EXHIBIT 10.2
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION, UNDER SAID ACT AND
LAWS.
AMENDED AND RESTATED WARRANT
TO PURCHASE
SHARES OF COMMON STOCK
OF
ZILA, INC.
Expires March 24, 2011
No. 3
September 25, 2006
          FOR VALUE RECEIVED, subject to the provisions hereinafter set forth,
the undersigned, Zila, Inc., a Delaware corporation (together with its
successors and assigns, the “Issuer”), hereby certifies that
BDC FINANCE, L.L.C.
or its registered assigns is entitled to subscribe for and purchase at an
initial exercise price of $2.22 per share, during the Term (as defined below),
1,200,000 shares of the duly authorized, validly issued, fully paid and
non-assessable Common Stock all subject to adjustment and upon the terms and
conditions as hereinafter provided. Capitalized terms used in this Warrant and
not otherwise defined herein shall have the respective meanings specified in
Section 7 hereof. This Warrant amends and restates that certain amended and
restated warrant to purchase 1,200,000 shares of Common Stock issued to BDC
Finance, L.L.C. on May 31, 2006.
          1. Term. The right to subscribe for and purchase shares of Warrant
Stock represented hereby shall commence on the date hereof and shall expire at
5:00 P.M., Eastern Time, on March 24, 2011 (such period being the “Term”).

 

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          2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
               (a) Time of Exercise. The purchase rights represented by this
Warrant may be exercised in whole or in part at any time and from time to time
during the Term.
               (b) Method of Exercise. The Holder hereof may exercise this
Warrant, in whole or in part, by the surrender of this Warrant (with the
exercise form attached hereto duly executed) at the principal office of the
Issuer, and by the payment to the Issuer of an amount of consideration therefor
equal to the Warrant Price in effect on the date of such exercise multiplied by
the number of shares of Warrant Stock with respect to which this Warrant is then
being exercised, payable at such Holder’s election (i) by certified or official
bank check or wire transfer of immediately available funds or (ii) by surrender
to the Issuer for cancellation of a portion of this Warrant representing that
number of unissued shares of Warrant Stock which is equal to the quotient
obtained by dividing (A) the product obtained by multiplying the Warrant Price
by the number of shares of Warrant Stock being purchased upon such exercise by
(B) the difference obtained by subtracting the Warrant Price from the Current
Market Price per share of Warrant Stock as of the date of such exercise, or
(iii) by a combination of the foregoing methods of payment selected by the
Holder of this Warrant. In any case where the consideration payable upon such
exercise is being paid in whole or in part pursuant to the provisions of clause
(ii), such exercise shall be accompanied by written notice from the Holder of
this Warrant specifying the manner of payment thereof and containing a
calculation showing the number of shares of Warrant Stock with respect to which
rights are being surrendered thereunder and the net number of shares to be
issued after giving effect to such surrender.
               (c) Issuance of Stock Certificates. In the event of any exercise
of the rights represented by this Warrant in accordance with and subject to the
terms and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding five Business Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised including any portion which is not
then exercisable pursuant to Section 5 (less any amount thereof which shall have
been cancelled in payment or partial payment of the Warrant Price as hereinabove
provided) shall also be issued to the Holder hereof within such time.
               (d) Transferability of Warrant; Warrant Stock. Subject to the
provisions of Section 2(e) hereof, this Warrant may be transferred on the books
of the Issuer by the Holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant at the principal office of the Issuer, properly
endorsed (by the Holder executing an assignment in the form attached hereto) and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer. This Warrant is exchangeable at the principal office of the
Issuer for Warrants for the purchase of the same aggregate number of shares of
Warrant Stock, each new Warrant to represent the right to purchase such number
of shares of Warrant Stock as the Holder hereof shall designate at the time of
such exchange. All Warrants issued on transfers

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or exchanges shall be dated the date hereof and shall be identical to this
Warrant except as to the number of shares of Warrant Stock issuable pursuant
hereto.
               (e) Compliance with Securities Laws.
                    (i) The Holder of this Warrant, by acceptance hereof,
acknowledges and agrees that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except pursuant to an effective registration statement, or an
exemption from registration, under the Securities Act and any applicable state
securities laws.
                    (ii) This Warrant and all certificates representing shares
of Warrant Stock issued upon exercise hereof shall be stamped or imprinted with
a legend in substantially the following form:
“THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF MAY
NOT BE SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN
EXEMPTION FROM REGISTRATION, UNDER SAID ACT AND LAWS.”
               (f) Continuing Rights of Holder. The Issuer will, at the time of
or at any time after each exercise of this Warrant, upon the request of the
Holder hereof or of any shares of Warrant Stock issued upon such exercise,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
               (g) Recapitalization, Reorganization, Reclassification,
Consolidation, Merger or Sale.
                    (i) Without limiting any other provision hereof, in case the
Issuer after the Closing Date shall do any of the following (each a “Triggering
Event”) (a) consolidate with or merge into any other Person and the Issuer shall
not be the continuing or surviving corporation of such consolidation or merger,
or (b) permit any other Person to consolidate with or merge into the Issuer and
the Issuer shall be the continuing or surviving Person but, in connection with
such consolidation or merger, any Capital Stock of the Issuer shall be changed
into or exchanged for securities of any other Person or cash or any other
property, or (c) transfer all or substantially all of its properties or assets
to any other Person, or (d) effect a capital reorganization or reclassification
of its Capital Stock, or (e) enter into any other transaction similar to any of
the foregoing, then, and in the case of each such Triggering Event, proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the Holder of this Warrant shall be entitled upon the
exercise hereof at any time after the consummation of such Triggering Event, to
the extent this Warrant is not exercised prior to such Triggering Event, or is
not redeemed in connection with such Triggering Event, to receive at the Warrant
Price in effect at the time immediately prior to the consummation of such
Triggering Event, in lieu of the Common Stock issuable upon such

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exercise of this Warrant prior to such Triggering Event, the securities, cash
and property to which such Holder would have been entitled upon the consummation
of such Triggering Event if such Holder had exercised the rights represented by
this Warrant immediately prior thereto, subject to adjustments (subsequent to
such corporate action) as nearly equivalent as possible to the adjustments
provided for in Section 4 hereof. The Issuer shall give reasonable prior notice
(but no less than 5 Business Days’ prior notice) of any Triggering Event to the
Holder of this Warrant in accordance with Section 11 hereof.
                    (ii) Notwithstanding anything contained in this Warrant to
the contrary, the Issuer will not effect any Triggering Event unless, prior to
the consummation thereof, each Person (other than the Issuer) which may be
required to deliver any securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written instrument delivered to, and
reasonably satisfactory to, the Holder, (a) the obligations of the Issuer under
this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (b) the obligation to deliver to such Holder such securities, cash or
property as, in accordance with the foregoing provisions of this Section 2(g),
such Holder shall be entitled to receive, and such Person shall have similarly
delivered to such Holder an opinion of counsel for such Person (which may be
in-house counsel), which opinion of counsel shall be reasonably satisfactory to
such Holder, stating that this Warrant shall thereafter continue in full force
and effect and the terms hereof (including, without limitation, all of the
provisions of this Section 2(g)) shall be applicable to the securities, cash or
property which such Person may be required to deliver upon any exercise of this
Warrant or the exercise of any rights pursuant hereto.
          3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.
               (a) The Issuer represents, warrants, covenants and agrees that
all shares of Warrant Stock which may be issued upon the exercise of this
Warrant, will, upon issuance, be duly authorized, validly issued, fully paid and
non-assessable and free from all taxes, liens and charges created by or through
the Issuer with respect to issuance (other than restrictions under federal and
state securities laws). The Issuer further covenants and agrees that during the
period within which this Warrant may be exercised, the Issuer will at all times
have authorized and reserved a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
               (b) If any shares of the Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. To the extent permissible
under the applicable securities exchange rules, if the Issuer shall list any
shares of Common Stock on any securities exchange it will, at its expense, list
thereon, maintain and increase when necessary such listing of, all shares of
Warrant Stock from time to time issued upon exercise of this Warrant or as
otherwise provided hereunder and unissued shares of Warrant Stock which are at
any time issuable hereunder, so long as any shares of Common Stock shall be so
listed. The Issuer will also so list on each securities exchange, and will
maintain such listing of, any other

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securities which the Holder of this Warrant shall be entitled to receive upon
the exercise of this Warrant if at the time any securities of the same class
shall be listed on such securities exchange by the Issuer.
               (c) The Issuer shall not by any action including, without
limitation, amending its Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of the Holder
hereof against impairment. Without limiting the generality of the foregoing,
without the consent of the Requisite Holders, the Issuer will (i) not permit the
par value, if any, of its Common Stock to exceed the then effective Warrant
Price, (ii) not amend or modify any provision of the Certificate of
Incorporation or by-laws of the Issuer in any manner that would adversely affect
in any way the powers, preferences or relative participating, optional or other
special rights of the Holders of the Warrants disproportionately in relation to
the holders of the Common Stock, (iii) take all such action as may be reasonably
necessary in order that the Issuer may validly and legally issue fully paid and
nonassessable shares of Common Stock, free and clear of any liens, claims,
encumbrances and restrictions (other than as provided herein and restrictions
under federal and state securities laws) created by or through Issuer with
respect to such issuance upon the exercise of this Warrant, and (iv) use its
reasonable best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Issuer to perform its obligations under this Warrant.
               (d) The Issuer agrees that neither it nor its Affiliates will in
the future issue any press releases or other public disclosure, including any
prospectus, proxy statement or other materials filed with any governmental
authority relating to a public offering of the stock of the Issuer or any of its
Subsidiaries, using the name of the Holder or its Affiliates without at least
two (2) Business Days prior notice to the Holder and without the prior written
consent of the Holder unless (and only to the extent that) the Issuer or its
Affiliate is required to do so under law and then, in any event, the Issuer or
such Affiliate will consult with the Holder before issuing such press release or
other public disclosure.
          4. Adjustment of Warrant Price and Warrant Share Number. The Warrant
Share Number and the Warrant Price shall be subject to adjustment from time to
time upon the happening of certain events, and the Holder hereof shall have
additional rights, as follows:
               (a) Subdivision or Combination of Shares. If the Issuer, at any
time while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Share Number
shall be proportionately increased (as at the effective date of such
subdivision) to reflect the increase in the total number of shares of Common
Stock outstanding as a result of such subdivision, or (ii) in the case of a
combination of shares, the Warrant Share Number shall be proportionately reduced
(as at the effective date of such combination) to reflect the reduction in the
total number of shares of Common Stock outstanding as a result of such
combination.

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               (b) Certain Dividends and Distributions. If the Issuer, at any
time while this Warrant is outstanding, shall:
                    (i) Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of, shares of
Common Stock or any Common Stock Equivalent, the Warrant Share Number shall be
adjusted, as at the date of such payment or other distribution), to that number
determined by multiplying the Warrant Share Number in effect immediately prior
to such payment or other distribution, by a fraction (1) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
after such dividend or distribution (plus in the event that the Issuer paid cash
for fractional shares, the number of additional shares which would have been
outstanding had the Issuer issued fractional shares in connection with said
dividends), and (2) the denominator of which shall be the total number of shares
of Common Stock outstanding immediately prior to such dividend or distribution;
or
                    (ii) Liquidating Dividends, etc. Make a distribution of its
property to the holders of its Common Stock as a dividend in liquidation or
partial liquidation or by way of return of capital other than as a dividend
payable out of funds legally available for dividends under the laws of the State
of Delaware, the Issuer shall concurrently make a cash payment to the Holder of
this Warrant equal to the fair market value of such property as would have been
payable to such Holder had such Holder been the Holder of record of the number
of shares of Warrant Stock issuable upon exercise of this Warrant on the record
date for such distribution or if no such record is taken, on the date of such
distribution; and appropriate provision therefor shall be made a part of any
such distribution; or
               (c) Other Action Affecting Common Stock. In case after the
Closing Date, the Issuer shall take any action affecting its Common Stock, other
than an action described in any of the foregoing Sections 4(a) through 4(b),
inclusive, and the failure to make any adjustment would not fairly protect the
purchase rights represented by this Warrant in accordance with the essential
intent and principle of this Section 4, then the Warrant Share Number shall be
adjusted in such manner and at such time as the Board may in good faith
determine to be equitable in the circumstances.
               (d) Adjustment of Warrant Price. Upon each adjustment in the
Warrant Share Number pursuant to any of the foregoing provisions of this
Section 4, the Warrant Price shall be adjusted, to the nearest ten thousandth of
one cent, to the product obtained by multiplying the Warrant Price immediately
prior to such adjustment in the Warrant Share Number by a fraction, the
numerator of which shall be the Warrant Share Number immediately before giving
effect to such adjustment and the denominator of which shall be the Warrant
Share Number immediately after giving effect to such adjustment; provided,
however, that if at any time, as a result of any adjustments hereunder, the
Warrant Price shall be less than the par value per share of Warrant Stock, then
the price payable per share of Warrant Stock by the Holder hereunder in the
event of an exercise of this Warrant at such time in whole or in part shall be
an amount equal to the par value per share of such Warrant Stock.
          5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, an

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“adjustment”), the Issuer shall cause its Chief Financial Officer to prepare and
execute a certificate setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each
adjustment. Any dispute between the Issuer and the Holder of this Warrant with
respect to the matters set forth in such certificate may at the option of the
Requisite Holders of this Warrant be submitted to an independent accounting firm
not then regularly engaged by the Issuer chosen by the Issuer and reasonably
acceptable to the Requisite Holders, which firm shall deliver a written opinion
as to such matters to the Issuer and the Holders within thirty days after
submission to it of such dispute. Such opinion shall be final and binding on the
parties hereto. The fees and expenses of such accounting firm shall be paid by
the Issuer.
          6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with any exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
fair market value of such fractional shares.
          7. Definitions. For the purposes of this Warrant, the following terms
have the following meanings:
          “Affiliate” means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, 5% or more of the Voting Stock of such Person,
(b) each Person that controls, is controlled by or is under common control with
such Person, (c) each of such Person’s officers, directors, joint venturers and
partners and (d) in the case of the Issuer, the immediate family members,
spouses and lineal descendants of individuals who are Affiliates of the Issuer.
For the purposes of this definition, “control” of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise.
          “Board” shall mean the Board of Directors of the Issuer.
          “Business Day” means any day except a Saturday, a Sunday or a legal
holiday in New York City.
          “Capital Stock” means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
          “Certificate of Incorporation” means the Certificate of Incorporation
of the Issuer as in effect on the Closing Date, and as hereafter from time to
time amended, modified, supplemented or restated in accordance with its terms
and pursuant to applicable law.
          “Closing Date” means March 24, 2006.

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          “Common Stock” means the Common Stock of the Issuer, par value $.001
per share, and any other Capital Stock into which such stock may hereafter be
changed.
          “Credit Agreement” means that certain credit agreement, dated as of
the Closing Date by and among the Issuer, the Investor and the other borrowers
and lenders party thereto.
          “Current Market Price” as in effect on any day, means the average of
the daily market prices of the Common Stock on the the Nasdaq Stock Markets
National Market System (“NMS”) for the period of 30 consecutive trading days
ending three trading days preceding such date or, if the Common Stock is not
listed on the NMS, then the last sale price on such day on the principal
domestic stock exchange on which such Common Stock is then listed or admitted to
trading, or, if no sale takes place on such day on such exchange, the average of
the closing bid and asked prices on such day as officially quoted on such
exchange, or, if the Common Stock is not then listed or admitted to trading on
any domestic stock exchange, then the Current Market Price for each such trading
day shall be the average of the reported closing bid and asked price quotations
on such day in the over-the-counter market, as reported by NASDAQ, or, if not so
reported, as furnished by the National Quotation Bureau, Inc., or if such firm
at the time is not engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business as selected by the
Issuer, or if there is no such firm, as furnished by any member of the National
Association of Securities Dealers, Inc. selected by the Issuer with the written
approval of the Requisite Holders (which approval shall not be unreasonably
withheld). If at any time such Common Stock is not listed on any domestic
exchange or quoted in the domestic over-the-counter market, the Current Market
Price shall be deemed to be the fair market value per share of such Common Stock
as determined in good faith by the Board (by determination of its disinterested
members) by notice to the Holder. If within twenty days after receipt of such
notice the Holder notifies the Board in writing to its disagreement as to such
fair market value as determined by the Board, the Current Market Price shall be
the fair market value per share of such Common Stock as determined by an
Independent Appraiser mutually selected by the Issuer and the Holder, which
selection shall be made by the Issuer and the Holder within seven days of
receipt of such objection by the Issuer. The determination of fair market value
by such Independent Appraiser shall be made within 30 days of such appraiser’s
engagement by Issuer. The fees and expenses of such Independent Appraiser shall
be paid by the Issuer if such fair market value as so determined is more than 5%
greater (if the Holder’s objection was that such determination was too low) or
5% lower (if the Requisite Holder’s objection was that such determination was
too high), in each case, than the amount thereof as determined by the Board, but
shall otherwise be paid by the Holder. The determination of fair market value by
such Independent Appraiser shall be based upon the fair market value of the
Issuer determined on a going concern basis as between a willing buyer and a
willing seller and taking into account all relevant factors determinative of
value (but without taking into account any discount for minority or non-control
ownership positions), and shall be final and binding on all parties. In
determining the fair market value of any shares of Common Stock, no
consideration shall be given to any restrictions on transfer of the Common Stock
imposed by agreement or by federal or state securities laws, or to the existence
or absence of, or any limitations on, voting rights, or to minority or
non-control ownership positions.
          “Exchange Act” means the Securities Exchange Act of 1934, as amended,
or any similar federal statute at the time in effect.

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          “Holders” mean the Persons who shall from time to time own any
Warrant. The term “Holder” means one of the Holders.
          “Independent Appraiser” means a nationally recognized investment
banking firm or other nationally recognized firm, in each case, that is
regularly engaged in the business of appraising the Capital Stock or assets of
corporations or other entities as going concerns, and which is not affiliated
with either the Issuer or the Holder.
          “Issuer” has the meaning specified in the first paragraph hereof.
          “Person” means an individual, a corporation, a partnership, a trust, a
limited liability company, an unincorporated organization or a government
organization or an agency or political subdivision thereof.
          “Requisite Holders” means at any time the Holders of Warrants (other
than the Issuer or any Subsidiary thereof) exercisable for a majority of the
shares of Warrant Stock issuable under the Warrants at the time outstanding.
          “Securities” means any debt or equity securities of the Issuer,
whether now or hereafter authorized, any instrument convertible into or
exchangeable for Securities or a Security, and any option, warrant or other
right to purchase or acquire any Security. “Security” means one of the
Securities.
          “Securities Act” means the Securities Act of 1933, as amended, or any
similar federal statute then in effect.
          “Subsidiary” means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the Issuer or
by one or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.
          “Voting Stock”, any class or classes (however designated) of capital
stock having ordinary voting power for the election of a majority of the members
of the Board (or other governing body) of the corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.
          “Warrants” means this Warrant and any other warrants of like tenor
issued in substitution or exchange for any thereof pursuant to the provisions of
Section 2(c) or 2(d) hereof or of any of such other Warrants.
          “Warrant Price” means the exercise price per share of Common Stock
specified in the first paragraph of this Warrant and such other exercise prices
as shall result from the adjustments specified in Section 4 hereof.
          “Warrant Share Number” means at any time the aggregate number of
shares of Warrant Stock which may at such time be purchased upon exercise of
this Warrant, after giving effect to all prior adjustments to such number made
or required to be made under the terms hereof.

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          “Warrant Stock” means Common Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants.
          8. Information. The Issuer shall deliver to the Holder hereof a copy
of the Issuer’s annual report and any other information mailed to stockholders
as if the Holder were a stockholder.
          9. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Requisite Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised, change the manner
of payment of the Warrant Price or modify any provision of this Section 9
without the consent of the Holder of this Warrant.
          10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
CONFLICTS OF LAW PRINCIPLES THEREOF.
          11. Notices. All notices and other communications provided for
hereunder shall be in writing and delivered by hand or sent by first class
registered mail, return receipt requested, or sent by telecopy (with such
telecopy to be confirmed promptly in writing sent by first class registered
mail, return receipt requested), and if to the Holder of this Warrant or of
Warrant Stock issued pursuant hereto, addressed to such Holder at its last known
address or telecopy number appearing on the books of the Issuer maintained for
such purposes, and if to the Issuer, addressed to:
Zila, Inc.
5227 North 7th Street
Phoenix, AZ 85014-2800
or to such other address or addresses or telecopy number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. All such communications shall be deemed to have been given or
made when so delivered by hand, upon actual receipt if sent by telecopy, or
three business days after being so mailed.
          12. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise. Time is of the essence in
this Warrant.
          13. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock.

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          14. No Voting Rights. This Warrant does not confer upon the Holder any
right to vote on, consent to or otherwise participate with respect to matters to
a vote of the stockholders of the Issuer or to receive notice as a stockholder
of the Issuer, as such, in respect of any matters whatsoever, nor any other
rights or liabilities as a stockholder, prior to the exercise hereof; this
Warrant does, however, require certain notices to the Holder as set forth
herein.
          15. Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
          16. Integration. This Warrant replaces all prior agreements,
supersedes all prior negotiations and constitutes the entire agreement of the
parties with respect to the transactions contemplated herein.
          17. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[SIGNATURE PAGE FOLLOWS]

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     In witness whereof, this Warrant has been duly executed as of the date of
this Warrant hereinabove set forth.

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

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EXERCISE FORM
[                                         ]
     The undersigned hereby irrevocably elects to exercise the right to purchase
represented by the attached Warrant for, and to purchase thereunder,
                     shares of Common Stock, par value $.001 per share (the
“Common Stock”), of Zila, Inc. (the “Issuer”), as provided for therein, and
tenders herewith payment of the Warrant Price in full in accordance with the
terms of the attached Warrant.
     Please issue a certificate or certificates for such shares of Common Stock
in the following name or names and denominations:
     If said number of shares of Common Stock shall not be all the shares of
Common Stock issuable upon exercise of the attached Warrant, a new Warrant is to
be issued in the name of the undersigned for the balance remaining of such
shares of Common Stock less any fraction of a share of Common Stock paid in
cash.

                     
 
                   
Dated:
          Signature        
 
                   
 
          Address        
 
                   
 
                   
 
                   

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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto _____ the within Warrant and all rights
evidenced thereby and does irrevocably constitute and appoint _____, attorney,
to transfer the said Warrant on the books of the within named corporation.

                     
 
                   
Dated:
          Signature        
 
                   
 
          Address        
 
                   
 
                   
 
                   

PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto _____ the right to purchase ____shares of the
Common Stock issuable upon exercise of the attached Warrant, and does
irrevocably constitute and appoint _____, attorney, to transfer that part of the
said Warrant on the books of the within named corporation.

                     
 
                   
Dated:
          Signature        
 
                   
 
          Address        
 
                   
 
                   
 
                   

FOR USE BY THE ISSUER ONLY:
This Warrant No. W-___ cancelled (or transferred or exchanged) this ___ day of
____, 20__, shares of Common Stock issued therefor in the name of ____, Warrant
No. W-___ issued for ___ shares of Common Stock in the name of________________

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