Document:

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Exhibit 4.2

REGISTRATION RIGHTS AGREEMENT

          This Registration Rights Agreement (the “Agreement”) is made and entered into as of this
13th day of August, 2007, by and among Zila, Inc., a Delaware corporation (the
“Company”), Visium Balanced Offshore Fund, Ltd., Visium Balanced Fund, LP, Visium Long Bias
Offshore Fund, Ltd. and Visium Long Bias Fund, LP (the “Visium Entities”) and Atlas Master Fund,
Ltd. (“Atlas” and, collectively with the Visium Entities, and any Affiliate or permitted transferee
of any of them, the “Investors”).

          A. The Company entered into a Purchase Agreement, dated as of November 13, 2006 (the “Note
Purchase Agreement”), with the investors party thereto pursuant to which, among other things, the
Company issued (i) an aggregate of 9,100,000 shares of the Company’s common stock, par value $0.001
per share (the “Common Stock”), (ii) $12,075,000.25 in aggregate principal amount of the Company’s
12% Convertible Notes (the “Convertible Notes”) convertible into shares of the Company’s common
stock, par value $0.001 per share (the “Common Stock”), at a conversion price of $1.75, (iii)
Warrants (the “Initial Warrants”) to acquire an aggregate of up to 5,403,000 shares of Common Stock
at an exercise price of $2.21 per share and (iv) Warrants (the “Additional Warrants”) to acquire an
aggregate of up to 3,105,000 shares of Common Stock at an exercise price of $2.21 per share.

          B. Pursuant to the terms of the Note Purchase Agreement, the Visium Entities acquired (i)
$5,000,000.25 in aggregate principal amount of the Convertible Notes, (ii) Initial Warrants to
acquire an aggregate of 428,569 shares of Common Stock and (iii) Additional Warrants to acquire an
aggregate of 1,285,712 shares of Common Stock.

          C. In connection with the Note Purchase Agreement, the Company entered into a Registration
Rights Agreement, dated as of November 28, 2006 (the “Note Registration Rights Agreement”),
pursuant to which, among other things, the Company agreed to provide certain registration rights
with respect to the shares of Common Stock issuable upon conversion of the Convertible Notes (the
“Note Conversion Shares”) and the shares of Common Stock issuable upon the exercise of the Initial
Warrants and the Additional Warrants (the “Note Warrant Shares”) with the Securities and Exchange
Commission (the “SEC”) for resale pursuant to the Securities Act of 1933, as amended (the “1933
Act”).

          D. The Company entered into a Purchase Agreement, dated as of November 13, 2006 (the “Secured
Note Purchase Agreement”), with the investors party thereto pursuant to which, among other things,
the Company issued (i) an aggregate of $12,000,001.20 in principal amount of the Company’s 6%
Senior Secured Convertible Notes (the “Secured Notes”) convertible into shares of Common Stock at a
conversion price of $2.20 and (ii) Warrants (the “Secured Note Warrants”) to acquire an aggregate
of up to 1,909,089 shares of Common Stock at an exercise price of $2.21 per share.

          E. Pursuant to the terms of the Secured Note Purchase Agreement, (A) the Visium Entities
acquired (i) $7,500,000.20 in aggregate principal amount of the Secured Notes and (ii) Secured Note
Warrants to acquire an aggregate of 1,193,180 shares of Common Stock

 

 

and (B) Atlas acquired (i) $4,500,001 in aggregate principal amount of the Secured Notes and
(ii) Secured Note Warrants to acquire an aggregate of 715,909 shares of Common Stock.

          F. In connection with the Secured Note Purchase Agreement, the Company entered into a
Registration Rights Agreement, dated as of November 28, 2006 (the “Secured Note Registration Rights
Agreement”), pursuant to which, among other things, the Company agreed to provide certain
registration rights with respect to the shares of Common Stock issuable upon conversion of the
Secured Notes (the “Secured Note Conversion Shares”) and the shares of Common Stock issuable upon
the exercise of the Secured Note Warrants (the “Secured Note Warrant Shares”) with the SEC for
resale pursuant to the 1933.

          G. The Company, the Investors and Balyasny Asset Management, L.P. have entered into an
Amendment Agreement (the “Amendment Agreement”) pursuant to which, among other things, (i) the
Company and the Investors have agreed to amend and restate the Secured Notes (as so amended and
restated, the “Amended and Restated Notes”) to provide, among other things, for the issuance of
shares of Common Stock in payment of interest on the Amended and Restated Notes (the “PIK Shares”)
and (ii) the Company and the Investors have agreed to terminate the Note Registration Rights
Agreement and the Secured Note Registration Rights Agreement with respect to the Investors and to
enter into this Registration Rights Agreement pursuant to which the Company has agreed to provide
certain registration rights with respect to the shares of Common Stock held by or issuable to the
Investors as specified in Exhibit A attached hereto (the “Investor Shares”). Capitalized
terms used herein have the respective meanings ascribed thereto in the Amendment Agreement unless
otherwise defined herein.

     The parties hereby agree as follows:

     1. Certain Definitions.

     As used in this Agreement, the following terms shall have the following meanings:

     “Affiliate” means, with respect to any person, any other person which directly or
indirectly controls, is controlled by, or is under common control with, such person.

     “Business Day” means a day, other than a Saturday or Sunday, on which banks in New
York City are open for the general transaction of business.

     “Common Stock” shall mean the Company’s common stock, par value $0.001 per share, and
any securities into which such shares may hereinafter be reclassified.

     “Prospectus” shall mean (i) the prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective amendments and all material
incorporated by reference in such prospectus, and (ii) any “free writing prospectus” as defined in
Rule 163 under the 1933 Act.

     “Register,” “registered” and “registration” refer to a registration
made by preparing and

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filing a Registration Statement or similar document in compliance with the 1933 Act (as
defined below), and the declaration or ordering of effectiveness of such Registration Statement or
document.

     “Registrable Securities” shall mean (i) the Investor Shares, (ii) the PIK Shares and
(iii) any other securities issued or issuable with respect to or in exchange for Registrable
Securities; provided, that, a security shall cease to be a Registrable Security upon (A) sale
pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such security becoming
eligible for sale by the Investors pursuant to

Rule 144(k).

     “Registration Statement” shall mean any registration statement of the Company filed
under the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the
provisions of this Agreement, amendments and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated by reference in such
Registration Statement.

     “Required Investors” means the Investors holding a majority of the Registrable
Securities.

     “SF Shares” means the shares of Common Stock issued or issuable to SF Capital pursuant
to the transactions described in the recitals to this Agreement.

     “Trading Day” means (i) if the relevant stock or security is listed or admitted for
trading on The New York Stock Exchange, Inc., the Nasdaq Global Market, the Nasdaq Capital Market
or any other national securities exchange, a day on which such exchange is open for business; (ii)
if the relevant stock or security is quoted on a system of automated dissemination of quotations of
securities prices, a day on which trades may be effected through such system; or (iii) if the
relevant stock or security is not listed or admitted for trading on any national securities
exchange or quoted on any system of automated dissemination of quotation of securities prices, a
day on which the relevant stock or security is traded in a regular way in the over-the-counter
market and for which a closing bid and a closing asked price for such stock or security are
available, shall mean a day, other than a Saturday or Sunday, on which The New York Stock Exchange,
Inc. is open for trading.

     “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

     2. Registration.

          (a) Registration Statements.

               (i)

                    (A) Promptly following the Restriction Termination Date, and in no event later than thirty
(30) days after the Restriction Termination Date (the “Initial Filing Deadline”), the Company shall
prepare and file with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then
available to the Company, on such form of registration statement

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as is then available to effect a registration for resale of the Investor Shares), covering the
resale of the Investor Shares.

                    (B) Promptly following the filing of the Company’s Annual Report on Form 10-K (each, a “10-K”)
(the “Filing Date”) in each year commencing with the filing of 10-K for the fiscal year ending July
31, 2008 and, in any event, no later than October 31 of each such year (the “Annual Filing
Deadline”), the Company shall prepare and file with the SEC a Registration Statement on Form S-3
(or, if Form S-3 is not then available to the Company, on such form of registration statement as is
then available to effect a registration for resale of the Investor Shares), covering the resale of
any PIK Shares issued by the Company which have not previously been registered by the Company.
Notwithstanding the provisions of this Section 2(a)(i)(B), the Company shall not be obligated to
file a registration statement in any year pursuant to this Section 2(a)(i)(B) unless the Market
Price (as defined in the Amended and Restated Notes) of the PIK Shares which have been issued but
not previously registered by the Company is at least equal to $250,000 as of the earlier of the
date the Registration Statement is filed by the Company or the Annual Filing Deadline for such
Registration Statement.

                    (C) Subject to any SEC comments, each Registration Statement filed pursuant to Section 2(a)(i)
shall include the plan of distribution attached hereto as Exhibit B; provided however, that
no Investor shall be named as an “underwriter” without such Investors prior written consent. Each
such Registration Statement also shall cover, to the extent allowable under the 1933 Act and the
rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares
of Common Stock resulting from stock splits, stock dividends or similar transactions with respect
to the Registrable Securities to which such Registration Statement relates. Such Registration
Statement shall not include any shares of Common Stock or other securities for the account of any
other holder without the prior written consent of the Required Investors, except that the Company
can include the SF Shares. Each Registration Statement (and each amendment or supplement thereto,
and each request for acceleration of effectiveness thereof) shall be provided in accordance with
Section 3(c) to the Investors and/or their counsel prior to its filing or other submission. If a
Registration Statement covering the Investor Shares or PIK shares, as applicable, is not filed with
the SEC on or prior to the Initial Filing Deadline or the Annual Filing Deadline, as applicable,
for such Registrable Securities (the “Applicable Effectiveness Deadline”), the Company will make
pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal
to 1.0% of the Market Price (as defined in the Amended and Restated Notes) of the Registrable
Securities included in the applicable Registration Statement as of the Applicable Effectiveness
Deadline (assuming such Registrable Securities were issued and outstanding as of such date) for
each 30-day period or pro rata for any portion thereof following the Initial Filing Deadline or the
Annual Filing Deadline, as applicable, for which the applicable Registration Statement is not filed
with respect to the applicable Registrable Securities. Such payments shall constitute the
Investors’ exclusive monetary remedy for such events, but shall not affect the right of the
Investors to seek injunctive relief. Such payments shall be made to each Investor in cash.

          (ii) Additional Registrable Securities. Upon the written demand of any Investor and
upon the occurrence of any event (other than an event covered by Rule 416 under the 1933 Act) such
that additional shares of Common Stock become issuable to the Investors pursuant to the terms of
the transactions described in the recitals to this Agreement (the

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“Additional Shares”), following the Restriction Termination Date, the Company shall prepare
and file with the SEC one or more Registration Statements on Form S-3 covering the resale of the
Additional Shares or amend the relevant Registration Statement filed pursuant to clause (i) above,
if such Registration Statement has not previously been declared effective (or, if Form S-3 is not
then available to the Company, on such form of registration statement as is then available to
effect a registration for resale of the Additional Shares, but only to the extent the Additional
Shares are not at the time covered by an effective Registration Statement. Such Registration
Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated
thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock
resulting from stock splits, stock dividends or similar transactions with respect to the Additional
Shares. Such Registration Statement shall not include any shares of Common Stock or other
securities for the account of any other Person without the prior written consent of the Required
Investors, except the Company may include any shares issuable to any other Person in the
transactions giving rise to the issuance or potential issuance of any Additional Shares. Subject
to any SEC comments, each Registration Statement filed pursuant to Section 2(a)(ii) shall include
the plan of distribution attached hereto as Exhibit B; provided however, that no Investor
shall be named as an “underwriter” without such Investors prior written consent. The Registration
Statement (and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the Investors and/or
their counsel prior to its filing or other submission. If a Registration Statement covering the
Additional Shares is required to be filed under this Section 2(a)(ii) and is not filed with the SEC
within thirty (30) days of the request of any Investor made after the Restriction Termination Date
or upon the occurrence of any of the events specified in this Section 2(a)(ii) (but in any event
not prior to the Restriction Termination Date), the Company will make pro rata payments to each
Investor, as liquidated damages and not as a penalty, in an amount equal to 1.0% of the Market
Price (as defined in the Amended and Restated Notes) of the Registrable Securities to be included
in the applicable Registration Statement as of the date such Registration Statement is required to
be filed (assuming such Registrable Securities were issued and outstanding as of such date) for
each 30-day period or pro rata for any portion thereof following the date by which such
Registration Statement should have been filed for which no Registration Statement is filed with
respect to the Additional Shares. Such payments shall constitute the Investors’ exclusive monetary
remedy for such events, but shall not affect the right of the Investors to seek injunctive relief.
Such payments shall be made to each Investor in cash.

     (b) Expenses. The Company will pay all expenses associated with each registration,
including filing and printing fees, the Company’s counsel and accounting fees and expenses, costs
associated with clearing the Registrable Securities for sale under applicable state securities
laws, listing fees, fees and expenses of one counsel to the Investors and the Investors’ reasonable
expenses in connection with the registration, but excluding discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities industry professionals with
respect to the Registrable Securities being sold.

     (c) Effectiveness.

          (i) The Company shall use best efforts to have any Registration Statement declared effective
as soon as practicable. The Company shall notify the Investors by facsimile or e-mail as promptly
as practicable, and in any event, within twenty-four (24) hours,

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after (A) any Registration Statement is declared effective and (B) the filing of any related
Prospectus under Rule 424(b), at which time the Company shall also provide the Investors with
copies of such related Prospectus. If (A)(w) a Registration Statement covering the resale of the
Investor Shares is not declared effective by the SEC prior to the earlier of (i) five (5) Business
Days after the SEC shall have informed the Company that no review of the Registration Statement
will be made or that the SEC has no further comments on the Registration Statement or (ii) the
90th day after the Restriction Termination Date (the 120th day after the
Restriction Termination Date if the Registration Statement is reviewed by the SEC), (x) a
Registration Statement covering the resale of any PIK Shares is not declared effective by the SEC
prior to the earlier of (i) five (5) Business Days after the SEC shall have informed the Company
that no review of the Registration Statement will be made or that the SEC has no further comments
on the Registration Statement or (ii) the 60th day after the applicable Annual Filing
Deadline (the 90th day after the Applicable Filing Deadline if the Registration
Statement is reviewed by the SEC) or (y) a Registration Statement covering Additional Shares is not
declared effective by the SEC within ninety (90) days following the time such Registration
Statement was required to be filed pursuant to Section 2(a)(ii) (the 120th day after
such date if the Registration Statement is reviewed by the SEC), or (B) after a Registration
Statement has been declared effective by the SEC, sales cannot be made pursuant to such
Registration Statement for any reason (including without limitation by reason of a stop order, or
the Company’s failure to update the Registration Statement), but excluding the inability of any
Investor to sell the Registrable Securities covered thereby due to market conditions and except as
excused pursuant to subparagraph (ii) below, then the Company will make pro rata payments to each
Investor, as liquidated damages and not as a penalty, in an amount equal to (i) 1.0% of the Market
Price (as defined in the Amended and Restated Notes) of the Registrable Securities included in the
applicable Registration Statement as of the date such Registration Statement is required to be
declared effective (assuming such Registrable Securities were issued and outstanding as of such
date) for each 30-day period or pro rata for any portion thereof following the date by which such
Registration Statement should have been effective (the “Blackout Period”) and (ii) 1.0% of the
Market Price (as defined in the Amended and Restated Notes) of the Registrable Securities included
in the applicable Registration Statement as of the date the Blackout Period begins (assuming such
Registrable Securities were issued and outstanding as of such date) for each 30-day period or pro
rata for any portion thereof that sales could not be made thereunder as provided in clause (B)
above. Such payments shall constitute the Investors’ exclusive monetary remedy for such events,
but shall not affect the right of the Investors to seek injunctive relief. The amounts payable as
liquidated damages pursuant to this paragraph shall be paid monthly within three (3) Business Days
of the last day of each month following the commencement of the Blackout Period until the
termination of the Blackout Period.

          (ii) For not more than twenty (20) consecutive days or for a total of not more than forty-five
(45) days in any twelve (12) month period, the Company may delay the disclosure of material
non-public information concerning the Company, by suspending the use of any Prospectus included in
any registration contemplated by this Section containing such information, the disclosure of which
at the time is not, in the good faith opinion of the Company, in the best interests of the Company
(an “Allowed Delay”); provided, that the Company shall promptly (a) notify the Investors in writing
of the existence of (but in no event, without the prior written consent of an Investor, shall the
Company disclose to such Investor any of the facts or circumstances regarding) material non-public
information giving rise to an Allowed Delay, (b)

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advise the Investors in writing to cease all sales under the Registration Statement until the
end of the Allowed Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay
as promptly as practicable.

          (d) Limitation on Liquidated Damages. Notwithstanding the other provisions of this
Section 2, in no event shall the Company be liable for liquidated damages in excess of an aggregate
of $3,000,000.

     3. Company Obligations. The Company will use commercially reasonable efforts to
effect the registration of the Registrable Securities in accordance with the terms hereof, and
pursuant thereto the Company will, as expeditiously as practicable:

          (a) use commercially reasonable efforts to cause each such Registration Statement to become
effective after 4:00 p.m. E.S.T. (the date the Registration Statement is declared effective shall
be referred to as the “Effective Date”) and to remain continuously effective for a period that will
terminate upon the earlier of (i) the date on which all Registrable Securities covered by such
Registration Statement as amended from time to time, have been sold, and (ii) the date on which all
Registrable Securities covered by such Registration Statement may be sold pursuant to Rule 144(k)
(the “Effectiveness Period”) and advise the Investors in writing when the Effectiveness Period has
expired;

          (b) prepare and file with the SEC such amendments and post-effective amendments to the
Registration Statement and the Prospectus as may be necessary to keep the Registration Statement
effective for the Effectiveness Period and to comply with the provisions of the 1933 Act and the
1934 Act with respect to the distribution of all of the Registrable Securities covered thereby;

          (c) provide copies to and permit counsel designated by the Investors, if any, in the selling
securityholder questionnaire attached hereto as Exhibit C (the “Selling Securityholder
Questionnaire”) to review each Registration Statement and all amendments and supplements thereto no
fewer than seven (7) days prior to their filing with the SEC and not file any document to which
such counsel reasonably objects;

          (d) furnish to the Investors and their legal counsel designated by the Investors, if any, in
the Selling Securityholder Questionnaire (i) promptly after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company (but not later than two (2) Business
Days after the filing date, receipt date or sending date, as the case may be) one (1) copy of any
Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and
each amendment or supplement thereto, and each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC,
in each case relating to such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment), and (ii) such number
of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements
thereto and such other documents as each Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor that are covered by the related
Registration Statement;

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          (e) use commercially reasonable efforts to (i) prevent the issuance of any stop order or other
suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such
order at the earliest possible moment;

          (f) prior to any public offering of Registrable Securities, use commercially reasonable
efforts to register or qualify or cooperate with the Investors and their counsel designated by the
Investors, if any, in the Selling Securityholder Questionnaire in connection with the registration
or qualification of such Registrable Securities for offer and sale under the securities or blue sky
laws of such jurisdictions requested by the Investors and do any and all other commercially
reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions
of the Registrable Securities covered by the Registration Statement; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto to (i) qualify to
do business in any jurisdiction where it would not otherwise be required to qualify but for this
Section 3(f), (ii) subject itself to general taxation in any jurisdiction where it would not
otherwise be so subject but for this Section 3(f), or (iii) file a general consent to service of
process in any such jurisdiction;

          (g) use commercially reasonable efforts to cause all Registrable Securities covered by a
Registration Statement to be listed on each securities exchange, interdealer quotation system or
other market on which similar securities issued by the Company are then listed;

          (h) immediately notify the Investors, at any time prior to the end of the Effectiveness
Period, upon discovery that, or upon the happening of any event as a result of which, the
Prospectus includes an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not misleading in light
of the circumstances then existing, and promptly prepare, file with the SEC and furnish to such
holder a supplement to or an amendment of such Prospectus as may be necessary so that such
Prospectus shall not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and

          (i) otherwise use commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act, including, without limitation, Rule 172
under the 1933 Act, file any final Prospectus, including any supplement or amendment thereof, with
the SEC pursuant to Rule 424 under the 1933 Act prior to 9:30 a.m. E.S.T. on the Trading Day
immediately following the Effective Date, promptly inform the Investors in writing if, at any time
during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172
and, as a result thereof, the Investors are required to deliver a Prospectus in connection with any
disposition of Registrable Securities and take such other actions as may be reasonably necessary to
facilitate the registration of the Registrable Securities hereunder; and make available to its
security holders, as soon as reasonably practicable, but not later than the Availability Date (as
defined below), an earnings statement covering a period of at least twelve (12) months, beginning
after the effective date of each Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the
purpose of this subsection 3(i), “Availability Date” means the 45th day following the end of the
fourth fiscal quarter that

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includes the effective date of such Registration Statement, except that, if such fourth fiscal
quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the 90th day
after the end of such fourth fiscal quarter).

          (j) with a view to making available to the Investors the benefits of Rule 144 (or its
successor rule) and any other rule or regulation of the SEC that may at any time permit the
Investors to sell shares of Common Stock to the public without registration, the Company covenants
and agrees to: (i) make and keep public information available, as those terms are understood and
defined in Rule 144, until the earlier of (A) six months after such date as all of the Registrable
Securities may be resold pursuant to Rule 144(k) or any other rule of similar effect or (B) such
date as all of the Registrable Securities shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under the 1934 Act; and (iii)
furnish to each Investor upon request, as long as such Investor owns any Registrable Securities,
(A) a written statement by the Company that it has complied with the reporting requirements of the
1934 Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on
Form 10-Q, and (C) such other information as may be reasonably requested in order to avail such
Investor of any rule or regulation of the SEC that permits the selling of any such Registrable
Securities without registration.

          (k) In the event that the amount of Registrable Securities which the Company is able to
register is subject to restriction pursuant to Section 2(e), upon the request of any Investor
holding Cut Back Shares, the Company will use its commercially reasonable best efforts to assist
the Investor in effecting a disposition to a third party of such Cut Back Shares or the securities
held by such Investor which are convertible into, exercisable for or exchangeable into Cut Back
Shares, provided such disposition complies with applicable securities law. The Company will
cooperate in any such disposition or proposed disposition by such Investor that complies with
applicable securities laws.

     4. Due Diligence Review; Information. The Company shall make available, during normal
business hours, for inspection and review by the Investors, advisors to and representatives of the
Investors (who may or may not be affiliated with the Investors and who are reasonably acceptable to
the Company), all financial and other records, all SEC Filings (as defined in the Purchase
Agreement) and other filings with the SEC, and all other corporate documents and properties of the
Company as may be reasonably necessary for the purpose of such review, and cause the Company’s
officers, directors and employees, within a reasonable time period, to supply all such information
reasonably requested by the Investors or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them), prior to and from time
to time after the filing and effectiveness of the Registration Statement for the sole purpose of
enabling the Investors and such representatives, advisors and underwriters and their respective
accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company
and the accuracy of such Registration Statement.

          The Company shall not disclose material nonpublic information to the Investors, or to advisors
to or representatives of the Investors, unless prior to disclosure of such information the Company
identifies such information as being material nonpublic information and provides

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the Investors, such advisors and representatives with the opportunity to accept or refuse to
accept such material nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the Company with respect
thereto.

     5. Obligations of the Investors.

          (a) Each Investor has furnished to the Company a Selling Securityholder Questionnaire and
shall furnish in writing to the Company such additional information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such registration as the
Company may reasonably request. At least five (5) Business Days prior to the first anticipated
filing date of any Registration Statement, the Company shall notify each Investor of the
information the Company requires from such Investor, to the extent not included in the Selling
Securityholder Questionnaire, if such Investor elects to have any of the Registrable Securities
included in the Registration Statement. An Investor shall provide such information to the Company
at least two (2) Business Days prior to the first anticipated filing date of such Registration
Statement if such Investor elects to have any of the Registrable Securities included in the
Registration Statement.

          (b) Each Investor, by its acceptance of the Registrable Securities agrees to cooperate with
the Company as reasonably requested by the Company in connection with the preparation and filing of
a Registration Statement hereunder, unless such Investor has notified the Company in writing of its
election to exclude all of its Registrable Securities from such Registration Statement.

          (c) Each Investor agrees that, upon receipt of any notice from the Company of either (i) the
commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the happening of an event
pursuant to Section 3(h) hereof, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such Registrable Securities,
until the Investor is advised by the Company that such dispositions may again be made.

     6. Indemnification.

          (a) Indemnification by the Company. The Company will indemnify and hold harmless each
Investor and its officers, directors, members, employees and agents, successors and assigns, and
each other person, if any, who controls such Investor within the meaning of the 1933 Act, against
any losses, claims, damages or liabilities, joint or several, to which they may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon: (i) any untrue statement or omission or alleged
untrue statement or omission of any material fact in any Registration Statement, any preliminary
Prospectus or final Prospectus, or any amendment or supplement thereof required to be stated
therein or necessary to make the statements therein not misleading; (ii) any blue sky application
or other document executed by the Company specifically for that purpose or based upon written
information furnished by the Company filed in any state or other

10

 

jurisdiction in order to qualify any or all of the Registrable Securities under the securities
laws thereof (any such application, document or information herein called a “Blue Sky
Application”); (iii) any violation by the Company or its agents of any rule or regulation
promulgated under the 1933 Act applicable to the Company or its agents and relating to action or
inaction required of the Company in connection with such registration; or (iv) any failure to
register or qualify the Registrable Securities included in any such Registration in any state where
the Company or its agents has affirmatively undertaken or agreed in writing that the Company will
undertake such registration or qualification on an Investor’s behalf and will reimburse such
Investor, and each such officer, director or member and each such controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon (i) such Investor’s failure to comply with the prospectus
delivery requirements of the Securities Act at any time when the Company does not meet the
conditions for use of Rule 172, has advised the Investor in writing that the Company does not meet
such conditions and that therefore the Investor is required to deliver a Prospectus in connection
with any sale or other disposition of Registrable Securities and has provided such Investor with a
current Prospectus for such use, (ii) an untrue statement or alleged untrue statement or omission
or alleged omission so made in conformity with information furnished by such Investor or any such
controlling person in writing specifically for use in such Registration Statement or Prospectus or
(iii) the use by an Investor of an outdated or defective Prospectus after the Company has notified
the Investor that such Prospectus is outdated or defective and the use of a corrected or updated
Prospectus would have avoided such losses, claims, damages, liabilities or expenses.

          (b) Indemnification by the Investors. Each Investor agrees, severally but not
jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its
directors, officers, employees, stockholders and each person who controls the Company (within the
meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including
reasonable attorney fees) resulting from (i) such Investor’s failure to comply with the prospectus
delivery requirements of the Securities Act at any time when the Company does not meet the
conditions for use of Rule 172, has advised the Investor in writing that the Company does not meet
such conditions and that therefore the Investor is required to deliver a Prospectus in connection
with any sale or other disposition of Registrable Securities and has provided such Investor with a
current Prospectus for such use, (ii) the use by an Investor of an outdated or defective Prospectus
after the Company has notified the Investor that such Prospectus is outdated or defective and the
use of a corrected or updated Prospectus would have avoided such losses, claims, damages,
liabilities or expenses, and (iii) any untrue statement of a material fact or any omission of a
material fact required to be stated in the Registration Statement or Prospectus or preliminary
Prospectus or amendment or supplement thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent that such untrue statement or omission is
contained in any information furnished in writing by such Investor to the Company specifically for
inclusion in such Registration Statement or Prospectus or amendment or supplement thereto. In no
event shall the liability of an Investor be greater in amount than the dollar amount of the
proceeds (net of all expense paid by such Investor in connection with any claim relating to this
Section 6 and the amount of any damages such Investor has otherwise been required to pay by reason
of such untrue statement or omission) received by such Investor upon

11

 

the sale of the Registrable Securities included in the Registration Statement giving rise to
such indemnification obligation.

          (c) Conduct of Indemnification Proceedings. Any person entitled to indemnification
hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses,
or (b) the indemnifying party shall have failed to assume the defense of such claim and employ
counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such
person, based upon written advice of its counsel, a conflict of interest exists between such person
and the indemnifying party with respect to such claims (in which case, if the person notifies the
indemnifying party in writing that such person elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that the failure of
any indemnified party to give notice as provided herein shall not relieve the indemnifying party of
its obligations hereunder, except to the extent that such failure to give notice shall materially
adversely affect the indemnifying party in the defense of any such claim or litigation. It is
understood that the indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any
time for all such indemnified parties. No indemnifying party will, except with the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or litigation.

          (d) Contribution. If for any reason the indemnification provided for in the preceding
paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless,
other than as expressly specified therein, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of the indemnified
party and the indemnifying party, as well as any other relevant equitable considerations. No
person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act
shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation.
In no event shall the contribution obligation of a holder of Registrable Securities be greater in
amount than the dollar amount of the proceeds (net of all expenses paid by such holder in
connection with any claim relating to this Section 6 and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission) received by it upon the sale of the Registrable Securities giving rise to such
contribution obligation.

     7. Miscellaneous.

          (a) Amendments and Waivers. This Agreement may be amended only by a writing signed by
the Company and the Required Investors. The Company may take any action

12

 

herein prohibited, or omit to perform any act herein required to be performed by it, only if
the Company shall have obtained the written consent to such amendment, action or omission to act,
of the Required Investors.

          (b) Notices. All notices and other communications provided for or permitted hereunder
shall be made as set forth in Section 9.4 of the Purchase Agreement.

          (c) Assignments and Transfers by Investors. The provisions of this Agreement shall be
binding upon and inure to the benefit of the Investors and their respective successors and assigns.
An Investor may transfer or assign, in whole or from time to time in part, to one or more persons
its rights hereunder in connection with the transfer of Registrable Securities by such Investor to
such person, provided that such Investor complies with all laws applicable thereto and provides
written notice of assignment to the Company promptly after such assignment is effected.

          (d) Assignments and Transfers by the Company. This Agreement may not be assigned by
the Company (whether by operation of law or otherwise) without the prior written consent of the
Required Investors, provided, however, that the Company may assign its rights and delegate its
duties hereunder to any surviving or successor corporation in connection with a merger or
consolidation of the Company with another corporation, or a sale, transfer or other disposition of
all or substantially all of the Company’s assets to another corporation, without the prior written
consent of the Required Investors, after notice duly given by the Company to each Investor.

          (e) Benefits of the Agreement. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective permitted successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as expressly provided in
this Agreement.

          (f) Counterparts; Faxes. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument. This Agreement may also be executed via facsimile, which shall be deemed an
original.

          (g) Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.

          (h) Severability. Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions hereof but shall be
interpreted as if it were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To the extent

13

 

permitted by applicable law, the parties hereby waive any provision of law which renders any
provisions hereof prohibited or unenforceable in any respect.

          (i) Further Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be required to carry
out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein
contained.

          (j) Entire Agreement. This Agreement is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings between the parties with respect to
such subject matter.

          (k) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the State of New York
without regard to the choice of law principles thereof. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York located in New York
County and the United States District Court for the Southern District of New York for the purpose
of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.

14

 

          IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized
officers to execute this Agreement as of the date first above written.

	 	 	 	 	 	 	 
	The Company:	 	ZILA, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gary V. Klinefelter	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Gary V. Klinefelter	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 

15

 

	 	 	 	 	 	 	 
	 	 	VISIUM BALANCED OFFSHORE FUND, LTD.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark Gottlieb	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mark Gottlieb	 	 
	 

	 	Title:
	 	CCO	 	 
	 
	 	 	 	 	 	 
	 	 	VISIUM LONG BIAS FUND, LP
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark Gottlieb	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mark Gottlieb	 	 
	 

	 	Title:
	 	CCO	 	 
	 
	 	 	 	 	 	 
	 	 	VISIUM LONG BIAS OFFSHORE FUND, LTD.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark Gottlieb	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mark Gottlieb	 	 
	 

	 	Title:
	 	CCO	 	 
	 
	 	 	 	 	 	 
	 	 	VISIUM BALANCED FUND, LP
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark Gottlieb	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mark Gottlieb	 	 
	 

	 	Title:
	 	CCO	 	 
	 
	 	 	 	 	 	 
	 	 	ATLAS MASTER FUND, LTD.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Scott Schroeder	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Scott Schroeder	 	 
	 

	 	Title:
	 	Authorized Signatory	 	 

16

 

Exhibit A

Investor Shares

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Shares Issuable Upon Conversion or Exercise of:	 	 
	 	 	 	 	 	 	 	 	 	 	Amended and	 	 	 	 
	 	 	 	 	 	 	Additional	 	Restated	 	Secured Note	 	 
	Investor	 	Shares	 	Warrants	 	Secured Notes	 	Warrants	 	Total(1)
	Visium Long Bias Offshore Fund,
Ltd.
	 	 	509,531	 	 	 	340,439	 	 	 	902,680	 	 	 	267,650	 	 	 	2,020,300	 
	Visium Long Bias Fund, LP
	 	 	134,474	 	 	 	89,847	 	 	 	238,233	 	 	 	70,637	 	 	 	533,191	 
	Visium Balanced Offshore Fund, Ltd.
	 	 	727,000	 	 	 	485,740	 	 	 	1,287,948	 	 	 	381,883	 	 	 	2,882,571	 
	Visium Balanced Fund, LP
	 	 	436,574	 	 	 	291,693	 	 	 	773,430	 	 	 	229,326	 	 	 	1,731,023	 
	Atlas Master Fund, Ltd. (c/o
Visium Asset Management, LLC)
	 	 	116,732	 	 	 	77,993	 	 	 	206,800	 	 	 	61,318	 	 	 	462,843	 
	Atlas Master Fund, Ltd. (c/o
Balyasny Asset Management, L.P.)
	 	 	—	 	 	 	—	 	 	 	2,045,455	 	 	 	671,005	 	 	 	2,716,460	 

 

			
	(1)	 	Excludes any shares of common stock issuable as payment for interest on the Amended and
Restated Secured Notes, and any additional shares of common stock that may become issuable as
a result of antidilution adjustments to any of the securities listed in this table, all of
which, for the avoidance of doubt, are entitled to registration rights as set forth in this
Agreement.

A-1

 

Exhibit B

Plan of Distribution

     The selling stockholders, which as used herein includes donees, pledgees, transferees or other
successors-in-interest selling shares of common stock or interests in shares of common stock
received after the date of this prospectus from a selling stockholder as a gift, pledge,
partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise
dispose of any or all of their shares of common stock or interests in shares of common stock on any
stock exchange, market or trading facility on which the shares are traded or in private
transactions. These dispositions may be at fixed prices, at prevailing market prices at the time
of sale, at prices related to the prevailing market price, at varying prices determined at the time
of sale, or at negotiated prices.

     The selling stockholders may use any one or more of the following methods when disposing of
shares or interests therein:

     – ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;

     – block trades in which the broker-dealer will attempt to sell the shares as agent, but may
position and resell a portion of the block as principal to facilitate the transaction;

     – purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

     – an exchange distribution in accordance with the rules of the applicable exchange;

     – privately negotiated transactions;

     – short sales effected after the date the registration statement of which this Prospectus is a
part is declared effective by the SEC;

     – through the writing or settlement of options or other hedging transactions, whether through
an options exchange or otherwise;

     – broker-dealers may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per share;

     – a combination of any such methods of sale; and

     – any other method permitted by applicable law.

     The selling stockholders may, from time to time, pledge or grant a security interest in some
or all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock,
from time to time, under this prospectus, or under an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest as

B-1

 

selling stockholders under this prospectus. The selling stockholders also may transfer the
shares of common stock in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of this prospectus.

     In connection with the sale of our common stock or interests therein, the selling stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The selling stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).

     The aggregate proceeds to the selling stockholders from the sale of the common stock offered
by them will be the purchase price of the common stock less discounts or commissions, if any. Each
of the selling stockholders reserves the right to accept and, together with their agents from time
to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly
or through agents. We will not receive any of the proceeds from this offering. Upon any exercise
of the warrants by payment of cash, however, we will receive the exercise price of the warrants.

     The selling stockholders also may resell all or a portion of the shares in open market
transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet
the criteria and conform to the requirements of that rule.

     The selling stockholders and any underwriters, broker-dealers or agents that participate in
the sale of the common stock or interests therein may be “underwriters” within the meaning of
Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn
on any resale of the shares may be underwriting discounts and commissions under the Securities Act.
Selling stockholders who are “underwriters” within the meaning of Section 2(11) of the Securities
Act will be subject to the prospectus delivery requirements of the Securities Act.

     To the extent required, the shares of our common stock to be sold, the names of the selling
stockholders, the respective purchase prices and public offering prices, the names of any agents,
dealer or underwriter, any applicable commissions or discounts with respect to a particular offer
will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.

     In order to comply with the securities laws of some states, if applicable, the common stock
may be sold in these jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the common stock may not be sold unless it has been registered or
qualified for sale or an exemption from registration or qualification requirements is available and
is complied with.

B-2

 

     We have advised the selling stockholders that the anti-manipulation rules of Regulation M
under the Exchange Act may apply to sales of shares in the market and to the activities of the
selling stockholders and their affiliates. In addition, to the extent applicable we will make
copies of this prospectus (as it may be supplemented or amended from time to time) available to the
selling stockholders for the purpose of satisfying the prospectus delivery requirements of the
Securities Act. The selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities, including liabilities
arising under the Securities Act.

     We have agreed to indemnify the selling stockholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to the registration of the
shares offered by this prospectus.

     We have agreed with the selling stockholders to keep the registration statement of which this
prospectus constitutes a part effective until the earlier of (1) such time as all of the shares
covered by this prospectus have been disposed of pursuant to and in accordance with the
registration statement or (2) the date on which the shares may be sold pursuant to Rule 144(k) of
the Securities Act.

B-3

 

Exhibit C

Zila, Inc.

Selling Securityholder Questionnaire

     The undersigned beneficial owner (the “Selling Securityholder”) of common stock (the “Common
Stock”), of Zila, Inc. (the “Company”) understands that the Company has filed or intends to file
with the Securities and Exchange Commission (the “Commission”) one or more Registration Statements
for the registration and resale of the Registrable Securities, in accordance with the terms of the
Registration Rights Agreement, dated as of July ___, 2007 (the “Registration Rights Agreement”),
among the Company and the Investors named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below. All capitalized terms used
and not otherwise defined herein shall have the meanings ascribed thereto in the Registration
Rights Agreement.

     The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:

QUESTIONNAIRE

1. Name.

     (a) Full legal name of Selling Securityholder:

 

     (b) Full legal name of registered Holder (if not the same as (a) above) through which
Registrable Securities listed in Item 3 below are held:

 

     (c) Full legal name of Natural Control Person (which means a natural person who directly or
indirectly alone or with others has power to vote or dispose of the securities covered by the
questionnaire):

 

     (d) State of organization or domicile of Selling Securityholder:

 

C-1

 

2. Address for Notices to Selling Securityholder:

 

 

 

  Telephone:

  Fax:

  Contact Person:

  Email:

Note: By providing an email address, the undersigned hereby consents to receipt of notices by email.

Any such notice shall also be sent to the following address (which shall not constitute notice):

 

 

 

  Telephone:

  Fax:

  Contact Person:

  Email:

3. Beneficial Ownership of Registrable Securities:

Type and principal amount of Registrable Securities beneficially owned:

 

 

 

If applicable, provide the information required by Items 1 and 2 for each beneficial
owner.

 

 

 

 

4. Broker-Dealer Status:

     (a) Are you a broker-dealer?

Yes o           No o

C-2

 

	Note:	 	If yes, the Commission’s staff has indicated that you should be
identified as an underwriter in any Registration Statement filed
pursuant to the Registration Rights Agreement.

          (b) Are you an affiliate of a broker-dealer?

Yes o           No o

          (c) If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable
Securities in the ordinary course of business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings, directly or indirectly, with any
person to distribute the Registrable Securities?

Yes o           No o

	 	Note:	 	If no, the Commission’s staff has indicated that you should be identified as
an underwriter in any Registration Statement filed pursuant to the Registration Rights
Agreement.

If you checked “Yes” to either of the questions in Item 4(a) or Item 4(b) above, please
state (a) the name of any such broker-dealer, (b) the nature of your affiliation or
association with such broker-dealer, (c) information as to such broker-dealer’s
participation in any capacity in the offering or the original placement of the Securities,
(d) the number of shares of equity securities or face value of debt securities of the
Company owned by you, (e) the date such securities were acquired and (f) the price paid for
such securities.

 

 

 

 

5. Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder.

     Except as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable Securities
listed above in Item 3.

Type and amount of other securities beneficially owned by the Selling
Securityholder:

 

 

C-3

 

	6.	 	Relationships with the Company:
	 
	 	 	Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.
	 
	 	 	State any exceptions here:
	 

 

 

	7.	 	Plan of Distribution:
	 
	 	 	Except as set forth below, the undersigned intends to distribute the Registrable Securities
listed above in Item 3 only as set forth in Exhibit B to the Registration Rights Agreement
(if at all):

 

 

          The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date hereof and prior to the effective
date of any applicable Registration Statement filed pursuant to the Registration Rights Agreement.

          By signing below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 7 and the inclusion of such information in each
Registration Statement filed pursuant to the Registration Rights Agreement and each related
prospectus. The undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of any such Registration Statement and the related
prospectus.

          By signing below, the undersigned acknowledges that it understands its obligation to comply,
and agrees that it will comply, with the provisions of the Exchange Act and the rules and
regulations thereunder, particularly Regulation M. The undersigned also acknowledges that it
understands that the answers to this Questionnaire are furnished for use in connection with
Registration Statements filed pursuant to the Registration Rights Agreement and any amendments or
supplements thereto filed with the Commission pursuant to the Securities Act.

          I confirm that, to the best of my knowledge and belief, the foregoing statements (including
without limitation the answers to this Questionnaire) are correct.

C-4

 

     IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Questionnaire to
be executed and delivered either in person or by its duly authorized agent.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:	 	 	 	Beneficial Owner:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 

	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT
MAIL, TO:

Zila, Inc.

5227 N. 7th Street

Phoenix, AZ 84014

Fax No.: (602) 234 2264

Attn: Gary V. Klinefelter

with a copy to:

Snell & Wilmer L.L.P.

400 East Van Buren Street

Phoenix, AZ 85004

Fax No.: (602) 382 6070

Attn: Michael M. Donahey, Esq.

C-5exv10w1

 

Exhibit 10.1

AMENDMENT AGREEMENT

     AMENDMENT AGREEMENT, dated August 13, 2007 (this “Agreement”), is among Zila, Inc., a Delaware
corporation (the “Company”), Visium Balanced Offshore Fund, Ltd., Visium Balanced Fund, LP, Visium
Long Bias Offshore Fund, Ltd. and Visium Long Bias Fund, LP (the “Visium Entities”), Atlas Master
Fund, Ltd. (“Atlas”) and Balyasny Asset Management, L.P. (“BAM” and, collectively with the Visium
Entities and Atlas, the “Investors”).

W I T N E S S E T H:

     WHEREAS, the Company entered into a Purchase Agreement, dated as of November 13, 2006 (the
“Note Purchase Agreement”), with the investors party thereto pursuant to which, among other things,
the Company issued (i) an aggregate of 9,100,000 shares of the Company’s common stock, par value
$0.001 per share (the “Common Stock”), (ii) $12,075,000 in aggregate principal amount of the
Company’s 12% Convertible Notes (the “Convertible Notes”) convertible into shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”), at a conversion price of $1.75,
(iii) Warrants (the “Initial Warrants”) to acquire an aggregate of up to 5,403,000 shares of Common
Stock at an exercise price of $2.21 per share and (iv) Warrants (the “Additional Warrants”) to
acquire an aggregate of up to 3,105,000 shares of Common Stock at an exercise price of $2.21 per
share; and

     WHEREAS, pursuant to the terms of the Note Purchase Agreement, the Visium Entities acquired
(i) $5,000,000.25 in aggregate principal amount of the Convertible Notes, (ii) Initial Warrants to
acquire an aggregate of 428,569 shares of Common Stock and (iii) Additional Warrants to acquire an
aggregate of 1,285,712 shares of Common Stock; and

     WHEREAS, in connection with the Note Purchase Agreement, the Company entered into a
Registration Rights Agreement, dated as of November 28, 2006 (the “Note Registration Rights
Agreement”), pursuant to which, among other things, the Company agreed to provide certain
registration rights with respect to the shares of Common Stock issuable upon conversion of the
Convertible Notes (the “Note Conversion Shares”) and the shares of Common Stock issuable upon the
exercise of the Initial Warrants and the Additional Warrants (the “Note Warrant Shares”) with the
Securities and Exchange Commission (the “Commission”) for resale pursuant to the Securities Act of
1933, as amended (the “Securities Act”); and

     WHEREAS, the Company entered into a Purchase Agreement, dated as of November 13, 2006 (the
“Secured Note Purchase Agreement”), with the investors party thereto pursuant to which, among other
things, the Company issued (i) an aggregate of $12,000,001.20 in principal amount of the Company’s
6% Senior Secured Convertible Notes (the “Secured Notes”) convertible into shares of Common Stock
at a conversion price of $2.20 and (ii) Warrants (the “Secured Note Warrants”) to acquire an
aggregate of up to 1,909,089 shares of Common Stock at an exercise price of $2.21 per share; and

     WHEREAS, pursuant to the terms of the Secured Note Purchase Agreement, (A) the Visium Entities
acquired (i) $7,500,000.20 in aggregate principal amount of the Secured Notes and (ii) Secured Note
Warrants to acquire an aggregate of 1,193,180 shares of Common Stock

 

 

and (B) Atlas acquired (i) $4,500,001 in aggregate principal amount of the Secured Notes and (ii)
Secured Note Warrants to acquire an aggregate of 715,909 shares of Common Stock; and

     WHEREAS, in connection with the Secured Note Purchase Agreement, the Company entered into a
Registration Rights Agreement, dated as of November 28, 2006 (the “Secured Note Registration Rights
Agreement”), pursuant to which, among other things, the Company agreed to provide certain
registration rights with respect to the shares of Common Stock issuable upon conversion of the
Secured Notes (the “Secured Note Conversion Shares”) and the shares of Common Stock issuable upon
the exercise of the Secured Note Warrants (the “Secured Note Warrant Shares”) with the Commission
for resale pursuant to the Securities Act; and

     WHEREAS, effective December 14, 2006, the Convertible Notes converted into an aggregate of
6,900,000 shares of Common Stock; and

     WHEREAS, as of the date hereof, the Company has not registered the Note Conversion Shares, the
Additional Warrant Shares, the Secured Note Shares or the Secured Warrant Shares beneficially owned
by the Visium Entities and Atlas for resale under the Securities Act; and

     WHEREAS, certain disputes have arisen among the Company and the Investors regarding such
failure; and

     WHEREAS, the parties hereto believe it is in their respective best interest to settle such
disputes as provided herein.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be
legally bound, the parties hereto agree as follows:

     Section 1. Equity Repurchase. At the Closing (as defined below), the Company shall
repurchase from the Visium Entities an aggregate of 932,832 Note Conversion Shares in exchange for
$1,249,994.88. The Note Conversion Shares to be repurchased pursuant to this Section 1 are
hereinafter referred to as the “Repurchased Shares”. The Repurchased Shares shall be allocated
among the Visium Entities as they may determine in their sole discretion. The Investors hereby
irrevocably waive any Event of Default that might be deemed to have occurred under the Secured
Notes as a result of the repurchase of the Repurchased Shares or the other transactions
contemplated hereby.

     Section 2. Warrant Repurchase. At the Closing (as defined below), the Company shall
repurchase from the Visium Entities and Atlas a total of 227,270 Secured Note Warrants in exchange
for $149,998.20 in cash. The Secured Note Warrants to be repurchased pursuant to this Section 2
are hereinafter referred to as the “Repurchased Warrants”. The Repurchased Warrants shall be
allocated among the Visium Entities and Atlas as they may determine in their sole discretion. The
Investors hereby irrevocably waive any Event of Default that might be deemed to have occurred under
the Secured Notes as a result of the repurchase of the Repurchased Warrants.

 

 

     Section 3. Note Amendment. Effective at the Closing, the Secured Notes shall be amended and
restated as provided in Exhibit A attached hereto (the “Amended and Restated Notes”) (the
“Note Amendment”). The Investors hereby irrevocably consent to the Note Amendment. No later than
the date of the Closing (the “Closing Date”), the Visium Entities and Atlas shall surrender their
Secured Notes to the Company for cancellation. In exchange therefor, on the Closing Date the
Company shall issue the Amended and Restated Notes to the Visium Entities and Atlas in the
respective principal amounts specified in the Secured Notes being surrendered. The Amended and
Restated Notes shall be secured by all of the assets of the Company as specified in the existing
Pledge and Security Agreement, dated as of November 28, 2006, among the Company, certain
subsidiaries of the Company and BAM, as collateral agent.

     Section 4. Registration Rights.

     (a) Effective at the Closing, the Note Registration Rights Agreement and the Secured Note
Registration Statement shall be terminated with respect to the Visium Entities and Atlas only.
Promptly following the date hereof, the Company shall use its commercially reasonable best efforts
to persuade the Commission that the registration of the shares of Common Stock issued or issuable
to the Investors as a result of the transactions described above (as amended by this Agreement)
(collectively, the “Registrable Securities”) is a valid secondary offering and not an offering “by
or on behalf of the issuer” as defined in Rule 415 and that none of the Investors is an
“underwriter” with respect thereto. The Visium Entities and Atlas shall have the right to
participate or have their counsel participate in any meetings or discussions with the Commission
regarding the Commission’s position and to comment or have their counsel comment on any written
submission made to the Commission with respect thereto. No such written submission shall be made
to the Commission to which counsel for the Visium Entities or Atlas reasonably objects. The
Company shall pay the fees and disbursements of Lowenstein Sandler PC incurred in connection with
this Section 4 upon demand subject to an aggregate cap of $35,000.

     (b) Upon a final determination by the Commission, the Company shall notify the Investors of
such determination. The date of such determination is hereinafter referred to as the “Restriction
Termination Date.” On the Restriction Termination Date, except as provided below, the new
Registration Rights Agreement in the form of Exhibit B attached hereto (the “New
Registration Rights Agreement”), shall become effective.

     (c) In the event that, despite the Company’s commercially reasonable efforts and compliance
with the terms of this Section 4, the Commission takes the position that all or some portion of the
Registrable Securities and the SF Shares (as defined in the New Registration Rights Agreement) may
not be registered immediately without naming the holders as underwriters, notwithstanding the
provisions of the New Registration Rights Agreement, the Company shall not be obligated to register
the Registrable Securities and/or SF Shares which the Commission has determined may not be
registered without naming the holders as underwriters (the “Cut Back Shares”) unless and until such
time as the Commission determines otherwise; provided, however, that the Company will not be
obligated to register any Cut Back Shares which are then eligible to be sold by the holder of such
shares under Rule 144(k). In no event shall the Company shall agree to name any Visium Entity or
Atlas as an “underwriter” in a Registration Statement without their prior written consent. Any
cut-back imposed on the

 

 

Registrable Securities and the SF Shares pursuant to this Section 4(c) shall be allocated among the
Visium Entities, Atlas and SF on a pro rata basis unless the Commission otherwise provides. Any
cut-back imposed on the Visium Entities and Atlas pursuant to this Section 4(c) shall be allocated
among the Visium Entities and Atlas on a pro rata basis and shall be allocated to the Investor
Shares or the PIK Shares (as defined in the Amended and Restated Notes) as the Visium Entities and
Atlas may determine in their sole discretion, unless the Commission otherwise requires or provides.
For purposes of the New Registration Rights Agreement, the Restriction Termination Date shall not
be deemed to have occurred with respect to any Cut Back Shares until such time, if any, as the
Company is able to register such Cut Back Shares.

     (d) In the event that the provisions of Section 4(c) become applicable, the Company shall
continue to use commercially reasonable efforts to effect the registration of all Cut Back Shares
as promptly as possible.

     Section 5. Amendment Fee. At the Closing, the Company shall pay to the Visium Entities and
Atlas an amendment fee of $600,000 (the “Amendment Fee”). The Amendment Fee shall be paid by wire
transfer of immediately available funds to one or more accounts specified by the Visium Entities
and Atlas. The Amendment Fee shall be allocated among the Visium Entities and Atlas as they may
determine in their sole discretion.

     Section 6. Termination of Side Letter. Effective as of the Closing, the side letter, dated
November 28, 2006, by and between the Company and BAM shall be terminated and of no further force
and effect.

     Section 7. Waiver of Antidilution Rights. Effective as of the Closing, each of the Investors
hereby irrevocably waive any right they may have pursuant to Section 4 of the Amended and Restated
Note and Section 8 of the Initial Warrants, the Additional Warrants and/or the Secured Note
Warrants, as applicable, to an adjustment of the Warrant Price thereof as a result of the
transactions contemplated hereby, including, without limitation, the issuance of any PIK Shares (as
defined in the New Notes) (the “Antidilution Waiver”). Notwithstanding the foregoing, the
Antidilution Waiver shall not be effective with respect to the Initial Warrants or the Additional
Warrants, as applicable, unless and until the Company obtains the written consent of the Majority
Holders of each of the Initial Warrants and the Additional Warrants, as applicable, in accordance
with Section 22 of each of such Warrants. Promptly following the date hereof, the Company shall
use its commercially reasonable best efforts to obtain the consent of such Majority Holders to the
Antidilution Waiver.

     Section 8. Mutual Releases.

     (a) Effective as of the Closing Date, the Company, on its own behalf and on behalf of its
affiliates, parents, subsidiaries, predecessors, successors, assigns, legal representatives and any
and all persons or entities claiming by or through any of them (the “Company Parties”), hereby
releases and forever discharges each of the Investors and their respective partners, stockholders,
members, managers, investment advisers, directors, officers, employees, agents and representatives,
and any and all persons or entities claiming by or through any of them (collectively, the “Investor
Released Persons”) of and from any and all manner of actions, causes

 

 

of action, suits, account reckonings, covenants, agreements, damages, judgments, claims and demands
whatsoever, at law or in equity, whether known or unknown, contingent or matured, and whether
currently existing or hereafter arising, which the Company Parties ever had, now have or may
hereafter have (collectively, “Claims”) against the Investor Released Persons arising on or prior
to the Closing Date; provided, however, that this release shall not cover any Claims any of the
Company Parties may have against any of the Investor Released Persons (i) under this Agreement and
the other Transaction Documents and (ii) to the extent arising from any fraudulent act or omission
(including violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and Rule 10b-5 thereunder) by any Investor Released Person not known to the Company
Parties on the date hereof. None of the Company Parties shall institute any action, claim or
complaint of whatever kind or nature in any federal, state or local court or other governmental
agency or administrative tribunal relating to any Claim which has been released hereby or any
contract, agreement, understanding or arrangement that has been canceled hereby.

     (b) Each of the Investors, on their own behalf and on behalf of their respective partners,
stockholders, members, managers, investment advisers, directors, officers, employees, agents and
representatives, and any and all persons or entities claiming by or through any of them (the
“Investor Parties”), hereby release and forever discharge the Company and its affiliates, parents,
subsidiaries, predecessors, successors, assigns, legal representatives and any and all persons or
entities claiming by or through any of them (collectively, the “Company Released Persons”) of and
from any and all Claims against the Company Released Persons arising on or prior to the Closing
Date; provided, however, that this release shall not cover any Claims any of the Investor Parties
may have against any of the Company Released Persons (i) under this Agreement and the other
Transaction Documents and (ii) to the extent arising from any fraudulent act or omission (including
violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder) by any Company Released
Person not known to the Investor Parties on the date hereof. None of the Investor Parties shall
institute any action, claim or complaint of whatever kind or nature in any federal, state or local
court or other governmental agency or administrative tribunal relating to any Claim which has been
released hereby or any contract, agreement, understanding or arrangement that has been canceled
hereby.

     Section 9. Company Representations. The Company hereby represents and warrants to each of
the Investors as follows:

     (a) The Company is duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full power and authority to execute and deliver this Agreement, the
Amended and Restated Notes and the New Registration Rights Agreement (collectively, the
“Transaction Documents”) and to perform its obligations hereunder, all of which have been duly
authorized by all requisite corporate action. Each of the Transaction Documents has been, or on
the Closing Date will be, duly authorized, executed and delivered by the Company and constitutes a
valid and binding agreement of the Company, enforceable against the Company in accordance with its
terms.

     (b) Neither the execution and delivery of this Agreement and the other Transaction Documents
by the Company nor the performance by the Company of its obligations hereunder

 

 

and thereunder will (i) contravene any provision contained in the Certificate of Incorporation or
Bylaws of the Company, (ii) violate or result in a breach (with or without the lapse of time, the
giving of notice or both) of or constitute a default under (A) any material contract, agreement,
commitment, indenture, mortgage, lease, pledge, note, license, permit or other instrument or
obligation or (B) any judgment, order, decree, law, rule or regulation or other restriction of any
governmental authority, in each case to which the Company is a party or by which the Company is
bound or to which any of its assets or properties are subject, (iii) result in the creation or
imposition of any material lien, claim, charge, mortgage, pledge, security interest, equity,
restriction or other encumbrance (collectively, “Encumbrances”) on any of the assets or properties
of the Company or any subsidiary, or (iv) result in the acceleration of, or permit any person to
accelerate or declare due and payable prior to its stated maturity, any obligation of the Company
or any subsidiary.

     (c) No notice to, filing with, or authorization, registration, consent or approval of any
governmental authority or other person is necessary for the execution, delivery or performance of
this Agreement and the other Transaction Documents or the consummation of the transactions
contemplated hereby or thereby by the Company.

     (d) The shares of Common Stock issuable upon the conversion of the Amended and Restated Notes
(the “New Conversion Shares”) have been duly authorized and reserved for issuance and upon issuance
thereof upon the due conversion of the Amended and Restated Notes, the New Conversion Shares shall
be validly issued, fully paid and nonassessable and subject to no Encumbrance, except those imposed
generally by applicable securities laws

     Section 10. Investor Representations. Each of the Investors hereby, severally and not
jointly, represents and warrants to the Company (as to itself only) as follows:

     (a) It is duly organized, validly existing and in good standing under the laws of its
jurisdiction of formation and has full power and authority to execute and deliver this Agreement
and the other Transaction Documents and to perform its obligations hereunder, all of which have
been duly authorized by all requisite corporate, partnership or limited liability company action,
as applicable. Each of the Transaction Documents to which it is a party has been, or on the
Closing Date will be, duly authorized, executed and delivered by it and constitutes its valid and
binding agreement, enforceable against it in accordance with its terms.

     (b) Neither the execution and delivery of this Agreement and the other Transaction Documents
by it nor the performance by it of its obligations hereunder and thereunder will (i) contravene any
provision contained in its organizational documents, (ii) violate or result in a breach (with or
without the lapse of time, the giving of notice or both) of or constitute a default under (A) any
material contract, agreement, commitment, indenture, mortgage, lease, pledge, note, license, permit
or other instrument or obligation or (B) any judgment, order, decree, law, rule or regulation or
other restriction of any governmental authority, in each case to which it is a party or by which it
is bound or to which any of its assets or properties are subject, or (iii) result in the creation
or imposition of any material Encumbrances on the Secured Notes, the Repurchased Shares or the
Repurchased Warrants held by it.

 

 

     (c) No notice to, filing with, or authorization, registration, consent or approval of any
governmental authority or other person is necessary for the execution, delivery or performance of
this Agreement and the other Transaction Documents or the consummation of the transactions
contemplated hereby or thereby by it.

     (d) It is the legal owner of the Secured Notes, Repurchased Shares and/or Repurchased Warrants
held by it free and clear of any Encumbrances, except those created pursuant to the Note Purchase
Agreement, the Secured Note Purchase Agreement, the Note Registration Rights Agreement and the
Secured Note Registration Rights Agreement and those imposed generally by applicable securities
laws. There are no voting trust arrangements, shareholder agreements or other agreements granting
any option, warrant, proxy or right of first refusal with respect to the Secured Notes, Repurchased
Shares and/or Repurchased Warrants held by it to any person or entity. It has the absolute and
unrestricted right, power and capacity to sell the Repurchased Shares and the Repurchased Warrants
to the Company as contemplated hereby free and clear of any Encumbrances (except for restrictions
imposed generally by applicable securities laws).

     Section 11. Conditions to Closing; Termination.

     (a) The obligations of each of the Investors hereunder are subject to the fulfillment to such
Investor’s satisfaction, on or prior to the Closing Date, of the following conditions, any of which
may be waived by it (as to itself only):

          (i) The representations and warranties made by the Company in Section 9 hereof qualified as to
materiality shall be true and correct at all times prior to and on the Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier date, and, the
representations and warranties made by the Company in Section 9 hereof not qualified as to
materiality shall be true and correct in all material respects at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly speaks as of an
earlier date, in which case such representation or warranty shall be true and correct in all
material respects as of such earlier date. The Company shall have performed in all material
respects all obligations and covenants herein required to be performed by it on or prior to the
Closing Date.

          (ii) The Company shall have obtained any and all consents, permits, approvals, registrations
and waivers necessary or appropriate for consummation of the transactions contemplated by the
Transaction Documents, all of which shall be in full force and effect.

          (iii) The Company shall have executed and delivered the New Registration Rights Agreement and
the Security Agreement.

          (iv) The Company shall have paid the Amendment Fee as provided herein.

 

 

          (v) The Company shall have repurchased the Repurchased Shares and the Repurchased Warrants as
provided herein.

          (vi) No judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of or by any
governmental authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or by the other Transaction Documents.

          (vii) No stop order or suspension of trading shall have been imposed by Nasdaq, the Commission
or any other governmental or regulatory body with respect to public trading in the Common Stock.

     (b) The obligations of the Company hereunder are subject to the fulfillment to the Company’s
satisfaction, on or prior to the Closing Date, of the following conditions, any of which may be
waived by it:

          (i) The representations and warranties made by the Investors in Section 10 hereof shall be
true and correct in all material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been made on and as of
said date. The Investors shall have performed in all material respects all obligations and
covenants herein required to be performed by them on or prior to the Closing Date.

          (ii) The Investors party thereto shall have executed and delivered the New Registration Rights
Agreement.

          (iii) The Investors shall have delivered to the Company (i) the certificates representing the
Repurchased Shares and (ii) the Repurchased Warrants, in each case accompanied by such executed
stock powers or other transfer documents reasonably requested by the Company.

     (c) The obligations of the Company, on the one hand, and the Investors, on the other hand, to
effect the Closing shall terminate as follows:

          (i) Upon the mutual written consent of the Company and the Investors;

          (ii) By the Company if any of the conditions set forth in Section 11(b) shall have become
incapable of fulfillment, and shall not have been waived by the Company;

          (iii) By an Investor (with respect to itself only) if any of the conditions set forth in
Section 11(a) shall have become incapable of fulfillment, and shall not have been waived by the
Investor; or

          (iv) By either the Company or any Investor (with respect to itself only) if the Closing has
not occurred on or prior to August 20, 2007;

 

 

provided, however, that, except in the case of clause (i) above, the party seeking to terminate its
obligation to effect the Closing shall not then be in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or the other Transaction Documents
if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate
its obligation to effect the Closing.

     (d) In the event of termination by the Company or any Investor of its obligations to effect
the Closing pursuant to this Section 11, written notice thereof shall forthwith be given to the
other Investors and the other Investors shall have the right to terminate their obligations to
effect the Closing upon written notice to the Company and the other Investors. Nothing in this
Section 11 shall be deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement or the other Transaction Documents or to impair the
right of any party to compel specific performance by any other party of its obligations under this
Agreement or the other Transaction Documents.

     Section 12. Closing. The Closing shall take place at the offices of Lowenstein Sandler PC,
1251 Avenue of the Americas, 18th Floor, New York, New York 10020, no later than the second
Business Day after the conditions to Closing set forth herein have been satisfied or waived, to the
extent permitted by applicable law, or at such other location and on such other date as the Company
and the Investors shall mutually agree.

     Section 13. Further Assurances. Subject to the terms and conditions herein provided, each of
the parties hereto shall take, or cause to be taken, all action, and to do, or cause to be done,
all things reasonably necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement and the other
Transaction Documents. In the event that at any time hereafter any further action is necessary to
carry out the purposes of this Agreement, the parties hereto shall take all such action without any
further consideration therefor.

     Section 14. Equitable Remedies. Each of the parties hereto acknowledges that the other
parties hereto would suffer immediate and irreparable harm for which an adequate remedy would not
be available at law as a result of any breach of this Agreement. Accordingly, in the event of any
breach, or threatened breach, of the provisions of this Agreement, each party hereto shall be
entitled to an order of specific performance or other injunctive relief against the breaching party
in addition to any other rights and remedies to which they may be entitled, whether at law or in
equity, and each party hereby irrevocably and unconditionally consents to the entry of an order
providing such relief in the event of any breach or threatened breach of the terms hereof by such
party. No party shall be required to post any bond or other security in connection with any such
action for specific performance or other injunctive relief.

     Section 15. Successors and Assigns. This Agreement may not be assigned by a party hereto
without the prior written consent of the other parties hereto. The provisions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted successors and assigns
of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns any rights,

 

 

remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.

     Section 16. Counterparts; Faxes. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument. This Agreement may also be executed via facsimile, which shall be deemed an
original.

     Section 17. Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.

     Section 18 Notices. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given as hereinafter described
(i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii)
if given by telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed
given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one Business Day after
delivery to such carrier. All notices shall be addressed to the party to be notified at the
address as follows, or at such other address as such party may designate by ten days’ advance
written notice to the other party:

If to the Company:

Zila, Inc.

5227 North 7th Street

Phoenix, Arizona 85014-2800

Attention: Frank Bellizzi

Fax: (602) 230-8418

If to the Investors:

to the addresses set forth on the signature pages hereto.

     Section 19. Expenses. The parties hereto shall pay their own costs and expenses in
connection herewith except that the Company shall pay the reasonable fees and expenses of
Lowenstein Sandler PC not to exceed $35,000. Such expenses shall be paid not later than the
Closing. The Company shall reimburse the Investors upon demand for all reasonable out-of-pocket
expenses incurred by the Investors, including without limitation reimbursement of attorneys’ fees
and disbursements for one counsel on behalf of the Investors, in connection with any amendment,
modification or waiver of this Agreement or the other Transaction Documents requested by the
Company. In the event that legal proceedings are commenced by any party to this Agreement against
another party to this Agreement in connection with this Agreement or the other Transaction
Documents, the party or parties which do not prevail in such proceedings shall severally, but not
jointly, pay their pro rata share of the reasonable attorneys’ fees and other

 

 

reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.

     Section 20. Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and the Investors.

     Section 21. Publicity. No public release or announcement concerning the transactions
contemplated hereby shall be issued by the Company or the Investors without the prior consent of
the Company (in the case of a release or announcement by the Investors) or the Investors (in the
case of a release or announcement by the Company) (which consents shall not be unreasonably
withheld), except that the Company may issue a press release describing the terms of the
Transaction Documents; provided that the Visium Entities shall have the right to comment on such
release prior to its publication. Notwithstanding the foregoing, the Investors acknowledge that
the Company shall be permitted to file a Current Report on Form 8-K to report the transactions
contemplated by the Transaction Documents if the Company determines that such filing is necessary
or advisable to comply with its reporting obligations under applicable securities laws.

     Section 22. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof but shall
be interpreted as if it were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.

     Section 23. Entire Agreement. This Agreement, including the Exhibits, and the other
Transaction Documents constitute the entire agreement among the parties hereof with respect to the
subject matter hereof and thereof and supersede all prior agreements and understandings, both oral
and written, between the parties with respect to the subject matter hereof and thereof.

     Section 24. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the State of New York
without regard to the choice of law principles thereof. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York located in New York
County and the United States District Court for the Southern District of New York for the purpose
of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and

 

 

irrevocably waives any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A
TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.

     Section 25. Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. Nothing contained herein or in any Transaction
Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of entity, or create
a presumption that the Investors are in any way acting in concert or as a group with respect to
such obligations or the transactions contemplated by the Transaction Documents. Each Investor
acknowledges that no other Investor has acted as agent for such Investor in connection herewith and
that no Investor will be acting as agent of such Investor in connection with monitoring its
investment in the Company or enforcing its rights under the Transaction Documents. Each Investor
shall be entitled to independently protect and enforce its rights, including, without limitation,
the rights arising out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Investor to be joined as an additional party in any proceeding for
such purpose.

     Section 26. No Strict Construction. Each of the parties hereto acknowledge that this
Agreement has been prepared jointly by the parties hereto, and shall not be strictly construed
against any party.

[signature page follows]

 

 

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.

	 	 	 	 	 	 	 
	 	 	ZILA, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gary V. Klinefelter	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Gary V. Klinefelter	 	 
	 

	 	Title:
	 	Vice President and Secretary	 	 

 

 

	 	 	 	 	 	 	 
	 	 	ATLAS MASTER FUND, LTD.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Scott Schroeder	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Scott Schroeder	 	 
	 

	 	Title:
	 	Authorized Signatory	 	 
	 
	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	Balyasny Asset Management, L.P.

181 West Madison

Suite 3600

Chicago, Illinois 60602	 	 
	 
	 	 	 	 	 	 
	 	 	BALYASNY ASSET MANAGEMENT, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Scott Schroeder	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Scott Schroeder	 	 
	 

	 	Title:
	 	Authorized Signatory	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	Balyasny Asset Management, L.P.

181 West Madison

Suite 3600

Chicago, Illinois 60602	 	 

 

 

	 	 	 	 	 	 	 
	 	 	VISIUM BALANCED OFFSHORE FUND, LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark Gottlieb	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mark Gottlieb	 	 
	 

	 	Title:
	 	CCO	 	 
	 
	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	Visium Asset Management, LLC

950 Third Avenue

New York, New York 10022	 	 
	 
	 	 	 	 	 	 
	 	 	VISIUM LONG BIAS FUND, LP	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark Gottlieb	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mark Gottlieb	 	 
	 

	 	Title:
	 	CCO	 	 
	 
	 	 	 	 	 	 
	 
	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	Visium Asset Management, LLC

950 Third Avenue

New York, New York 10022	 	 
	 
	 	 	VISIUM LONG BIAS OFFSHORE FUND, LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark Gottlieb	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mark Gottlieb	 	 
	 

	 	Title:
	 	CCO	 	 
	 
	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	Visium Asset Management, LLC

950 Third Avenue

New York, New York 10022	 	 

 

 

	 	 	 	 	 	 	 
	 	 	VISIUM BALANCED FUND, LP	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mark Gottlieb	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mark Gottlieb	 	 
	 

	 	Title:
	 	CCO	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 	 	Visium Asset Management, LLC

950 Third Avenue

New York, New York 10022

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