Exhibit 10.1
SECOND AMENDMENT AGREEMENT
SECOND AMENDMENT AGREEMENT, dated
June 3, 2008 (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”), Balyasny Asset Management, L.P.,
(“BAM” and, collectively with the Visium Entities and
Atlas, the “Investors”), and Balyasny Asset Management,
L.P., as collateral agent (the “Agent”).
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, 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, 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 (the “Note Conversion Shares”) 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, the Investors and the
Agent entered into a Pledge and Security Agreement, dated as of
November 28, 2006 (the “Security Agreement”);
and
WHEREAS, effective August 13,
2007, the Company entered into an Amendment
Agreement (the “Amendment Agreement”) with the
Investors providing for, among other things, (i) the
repurchase of 932,832 Note Conversion Shares; (ii) the
repurchase of 227,270 Secured Note Warrants; and (iii) an
amendment and restatement of the Secured Notes (references to the
“Secured Notes” shall mean such notes as amended and
restated on August 13, 2007); and
WHEREAS, the parties hereto believe
it is in their respective best interests to amend the Secured Notes
as provided herein and to take the other actions set forth
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. Note
Amendment . Effective upon the execution and delivery of
this Agreement, 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. Promptly following the date hereof, the Investors
Visium Entities and Atlas shall surrender their Secured Notes to
the Company for cancellation and, upon receipt of such Secured
Notes, 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.
Section 2. Amendment Fee;
Waiver. Simultaneous with the execution and delivery of
this Agreement by the parties hereto, the Company shall pay to the
Investors an amendment fee of $1,200,000 (the “Amendment
Fee”). The Amendment Fee shall be paid by the issuance of an
aggregate of 4,626,595 newly issued, fully paid and nonassessable
shares of Common Stock (the “Amendment Shares”). The
Amendment Shares shall be allocated among the Investors as set
forth on the signature pages to this Agreement. Each of the
Investors hereby irrevocably waives any antidilution adjustment it
would otherwise be entitled to receive under any Company securities
as a result of the issuance of the Amendment Shares as provided
hereby.
Section 3. Warrant
Surrender. Simultaneous with the execution and delivery of
this Agreement by the parties hereto, the Investors shall surrender
to the Company for cancellation Initial Warrants, Additional
Warrants and Secured Note Warrants to acquire an aggregate of
3,396,100 shares of Common Stock held by them (the
“Surrendered Warrants”). The Surrendered Warrants being
surrendered by each of the Investors are set forth on the signature
pages to this Agreement.
Section 4. Deposit Account
Control Agreements. The Company shall use its commercially
reasonable efforts, and shall cause each Subsidiary Guarantor (as
defined in the Security Agreement) to use its commercially
reasonable efforts, to enter into Deposit Account Control
Agreements in customary form (with such changes therein or
modifications thereto as the Investors may reasonably approve, such
approval not to be unreasonably withheld or delayed) (the
“Control Agreements”) with each depository institution
holding funds of the Company or any Subsidiary Guarantor (a
“Depositary”). Not later than 20 days after the
date hereof (the “Deadline”), the Company shall, and
shall cause each Subsidiary Guarantor to, have entered into Control
Agreements with each Depositary. In the event that, after the date
hereof, the Company or any Subsidiary Guarantor wishes to establish
a new account with any Depository which has not previously executed
a Control Agreement, it shall be a condition
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precedent to such establishment that the Depositary enter into a
Control Agreement before receiving any funds of the Company or a
Subsidiary Guarantor. From and after the Deadline, in no event
shall the Company or any Subsidiary Guarantor deposit funds with
any Depositary that has not executed a Control Agreement. The
failure of the Company to have Control Agreements in place with
each Depositary holding funds of the Company or a Subsidiary
Guarantor by the Deadline and the failure of the Company to
otherwise comply with the terms of this Section 4 shall
constitute additional “Events of Default” under the
Amended and Restated Notes.
Section 5. Registration
Rights . The parties acknowledge that the Company has fully
performed its obligations under Sections 4(a) and (b) of the
Amendment Agreement and shall have no further obligations under
such Sections 4(a) and (b); provided, however, that nothing in this
sentence shall affect the Company’s obligations under the New
Registration Rights Agreement (as defined in the Amendment
Agreement). Simultaneous with the execution and delivery of this
Agreement by the parties hereto, the Company and the Investors
shall execute and deliver a Registration Rights Agreement (the
“Registration Rights Agreement”) in the form attached
hereto as Exhibit B (this Agreement, the Amended and
Restated Notes, the Control Agreements and the Registration Rights
Agreement are collectively referred to herein as the
“Transaction Documents”).
Section 6. Financial
Reports. Not later than the close of business on each
Wednesday, the Company shall provide to the Investors “flash
reports” in the form currently prepared by the Company for
use by the Company’s senior management showing weekly cash
flow, income and balance sheet information and other information
utilized by senior management in operating the Company for the
prior week (the “Flash Reports”). The Flash Reports
shall be delivered to each Investor in accordance with the
instructions contained in Exhibit C attached hereto.
Each Investor acknowledges that the information contained in the
Flash Reports may constitute material nonpublic information
regarding the Company and shall use the information in such Flash
Reports only for the purpose of assuring compliance by the Company
with its obligations under the Transaction Documents and the other
Deal Documents (as such term is defined in the Amended and Restated
Notes). Each Investor shall preserve the confidentiality of the
information contained in the Flash Reports and shall assure that
such information is not used in a manner that would violate
applicable securities laws or that would cause the Company to
violate such laws, including Rule 10b-5 and
Regulation FD. Any Investor shall have the right to suspend or
waive, with respect to itself only, the right to receive the Flash
Reports as provided herein by providing written notice to the
Company to such effect.
Section 7. 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 and the other Transaction Documents and
to perform its obligations hereunder and thereunder, all of which
have been duly authorized by all requisite corporate action. The
Transaction Documents have, or will be, duly authorized, executed
and delivered by the Company and constitute, or will constitute,
valid and binding agreements of the Company, enforceable against
the Company in accordance with their terms.
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(b) Neither the execution and
delivery of the 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,
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