exv10w1



 





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.



 









 





     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








 




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.




 









 




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.