Agreement

Exhibit 10.3

March 4, 2005

Betty J. Pecha

Dear Betty:

     This will confirm that beginning on this date, the following terms will apply to your employment with Zila, Inc. and/or whichever one of Zila, Inc.’s subsidiary or affiliated companies employs you (the company that employs you shall be termed the “Company”)(this “Agreement”):

     1. Eligibility for future awards of stock options. Beginning with Zila, Inc.’s fiscal year 2005, you will be eligible under the Incentive Bonus and Option Plan, or such amended or restated incentive bonus and option award plan as may then be in effect, for an annual award of options to purchase Zila, Inc. common stock that is greater than the award eligibility specified in the Incentive Bonus and Option Plan for an employee at your level. In all other respects, your eligibility shall be governed by the Incentive Bonus and Option Plan or such amended or restated incentive bonus and option award plan as may then be in effect (the plan then in effect is hereby incorporated by reference as if fully set forth herein). The grant and/or exercise of any such options shall be governed in all respects by the Stock Option Plan or such amended or restated stock option plan as may then be in effect (the plan then in effect is hereby incorporated by reference as if fully set forth herein).

     2. Severance pay. If your employment with the Company terminates, you shall be eligible to receive severance pay in accordance with the following:

          2.1 Change in control. If your employment is terminated because of a change in control of Zila, Inc. and you provide Zila, Inc. and the Company with a written release, in a form acceptable to Zila, Inc. and the Company, from all legal liability arising out of any events that occurred prior to execution of such release, you shall receive severance pay equivalent to twelve (12) months of your then-current base salary. For purposes of this Agreement, “change in control” shall be defined and governed by the definition of “change in control” contained in the Stock Option Plan or such amended or restated stock option plan as may then be in effect.

          2.2 Other termination. If your employment is terminated for any reason that is unrelated to (i) your conduct or job performance and (ii) your inability to perform your job (e.g., due to incapacity or death), and you provide Zila, Inc. and the Company with a written release, in a form acceptable to Zila, Inc. and the Company, from all legal liability arising out of any events that occurred prior to execution of such release,

you shall receive severance pay equivalent to six (6) months of your then-current base salary.

          2.3 No other rights to severance pay. You shall not be entitled to receive severance pay if you voluntarily resign from your employment or your employment terminates for a reason related to your conduct or job performance or your employment terminates for any other reason not specifically recited above as qualifying you for severance benefits.

          2.4 Timing of severance pay. Any severance pay due you under this Agreement shall be made over the applicable time period (e.g., six months of pay over six months) in accordance with the Company’s regular payroll dates during that time period.

          2.5 Cessation of severance payments. Your right to receive severance pay sh