entities, predecessors, parents or divisions.
Notwithstanding any provision hereof to the

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contrary, however, Executive does not release his rights to indemnification
under provisions of the Company certificate of incorporation, bylaws or
applicable law.
     B. Executive shall deliver to Company 1) the Company’s computer and cell
phone that are currently in Executive’s possession; and 2) any other Company
property including any documents, materials, files, or computer files, or
copies, reproductions, duplicates, transcriptions, or replicas thereof, relating
to Company’s business or affairs, which are in Executive’s possession or
control, or of which Executive is aware. Executive will make a diligent search
for the afore-mentioned items. Executive will deliver these items to Company by
June 21, 2007.
     C. Executive hereby agrees to comply with the all of the restrictions and
requirements in Section 7 of his Employment Contract entitled “Confidential
Information; Noncompetition” for a period of two years beginning on the date of
his resignation from the Company regardless of the period of time during which
Executive receives payments hereunder.
III.
     The provisions of this Agreement are severable. This means that if any
provision is invalid, it will not affect the validity of the other provision. If
the scope of any restrictions of this Agreement should ever be deemed to exceed
that permitted by applicable law or be otherwise overbroad, Executive agrees
that a court of competent jurisdiction shall enforce that restriction to the
maximum scope permitted by law under the circumstances.
IV.
     Executive agrees to use his commercially reasonable efforts to cooperate
fully with The Company and its counsel at the Company’s expense in connection
with any charges of discrimination, lawsuits or other legal matters relating to
Company in which Company determines that Executive is a relevant witness.
Executive’s cooperation will include meeting at reasonable times with Company’s
attorneys, providing the attorneys with requested information, consenting to
depositions and interviews, and appearing as a witness on behalf of Company in
any government investigation, formal or informal, in which Company or any of its
affiliates is a respondent, subject, or called upon to be interviewed or
examined under oath as a third party, in each case for which Executive shall
receive reasonable compensation for his time. Except as otherwise provided in
this Agreement, and except to the extent Executive’s counsel advises him that
such representation presents a potential conflict of interest, with respect to
any such depositions, interviews, and appearances, Executive agrees to be
represented by Company’s counsel. Executive agrees to work with such counsel in
preparation therefor.
V.
     Executive agrees that he will not seek nor accept employment in the future
with the Company or any of its subsidiaries, affiliates, successors, or
divisions.

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VI.
     By his signature below, Executive affirms that he has been given at least
21 days during which to consider this Agreement. Executive has been advised to
seek legal counsel prior to signing this Agreement.
VII.
     Executive may revoke this Agreement at any time within seven (7) days
following his execution of the Agreement. Such revocation must be provided in
writing and received during the seven (7) day revocation period. To be
effective, the revocation must be received by the following individual:
General Counsel
Zila, Inc.
5227 N. 7th Street
Phoenix, AZ 84014
     This Agreement shall not become effective or enforceable until the
foregoing revocation period has expired.
VIII.
     The Company and Executive mutually agree not to disparage the other, either
directly or indirectly. However, nothing in this Section precludes either party
from testifying or participating in any legal proceeding in which the party is
required by law to provide information about the other party.
IX.
     Executive agrees that all requests for employment verification with the
Company be directed to the Company’s Director of Human Resources, Chief
Financial Officer or General Counsel. The Company agrees that it will provide
only Executive’s position, dates of employment and the fact that he resigned, in
response to such employment verification requests. The Company agrees to issue a
press release in the form attached hereto as Exhibit A to announce this
Agreement and shall not make public statements regarding Executive which
contradict such press release.
X.
     This Agreement supersedes and replaces all prior discussions,
understandings, and oral agreements between the parties except as noted herein,
and contains the entire agreement between them on the matters herein contained.
This Agreement may not be changed orally, but only by a written agreement signed
by Executive and Company.

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XI.
     The laws of the State of Arizona will apply to this Agreement.

              /s/ Douglas D. Burkett, Ph.D.   Date:   6/13/07           Douglas
D. Burkett, Ph.D.            
 
        Zila, Inc.            
 
        By:  
/s/ Gary V. Klinefelter
  Date:   6/13/07    
 
           
Gary V. Klinefelter, Vice President
       

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Exhibit A
(ZILA LOGO) [p73996p7399601.gif]
 
5227 North 7th Street Phoenix, Arizona 85014 (602) 266-6700 Fax (602) 234-2264
www.zila.com
Zila CEO Departs — Company Continues To Focus On Oral Cancer Screening Business
PHOENIX—(BUSINESS WIRE)—June 13, 2007—Zila, Inc. (NASDAQ GM: ZILA), announced
today that Douglas Burkett has resigned as CEO and director of Zila, effectively
immediately, in order to pursue other interests.
Frank J. Bellizzi, D.M.D., Zila Executive Vice President and the President of
its pharmaceutical division, will expand his leadership responsibilities while
the Board addresses the CEO position. David R. Bethune, Chairman of the Board of
Zila commented, “I have great confidence in Frank’s ability and look forward to
working closely with him as we move forward.”
Mr. Bellizzi stated, “As an organization, we intend to aggressively drive the
Company to profitability and continue to expand Zila’s leadership position in
oral cancer detection.” Mr. Bellizzi has over 15 years of experience, within and
beyond the Life Science industry, across operations, finance, strategic business
development and investment banking. He holds an MBA from The Wharton School, a
Doctorate in Dental Medicine from The University of Pennsylvania, and a Bachelor
of Science degree from Georgetown University.
Zila will file its Form 10-Q on Monday, June 18 and will conduct its quarterly
conference call with investors on Tuesday, June 19, 2007. Call-in information
has been previously provided in a separate press release.
About Zila, Inc.
Zila, Inc., headquartered in Phoenix, is a leading oral cancer diagnostic
company focused on the prevention and treatment of oral disease:
Zila is dedicated to establishing ViziLite(R) Plus as the new standard of care
within the medical community for the early detection of oral abnormalities that
could lead to cancer, with an initial focus on the dental market through
Pro-Dentec(R), a leading designer, manufacturer and marketer of Soft Tissue
Management (STM(R)) products. Sold exclusively and directly to dental
professionals, Pro-Dentec’s core products include the Rota-dent(R) Professional
Powered Brush, the Pro-Select3(R) Piezo-Ultrasonic Scaler System and a suite of
pharmaceutical STM(R) products for both in-office and home-care use.

 

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For more information about Zila, visit www.zila.com.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are based largely on
Zila’s expectations or forecasts of future events, can be affected by inaccurate
assumptions and are subject to various business risks and known and unknown
uncertainties, a number of which are beyond the Company’s control. Therefore,
actual results could differ materially from the forward-looking statements
contained herein. A wide variety of factors could cause or contribute to such
differences and could adversely impact revenues, profitability, cash flows and
capital needs. There can be no assurance that the forward-looking statements
contained in this press release will, in fact, transpire or prove to be
accurate, and we disclaim any obligation to update or revise any such
forward-looking statements. For a more detailed description of these and other
cautionary factors that may affect Zila’s future results, please refer to the
documents we file with the Securities and Exchange Commission, including our
Form 10-K for the fiscal year ended July 31, 2006, our Current Report on Form
8-K filed on December 28, 2006, and our Form 10-Q for the quarter ended
January 31, 2007.
CONTACT: Zila, Inc.
Lawrence Gyenes, Chief Financial Officer, 602-266-6700
or
The Investor Relations Group
Investor Relations:
Adam Holdsworth, 212-825-3210
or
Media:
Bill Douglass, 212-825-3210
SOURCE: Zila, Inc.