<PAGE>   1
                                                                    EXHIBIT 10-G


                                MERGER AGREEMENT


         By this MERGER AGREEMENT dated as of April 3, 1997 (this "Agreement"),
ZILA, INC., a Delaware corporation ("Zila"), CYGNUS IMAGING, INC., an Arizona
corporation ("Cygnus"), CYGNUS MERGER CORPORATION, a Delaware corporation
("CMC"), and EGIDIO CIANCIOSI ("Cianciosi"), JAMES T. JENSEN and KENNETH D. KIRK
(collectively, and jointly and severally, "Shareholders"), hereby represent,
warrant, covenant and agree as follows:

                                    ARTICLE 1
                                   THE MERGER

         1.1 Approval of Merger. The respective boards of directors of Zila, CMC
and Cygnus have, the Shareholders (as shareholders of Cygnus) have, and the sole
shareholder of CMC has, by resolutions duly adopted, approved the following
provisions of this Article 1 as the plan of merger required by the laws of the
states of Delaware and Arizona in connection with the merger described herein.

         1.2 Present Structure. Shareholders own 100% of the issued and
outstanding capital stock (the "Cygnus Common Stock") of Cygnus, as follows:

<TABLE>
<CAPTION>
                   Shareholder                Shares                 %
                   -----------                ------               -----

<S>                                          <C>                   <C>  
                   Egidio Cianciosi          3,000,000             91.94

                   James T. Jensen             100,000              3.06

                   Kenneth D. Kirk             163,158              5.00

                                             3,263,158            100.00
                                             =========            ======
</TABLE>

         1.3 Merger Structure. The respective boards of directors of CMC and
Cygnus have determined that it is advisable to consummate the merger transaction
described herein (the "Merger"), as a result of which all of the Cygnus Common
Stock will be converted into shares of the common stock, $.001 par value per
share, of Zila ("Zila Common Stock") and Cygnus will be wholly owned directly or
indirectly by Zila, all on the terms and subject to the conditions set forth in
this Agreement.

         1.4 Effective Time of Merger. At the Effective Time (as defined below),
in accordance with this Agreement and applicable law, CMC shall be merged with
and into Cygnus, the separate existence of CMC (except as may be continued by
operation of law) shall cease, and Cygnus shall
<PAGE>   2
continue as the surviving corporation under the name "Cygnus Imaging, Inc."
Cygnus, in its capacity as the corporation surviving the Merger, sometimes is
referred to herein as the "Surviving Corporation."

         1.5  Effect of the Merger. The Surviving Corporation shall possess all
the rights, privileges, immunities and franchises, of a public as well as of a
private nature, of each of CMC and Cygnus (collectively, the "Constituent
Corporation"); and all property, real, personal, and mixed, and all debts due on
whatever account, including subscriptions to shares, and all other choses in
action, and all and every other interest of or belonging to or due to each of
the Constituent Corporations, shall be taken and deemed to be transferred to and
vested in the Surviving Corporation without further act or deed; and the
Surviving Corporation shall be responsible and liable for all liabilities and
obligations of each of the Constituent Corporations.

         1.6  Consummation of the Merger. The date on which the consummation of
the transactions contemplated by this Agreement (the "Closing") actually takes
place is referred to in this Agreement as the "Closing Date." On the Closing
Date, the parties hereto will cause articles of merger relating to the Merger to
be delivered to the Secretaries of State of the states of Delaware and Arizona
in such form as required by, and executed in accordance with, the relevant
provisions of applicable law. The Merger shall be effective at such time as such
articles of merger are duly filed with and accepted by the Secretaries of State
of the states of Delaware and Arizona in accordance with applicable law (the
"Effective Time").

         1.7  Articles of Incorporation and Bylaws, Directors and Officers. The
Articles of Incorporation and Bylaws of Cygnus, as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation immediately after the Effective Time and shall thereafter
continue to be its Articles of Incorporation and Bylaws until amended as
provided therein and under the applicable law. The directors of CMC holding
office immediately prior to the Effective Time shall be the directors of the
Surviving Corporation immediately after the Effective Time. The officers of
Cygnus holding office immediately prior to the Effective Time shall be the
officers (holding the same offices as they held with Cygnus) of the Surviving
Corporation immediately after the Effective Time.

         1.8  Conversion of Securities. Subject to Section 1.10(b), at the
Effective Time, by virtue of the Merger and without any action on the part of
CMC, Cygnus or the holder of any of the following securities:

              (a) The shares of Cygnus Common Stock issued and outstanding
         immediately prior to the Effective Time shall automatically be canceled
         and extinguished and be converted into and become a right to receive an
         aggregate number of shares of Zila Common Stock having a value (as
         determined pursuant to the next sentence) equal to $1,725,000. For
         purposes of determining the number of shares of Zila Common Stock to be
         issued in exchange for the Cygnus Common Stock, the value of such Zila
         Common Stock shall be deemed to be an amount equal to the average of
         the closing bid prices for the Zila Common Stock



                                       -2-
<PAGE>   3
         as reported by the Nasdaq Small-Cap Market (or such other exchange upon
         which the Zila Common Stock is listed for trading at such time) for the
         five trading days immediately preceding the Closing Date.

              (b) Each share of Cygnus Common Stock issued and outstanding
         immediately prior to the Effective Time and held in the treasury of
         Cygnus or owned by Zila or CMC shall automatically be canceled and
         extinguished and no payment shall be made with respect thereto.

              (c) Each share of CMC common stock, par value $.001 per share,
         issued and outstanding immediately prior to the Effective Time shall
         automatically be converted into and become one validly issued, fully
         paid and nonassessable share of common stock, par value $.01 per share,
         of the Surviving Corporation.

              (d) If any shares of Cygnus Common Stock outstanding immediately
         prior to the Effective Time are unvested or are subject to a repurchase
         option, risk of forfeiture or other condition under any applicable
         restricted stock purchase agreement or other agreement with Cygnus,
         then the shares of Zila Common Stock issued in exchange for such shares
         of Cygnus Common Stock will also be unvested and subject to the same
         repurchase option, risk of forfeiture or other condition, and the
         certificates representing such shares of Zila Common Stock may
         accordingly be marked with appropriate legends.

         1.9  Closing of Cygnus Transfer Books. At the Effective Time,
Shareholders, as holders of certificates representing shares of Cygnus Common
Stock that were outstanding immediately prior to the Effective Time, shall cease
to have any rights as shareholders of Cygnus, and the stock transfer books of
Cygnus shall be closed and no transfer of shares of Cygnus Common Stock issued
and outstanding immediately prior to the Effective Time shall thereafter be
made. If, after the Effective Time, valid certificates previously representing
such shares are presented to the Surviving Corporation or the Disbursing Agent
(as defined in Section 1.10), they shall be exchanged as provided in Section
1.10.

         1.10 Exchange of Certificates.

              (a) After the Effective Time, a transfer agent or disbursing agent
         to be designated by Zila (which may not be Zila or a subsidiary of
         Zila) shall act as disbursing agent (the "Disbursing Agent") in
         effecting the exchange of Zila Common Stock for certificates which,
         immediately prior to the Effective Time, represented shares of Cygnus
         Common Stock. As soon as practicable after the Effective Time, the
         Disbursing Agent or Zila shall advise each holder of certificates
         theretofore representing such shares of the procedure for surrendering
         such certificates to Zila or the Disbursing Agent. Upon the surrender
         and exchange of a certificate theretofore representing shares of Cygnus
         Common Stock, the holder shall be issued a certificate representing the
         number of shares of Zila



                                       -3-
<PAGE>   4
         Common Stock to which such person is entitled pursuant to Section
         1.8(a) and the certificate theretofore representing shares of Cygnus
         Common Stock shall forthwith be canceled. Until so surrendered and
         exchanged, each Certificate theretofore representing shares of Cygnus
         Common Stock shall represent solely the right to receive the Zila
         Common Stock into which the shares it theretofore represented shall
         have been converted pursuant to Section 1.8(a), and the Surviving
         Corporation shall not be required to pay the holder thereof the Zila
         Common Stock to which such holder otherwise would be entitled; provided
         that procedures allowing for payment against lost or destroyed
         certificates against receipt of customary and appropriate
         certifications and indemnities shall be provided.

              (b) No fractional shares of Zila Common Stock shall be issued in
         connection with the Merger, and no certificates for any such fractional
         shares shall be issued. In lieu of such fractional shares, any
         fractional share interest in Zila Common Stock which a holder of Cygnus
         Common Stock would otherwise be entitled to receive in the Merger
         (after aggregating all fractional shares of Zila Common Stock that
         would otherwise be issuable to such holder) shall be rounded up to the
         nearest whole share if such fraction is 0.5 or greater and shall be
         rounded down to the nearest whole share if such fraction is less than
         0.5.

         1.11 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"). The parties to this
Agreement hereby adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.

         1.12 Cygnus Indebtedness. The indebtedness of Cygnus as of the Closing
Date will include indebtedness in the aggregate amount of $418,438 owing to
Egidio Cianciosi, Sandra Jackman and Kenneth D. Kirk (the "Shareholder
Indebtedness"). The parties acknowledge and agree that such Shareholder
Indebtedness shall will be assumed by the Surviving Corporation and shall remain
indebtedness of Cygnus, as the Surviving Corporation, following the Effective
Time and that, within fifteen (15) business days following the Effective Time,
Cygnus, as the Surviving Corporation, will repay the outstanding principal and
interest of such indebtedness.

         1.13 Taking of Necessary Action; Further Action. Zila and CMC, on the
one hand, and Cygnus and the Shareholders, on the other hand, shall use all
reasonable efforts to take all such action (including without limitation action
to cause the satisfaction of the conditions of the other to effect the Merger)
as may be necessary or appropriate in order to effectuate the Merger as promptly
as possible. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation and Zila with full possession of all the rights,
privileges, immunities and franchises of the Constituent Corporations, the
officers and directors of the Surviving Corporation and Zila are fully
authorized in the name of the Constituent Corporations or otherwise to take, and
shall take, all such action.



                                       -4-
<PAGE>   5
                                    ARTICLE 2
             REPRESENTATIONS AND WARRANTIES OF CIANCIOSI AND CYGNUS

         Except as specifically provided otherwise in this Article 2, as of the
execution and delivery of this Agreement (and as of the Effective Time with
respect to representations and warranties contained in all certificates and
other documents delivered pursuant to Section 7.2), each of Cianciosi, in his
individual capacity and as an officer and director of Cygnus, and Cygnus
represents and warrants to Zila and CMC as follows:

         2.1 Due Execution. This Agreement has been duly executed and delivered
by Shareholders and constitutes the valid and binding agreement of each of them
in accordance with its terms. Shareholders have full power and authority to
execute, deliver and perform this Agreement. Cygnus has the requisite corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by Cygnus
and the consummation by Cygnus of the transactions contemplated hereby have been
duly authorized by the Board of Directors and Shareholders of Cygnus, and no
other corporate proceedings on the part of Cygnus are necessary to authorize
this Agreement and such transactions. This Agreement has been duly executed and
delivered by Cygnus and constitutes a valid and binding obligation of Cygnus,
enforceable in accordance with its terms. No authorization, consent or approval
of, or filing with, any public body, court or authority is necessary on the part
of Cygnus or Shareholders for the consummation by Cygnus or Shareholders of the
transactions contemplated by this Agreement.

         2.2 No Violation of Other Instruments. The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated
hereby will not, violate any provisions (including provisions requiring any
consent or approval) of any charter, bylaw, mortgage, lien, order, judgment,
decree, or of any material lease, agreement or instrument to which any
Shareholder or Cygnus is a party or by which any Shareholder or Cygnus is bound,
and will not violate any other material restriction of any kind or character to
which any Shareholder or Cygnus is subject.

         2.3 Corporate Status. Cygnus is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona and is
qualified in each jurisdiction in which its owning, leasing, utilization of
property or conduct of business makes such qualification necessary. Cygnus has
all requisite power and authority to own, lease and utilize its properties and
assets and to conduct its businesses as now being conducted.

         2.4 Corporate Records. The corporate minute book of Cygnus has been
made available to Zila and is complete, including therein the Articles of
Incorporation and Bylaws of Cygnus (or the equivalent documents or copies
thereof) together with any amendments thereto; the minutes contained therein
accurately reflect the actions and proceedings of the board of directors and any
committee thereof and of the shareholders of Cygnus; and the signatures
appearing on all documents contained therein are the true signatures of the
persons purporting to have signed the same.



                                       -5-
<PAGE>   6
         2.5 The Cygnus Common Stock. The Cygnus Common Stock constitutes all
the issued and outstanding capital stock of Cygnus. The Cygnus Common Stock is
validly issued, fully paid and nonassessable and is owned of record and
beneficially by Shareholders as described in Section 1.1, free and clear of any
and all liens, security interests and other encumbrances, stockholders'
agreements and voting trusts. There is no (i) outstanding subscription, option,
call, warrant or right (whether or not currently exercisable) to acquire any
shares of the capital stock or other securities of Cygnus; (ii) outstanding
security, instrument or obligation that is or may become convertible into or
exchangeable for any shares of the capital stock or other securities of Cygnus;
(iii) contract or agreement under which Cygnus is or may become obligated to
sell or otherwise issue any shares or its capital stock or any other securities;
or (iv) condition or circumstance that may give rise to or provide a basis for
the assertion of a claim by any person or entity to the effect that such person
or entity is entitled to acquire or receive any shares of capital stock or other
securities of Cygnus. All outstanding shares of Cygnus Common Stock have been
issued and granted in compliance with (i) all applicable securities laws and
other applicable laws and regulations, and (ii) all requirements set forth in
applicable contracts and agreements.

         2.6 Subsidiaries. Cygnus does not own, beneficially or otherwise, any
capital stock or other equity interest, partnership interest, joint venture
interest, or any other security issued by any other corporation, organization or
entity, and Cygnus has not agreed and is not obligated to make any future
investment in or capital contribution to any such corporation, organization or
entity.

         2.7 No Partnership. Cygnus is not a party to any joint venture,
partnership or other profit or loss sharing agreement.

         2.8 Financial Statements. Cygnus has heretofore delivered or caused to
be delivered to Zila statements of financial condition and related statements of
operations respecting the consolidated business and operations of Cygnus for and
as of the fiscal years ended December 31, 1996 and 1995 (such financial
statements are hereinafter collectively called the "Financial Statements"). The
Financial Statements are correct and complete, present fairly the financial
position, results of operations, and changes in financial position of the
consolidated business and operations of Cygnus as of the dates or for the
periods indicated, are consistent with the books and records of the entities to
which they relate and have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved.

         2.9 Inventories. The inventories of Cygnus disclosed in the December
31, 1996 financial statements referred to at Section 2.8 hereof (the "12/96
Financials"), including finished goods, work in process, raw materials and
supplies, consisted of items, valued at cost or market, whichever is lower, that
were merchantable or usable in the ordinary course of the businesses of Cygnus
in quantities and amounts not in excess of the reasonable needs of such
businesses, except only for obsolete, defective and excess items for which the
carrying value (net of applicable reserves, if any) did not exceed net
realizable values, after giving full consideration to the cost of carrying or
disposing of or marketing such items. Since December 31, 1996, there have been



                                       -6-
<PAGE>   7
no changes in such inventories except as a consequence of sales and purchases in
the ordinary course of business.

         2.10 Accounts Receivable. Except to the extent of reserves set forth in
the 12/96 Financials, all of the accounts receivable, notes, and other
obligations for payment of money to Cygnus as of December 31, 1996 were (i)
valid and legally enforceable obligations of the persons purported to be liable
thereon; and (ii) free of any defense, counterclaim, setoff or deduction. Since
December 31, 1996, there have been no changes in such receivables, notes and
other obligations except for changes arising in the ordinary course of Cygnus'
business.

         2.11 Title to Properties and Assets. Cygnus has good and marketable
title to the properties and assets reflected in the 12/96 Financials and the
Exhibits to this Agreement, except properties and assets disposed of since
December 31, 1996 in the ordinary course of Cygnus' business. The properties and
assets of Cygnus are not subject to any mortgage, pledge, lien, security
interest, lease, encumbrance or charge other than those (i) disclosed in the
12/96 Financials, (ii) arising from taxes not yet due or payable or being
contested in good faith by appropriate proceedings diligently conducted; or
(iii) disclosed in Exhibit 2.11 to this Agreement. Exhibit 2.11 to this
Agreement accurately sets forth in summary form all real property owned, leased
or used by Cygnus and the nature of any mortgage, pledge, lien, security
interest, lease, encumbrance or charge materially affecting such real property.

         2.12 Liabilities. Cygnus does not have any liabilities, for borrowed
money or otherwise, except (i) as disclosed in the 12/96 Financials; or (ii) as
incurred in the ordinary course of business since December 31, 1996 and
identified in Exhibit 2.12 to this Agreement. Cygnus is not directly or
indirectly liable upon or obligated in any other way to provide funds to or to
guarantee or assume any debt or obligation of any individual or any legal entity
other than of Cygnus, except as a consequence of endorsements made in the
ordinary course of business in connection with the deposit of items for
collection.

         2.13 Material Contracts. A true and complete schedule of all Material
Contracts is attached to this Agreement as Exhibit 2.13. For purposes of this
Agreement, a "Material Contract" is any contract or agreement (i) which is
disclosed or identified in any Exhibit to this Agreement; (ii) which is outside
the ordinary course of business of Cygnus; or (iii) which is within the ordinary
course of business of Cygnus having an unfulfilled direct or contingent
commitment of Cygnus which involves (a) an obligation on the part of Cygnus to
pay in excess of $10,000 or to provide goods and/or services in excess of such
amount, or (b) an obligation of any person or entity to provide goods and/or
services to Cygnus in excess of such amount or which are otherwise critical to
the businesses of Cygnus. Each Material Contract is in full force and effect, is
valid and binding upon the parties thereto and is enforceable by them in
accordance with its terms. Shareholders are not aware of any circumstance which
could reasonably be expected to adversely affect Cygnus in the performance of
its obligations under a Material Contract or in the realization of the benefits
contemplated by a Material Contract. To the knowledge of Shareholders, Cygnus is
not bound by any Material Contract to perform services



                                       -7-
<PAGE>   8
or provide goods which, upon performance by Cygnus, could reasonably be expected
to result in a loss to Cygnus.

         2.14 Pending Litigation; Contingencies. Except as set forth on Exhibit
2.14 to this Agreement, there are no actions, suits, proceedings or formal
inquiries before any court, arbitration board, regulatory agency or governmental
body pending (or to the knowledge of Shareholders, threatened) against or
affecting Cygnus or any of its assets, business operations, rights or prospects.
None of such matters is reasonably likely to result in a material adverse change
in the business, operations, assets or prospects of Cygnus.

         2.15 No Defaults. No event has occurred and no condition exists which
constitutes, or with the giving of notice or lapse of time, or both, would
constitute, a default by Cygnus in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in (i) any indenture
or other agreement creating, evidencing or securing indebtedness of Cygnus, or
(ii) any other Material Contract or any material permit to which Cygnus is a
party or by which Cygnus or its business or properties may be bound or adversely
affected. Cygnus is not in default with respect to any order, writ, injunction
or decree of any court or in default under any order, material regulation or
demand of any federal, state, municipal or other governmental agency.

         2.16 Compliance with Statutes and Regulations. Cygnus is in compliance
in all material respects with, and has at all times complied in all material
respects with, all applicable statutes, permit and licensing requirements,
zoning and building codes, land use regulations, health, safety and
environmental standards and orders of, and all restrictions imposed by, all
governmental authorities having jurisdiction over it or the conduct of its
business and the ownership and operation of its assets. No consent, approval or
other order of any governmental or administrative board or body is required as a
condition to the validity of this Agreement or to the consummation of the
transactions contemplated hereby.

         2.17 Tax Matters. Cygnus has timely filed all federal, state, local and
foreign tax returns for income taxes, sales taxes, withholding and payroll
taxes, property taxes and other taxes of every kind whatsoever required by law
to have been filed prior to the Effective Time. For purposes of the preceding
sentence, a return shall be deemed to have been timely filed if it was filed
after the date due but within any period allowed in an extension granted by the
responsible taxing authority. All such tax returns were complete and accurate in
all material respects as of their filing dates. Cygnus has paid or caused to be
paid all taxes which have become due, together with any interest, if any, due
thereon and any penalties or late fees associated therewith, whether pursuant to
such returns or pursuant to any assessments or otherwise. The amounts
established as provisions for taxes in the Financial Statements are sufficient
for the payment of all unpaid federal, state, county, local and foreign taxes
(including all assessments and other governmental charges respecting income,
receipts, assets or franchises) applicable to the period ended on the date and
for all years and periods prior thereto to which each Financial Statement
relates and for which Cygnus may be liable in its own right or as transferee of
the assets of, or as successor to any other corporation, association,
partnership, joint venture or other entity. The Merger and any



                                       -8-
<PAGE>   9
other transaction contemplated by this Agreement will not result in the
imposition of any tax liability (including any liability for stock transfer,
stamp or similar taxes) upon Zila, CMC or Cygnus.

         2.18 Employment of Labor. Cygnus has complied in all material respects
with applicable federal and state laws and regulations relating to the
employment of labor, including the provisions thereof relating to wages, hours,
safety, and fair employment practices. No employees of Cygnus are represented by
a collective bargaining unit. To the knowledge of Shareholders, no such
collective bargaining unit is attempting to represent any employees of Cygnus.
Except as disclosed in the Disclosure Materials (hereinafter defined) or as
otherwise specifically set forth in an Exhibit to this Agreement, Cygnus does
not have any obligation to or customary arrangement with employees for bonuses,
incentive compensation, vacations, severance pay, insurance or other benefits or
perquisites.

         2.19 Insurance. There is in effect for Cygnus such insurance against
loss or damage of the kinds customarily insured against by corporations engaged
in the same or similar business or having similar properties, with reputable
insurers, in such amounts and by such methods as is customary in the case of
such corporations.

         2.20 Employee Benefit Plans. With respect to the employee benefits
provided to employees and former employees of Cygnus:

              (a) Cygnus currently maintains only the employee pension benefit
         plans, as defined in Section 3(2) of the Employee Retirement Income
         Security Act of 1974, as amended ("ERISA"), as are listed in Exhibit
         2.20 to this Agreement (the "Pension Plans").

              (b) Cygnus currently maintains only the employee welfare benefit
         plans, as defined in Section 3(l) of ERISA (including but not limited
         to, life insurance, medical, hospitalization, holiday, vacation,
         disability dental and vision plans), as are listed in Exhibit 2.20 to
         this Agreement (the "Welfare Plans").

              (c) Cygnus currently maintains, or has entered into, only the
         compensation programs and/or employment arrangements, (including but
         not limited to, incentive compensation, bonus, severance, sick pay,
         salary continuation, deferred compensation, supplemental executive
         compensation plans, and employment and consulting agreements) as are
         listed in Exhibit 2.20 to this Agreement (the "Compensation Programs").

              (d) Cygnus does not contribute, and has not contributed within the
         last five years, to any multiemployer plan, as defined by Section 3(37)
         of ERISA.

              (e) Each Pension Plan and Welfare Plan as written and as
         administered is in compliance with ERISA; each Pension Plan which is
         intended to be qualified



                                       -9-
<PAGE>   10
         under Section 401(a) of the Internal Revenue Code of 1986, as amended
         (the "Code") has been determined by the Internal Revenue Service to be
         so qualified or a request for such determination has been timely filed
         with the Internal Revenue Service (and to Cygnus' knowledge nothing has
         occurred since the date of the last such determination which could
         reasonably be expected to cause the Internal Revenue Service to revoke
         such determination).

              (f) Any Pension Plan or any Welfare Plan designed to satisfy the
         requirements of Section 125, Section 401, Section 401(k), Section 409,
         Section 501(c)(9), Section 4975(e)(7), and/or Section 4980B of the
         Code, satisfies such section.

              (g) No accumulated funding deficiency, as defined in Section
         302(a)(2) of ERISA, exists (whether or not waived) with respect to any
         Pension Plan as of the date hereof.

              (h) All amounts required to be paid by Cygnus with respect to each
         Pension Plan, Welfare Plan and Compensation Program have been
         indefeasibly paid in full.

              (i) None of the Pension Plans or Cygnus or any party in interest
         or disqualified person has engaged in any non-exempt "prohibited
         transactions" as defined in Section 406 of ERISA or Section 4975 of the
         Code.

              (j) Except as disclosed in Exhibit 2.20 to this Agreement, no
         Pension Plan or Welfare Plan provides benefits, including without
         limitation death or medical benefits (whether or not insured), with
         respect to current or former employees beyond their retirement or other
         termination of service other than (i) coverage mandated by applicable
         law, (ii) retirement benefits under a Pension Plan, (iii) death
         benefits under a Welfare Plan, (iv) deferred compensation accrued on
         the books of Cygnus, or (v) benefits the full cost of which is borne by
         the current or former employee (or his or her beneficiary).

              (k) No "leased employee," as that term is defined in Section
         414(n) of the Code, performs services for Cygnus.

              (l) No liability has been, or is expected by Cygnus to be,
         incurred by Cygnus under Section 4062 of ERISA with respect to any
         Pension Plan.

              (m) No reportable event within the meaning of Title IV of ERISA
         has occurred with respect to any Pension Plan.

              (n) Cygnus has furnished Zila with correct and complete copies of
         each Pension Plan, Welfare Plan, and Compensation Program, together
         with any trust



                                      -10-
<PAGE>   11
         agreements, summary plan descriptions, employee informational material,
         financial statements relating thereto and participant listings.

         2.21 Proprietary Rights. Except as set forth in Exhibit 2.21, Cygnus
does not own, nor is it licensed under, any patent, patent application,
trademark, trademark application, trade name, service mark, copyright,
franchise, corporate name, trade secret or other proprietary right or asset (all
of the foregoing are hereinafter referred to as "Proprietary Rights"). Cygnus
owns and possesses all rights, titles and interest, or a valid license, in and
to the Proprietary Rights set forth in Exhibit 2.21. Exhibit 2.21 describes all
Proprietary Rights which have been licensed to third parties and all Proprietary
Rights which are licensed from third parties by Cygnus. Cygnus has taken all
necessary action to protect the Proprietary Rights set forth in Exhibit 2.21.
Cygnus has not received any notice of, nor is it aware of any facts which
indicate a likelihood of, any infringement, misappropriation, or conflict from
any third party with respect to the Proprietary Rights which are listed on
Exhibit 2.21; Cygnus has not infringed, misappropriated or otherwise conflicted
with any Proprietary Rights or similar rights or assets of any third parties,
nor is it aware of any such infringement, misappropriation or conflict which
will occur in the continued operation of the business of Cygnus; and no claim by
any third party contesting the validity of any Proprietary Rights listed in
Exhibit 2.21 has been made, is currently outstanding or, to the best knowledge
of Cygnus, is threatened.

         2.22 Questionable Payments. To the knowledge of Shareholders, Cygnus
has not, directly or indirectly: used corporate funds for unlawful
contributions, gifts, entertainment, or for other unlawful expenses relating to
political activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds; violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977 applicable to the conduct of its business;
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; made any false or fictitious entry on its books or records; or
made any bribe, rebate, payoff, influence payment, kickback, or other unlawful
payment to any person or entity, private or public, regardless of form, whether
in money, property, or services, to obtain favorable treatment in securing
business or to obtain special concessions, or to pay for favorable treatment for
business secured or for special concessions already obtained.

         2.23 Disclosure Materials; Untrue Statements. In connection with the
execution and delivery of this Agreement, Shareholders have provided or caused
to be provided to Zila (including its agents, advisors and representatives)
various documents and other materials relating to Cygnus. Such documents and
other materials, together with the representations and warranties of
Shareholders contained in this Agreement, and the schedules, exhibits and
certificates furnished by Shareholders or Cygnus to Zila (including its agents,
advisors and representatives) in connection with the execution of this Agreement
or in connection with the transactions contemplated hereby are referred to
herein as the "Disclosure Materials." The Disclosure Materials, taken as a
whole, contain an accurate description of the current businesses and operations
of Cygnus. Shareholders have not directly or indirectly made, in connection with
the offer and sale of the Cygnus Common Stock to Zila, (a) any statement which
as of the date thereof



                                      -11-
<PAGE>   12
is false or misleading with respect to any material fact, or (b) an omission or
failure to state any material fact (i) necessary in order to make the statements
made in the light of the circumstances in which they were made, not false or
misleading, or (ii) necessary to correct an earlier statement which has
subsequently become false or misleading.

         2.24 Absence of Adverse Changes. Other than as described in Schedule
2.24 to this Agreement, since December 31, 1996, Cygnus taken as a whole:

              (a) has not suffered any material adverse change in its
         businesses, assets, financial affairs or prospects;

              (b) has conducted its businesses in the ordinary course and has
         not made any unusual commitments, acquisitions, borrowings, purchases,
         payments or sales;

              (c) has not suffered any damage, destruction, or loss, whether or
         not covered by insurance, materially and adversely affecting its
         properties, assets or business;

              (d) has not made any declaration or setting aside or payment of
         any dividend or other distribution in respect of the capital stock of
         Cygnus, or any direct or indirect redemption, purchase or other
         acquisition of any stock; and

              (e) has not made any material change in compensation (including
         bonus compensation) payable to or to become payable to any of its
         officers, employees or agents or any changes in employee fringe
         benefits.

                                    ARTICLE 3
                 REPRESENTATIONS AND WARRANTIES OF ZILA AND CMC

         Zila and CMC represent and warrants to Shareholders, and each of them,
as follows:

         3.1  Corporate Status. Each of Zila and CMC is a corporation duly
organized and in good standing under the laws of the State of Delaware. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, violate any provision of any charter,
bylaw, mortgage, lien, lease, agreement, instrument, order, judgment or decree
to which Zila or CMC is a party or by which Zila or CMC is bound, and will not
violate any other restriction of any kind or character to which Zila or CMC is
subject.

         3.2  Due Authorization. The execution and delivery of this Agreement by
Zila and CMC has been duly and validly authorized and all requisite corporate
actions have been taken to make it valid and binding upon Zila and CMC,
respectively, in accordance with its terms.



                                      -12-
<PAGE>   13
                                    ARTICLE 4
               CONDITIONS PRECEDENT TO OBLIGATIONS OF ZILA AND CMC

         The obligations of Zila and CMC arising under this Agreement to be
performed at the Effective Time are subject to fulfillment at or prior to the
Effective Time of each of the following conditions:

         4.1 Representations and Warranties True. Each of the representations
and warranties of Shareholders and Cygnus contained in this Agreement shall have
been true and correct when made.

         4.2 Financial Statements. Zila shall have received the Financial
Statements and the 12/96 Financials.

         4.3 Contract Amendments. To the extent requested by Zila, all contracts
between Cygnus and any Shareholder or any member of the family of any
Shareholder shall have been amended to make such reasonable changes to the terms
thereof which shall be satisfactory to Zila (the "Contract Amendments"), and
Zila shall have received evidence thereof satisfactory to it.

         4.4 Approvals. Zila shall have received evidence satisfactory to it
that the transactions contemplated by this Agreement have been approved by the
Board of Directors and shareholders of Cygnus, and by any lenders or creditors
of Cygnus or other parties of which consent is required in order for Cygnus to
enter into the transactions contemplated by this Agreement.

         4.5 Access to Properties and Information. Cygnus shall have permitted
Zila and its representatives full access during normal business hours to all of
the properties, books, tax returns, contracts and records of Cygnus, and shall
have provided all documents and information with respect to its affairs, as may
have been reasonably requested by Zila or such representatives.

         4.6 Satisfactory Investigation. Zila and its consultants and
representatives shall have completed their investigation and review of the
business and affairs of Cygnus, and such investigation and review shall have
disclosed no event or condition which would, in the reasonable judgment of Zila,
make it inadvisable to consummate the transactions contemplated by this
Agreement.

         4.7 No Litigation. There shall be no action, proceeding or threatened,
pending or actual litigation to enjoin, restrain or prohibit the consummation of
the transactions contemplated by this Agreement or which would have the effect,
if successful, of imposing any liability upon Zila or impairing the right of
Zila to own all of the issued and outstanding common stock of the Surviving
Corporation upon the Effective Time or to continue the business of Cygnus as
presently conducted.

         4.8 Compliance with Section 7.2. Shareholders and Cygnus shall have
complied with Section 7.2.



                                      -13-
<PAGE>   14
                                    ARTICLE 5
         CONDITIONS PRECEDENT TO OBLIGATIONS OF SHAREHOLDERS AND CYGNUS

         The obligations of Shareholders and Cygnus arising under this Agreement
to be performed at the Effective Time are subject to fulfillment at or prior to
the Effective Time of each of the following conditions:

         5.1  Representations and Warranties True. Each of the representations
and warranties of Zila and CMC contained in this Agreement shall be true and
correct.

         5.2  Stock Options. Mr. Egidio Cianciosi shall have been granted
options, pursuant to Zila's existing employee stock option plan, to purchase
75,000 shares of Zila Common Stock at an exercise price equal to the average of
the closing bid and ask prices on the Closing Date as reported by the Nasdaq
Small-Cap Market (or such other exchange upon which the Zila Common Stock is
listed for trading at such time). Such options shall vest at the rate of 25,000
shares per year, with the first 25,000 shares vesting one year following the
Closing Date, and shall be subject to other customary terms and conditions.

         5.3  Compliance with Section 7.3. Zila and CMC shall have complied with
Section 7.3.

                                    ARTICLE 6
                     CONDUCT OF BUSINESS PENDING THE CLOSING

         6.1  Conduct of Business Pending the Closing. Cygnus and Shareholders
covenant and agrees that, prior to the Effective Time, unless Zila shall
otherwise consent in writing or as otherwise expressly contemplated or permitted
by this Agreement:

              (a) The business of Cygnus shall be conducted only in, and Cygnus
         shall not take any action except in, the ordinary course, on an
         arm's-length basis and in accordance in all material respects with all
         applicable laws, rules and regulations and past custom and practice;
         and Cygnus shall maintain its facilities in good condition and repair
         and in accordance with Cygnus' policies and procedures relating thereto
         as in effect prior to the execution of this Agreement;

              (b) Cygnus shall not, directly or indirectly, do or pen-nit to
         occur any of the following: (i) issue, sell, pledge, dispose of or
         encumber (A) any additional shares of, or any options, warrants,
         conversion privileges or rights of any kind to acquire any shares of,
         any of its capital stock, except for issuances upon the exercise of
         options or warrants outstanding on the date hereof, or (B) any of its
         assets, except for fair value in the ordinary course of business; (ii)
         amend or propose to amend its Articles of Incorporation or Bylaws;
         (iii) split, combine or reclassify any outstanding shares of the Cygnus
         Common Stock or other securities of Cygnus, or declare, set aside or
         pay any dividend of other distribution payable in cash, stock, property
         or otherwise with respect to any of the Cygnus Common



                                      -14-
<PAGE>   15
         Stock or other securities of Cygnus; (iv) redeem, purchase or acquire
         or offer to acquire any of the Cygnus Common Stock or other securities
         of Cygnus; (v) acquire (by merger, exchange, consolidation, acquisition
         of stock or assets or otherwise) any corporation, partnership, joint
         venture or other business organization or division or material assets
         thereof; (vi) incur or guarantee any indebtedness for borrowed money or
         issue any debt securities; or (vii) enter into or propose to enter
         into, or modify or propose to modify, any agreement, arrangement or
         understanding with respect to any of the matters set forth in this
         Section 6.1(b);

              (c) Cygnus shall not, directly or indirectly, (i) enter into or
         modify any contract, agreement or understanding with Egidio Cianciosi;
         (ii) enter into or modify any employment, severance or similar
         agreements or arrangements with, or grant any bonuses, salary
         increases, severance or termination pay to, any officers or directors
         or consultants; (iii) make any capital expenditures, including any
         capitalizable lease obligations, other than expenditures necessary to
         maintain existing assets in good repair and other capital expenditures
         in amounts not exceeding $5,000 in the aggregate; or (iv) in the case
         of employees who are not officers or directors or consultants, grant or
         take any action with respect to the granting of any salary increases,
         severance or termination pay or increases in other benefits, other than
         grants or such actions as are in the ordinary course of Cygnus'
         business and are consistent with Cygnus' historic compensation
         practices, or grant or take any actions with respect to the granting of
         any bonuses;

              (d) Cygnus shall not adopt or amend any bonus, profit sharing,
         compensation, stock option, pension, retirement, deferred compensation,
         employment or other employee benefit plan, trust, fund or group
         arrangement for the benefit or welfare of any employees or any bonus,
         profit sharing, compensation, stock option, pension, retirement,
         deferred compensation, employment or other employee benefit plan,
         agreement, trust, fund or arrangements for the benefit or welfare of
         any director;

              (e) Cygnus shall use its best efforts to cause its current
         insurance (or reinsurance) policies not to be canceled or terminated or
         reduced in coverage amount or any of the coverage thereunder to lapse,
         unless simultaneously with such termination, cancellation, reduction in
         coverage amount or lapse, replacement policies providing coverage equal
         to or greater than the coverage under the canceled, terminated, reduced
         or lapsed policies for substantially similar premiums are in full force
         and effect;

              (f) Cygnus (i) shall use its best efforts to preserve intact its
         business organization and good will, keep available the services of its
         officers and employees as a group and maintain satisfactory
         relationships with suppliers, distributors, customers and others having
         business relationships with it; (ii) shall




                                                      -15-
<PAGE>   16
         confer at Zila's request (but in no event less frequently than weekly)
         with representatives of Zila to report on operational matters and the
         general status of ongoing operations; (iii) shall not take any action
         which would render, or which reasonably may be expected to render, any
         representation or warranty made by it in this Agreement or in any other
         agreement or instrument executed in connection with the transactions
         contemplated hereby untrue at, or at any time prior to, the Effective
         Time; (iv) shall notify Zila of any emergency or other change in the
         normal course of its business or in the operation of its properties and
         of any governmental or third party complaints, investigations or
         hearings (or communications indicating that the same may be
         contemplated) if such emergency, change, complaint, investigation or
         hearing would be material, individually or in the aggregate, to the
         business, operations or financial condition of Cygnus or to Cygnus' or
         Zila's ability to consummate the transactions contemplated by this
         Agreement; and (v) shall notify Zila if Cygnus shall discover that any
         representation or warranty made by it in this Agreement was when made,
         or has subsequently become, untrue;

              (g) Cygnus shall not change any of its methods of accounting or
         accounting practices in any material respect, and Cygnus shall not make
         any tax election;

              (h) Cygnus will not waive or agree to waive any applicable statute
         of limitations or any similar statutory or judicial doctrine benefiting
         Cygnus; and

              (i) Cygnus shall not commence or settle any material legal action
         or proceeding.

         6.2  Notification. During the period subsequent to the execution of
this agreement and prior to the Closing Date (the "Pre-Closing Period"), Cygnus
shall promptly notify Zila in writing of:

              (a) the discovery by Cygnus of any event, condition, fact or
         circumstance that occurred or existed on or prior to the date of this
         Agreement and that caused or constitutes an inaccuracy in or breach of
         any representation or warranty made by Cygnus in this Agreement;

              (b) any event, condition, fact or circumstance that occurs, arises
         or exists after the date of this Agreement and that would cause or
         constitute an inaccuracy in or breach of any representation or warranty
         made by Cygnus in this Agreement if (i) such representation or warranty
         had been made as of the time of the occurrence, existence or discovery
         of such event, condition, fact or circumstance, or (ii) such event,
         condition, fact or circumstance had occurred, arisen or existed on or
         prior to the date of this Agreement;



                                      -16-
<PAGE>   17
              (c) any breach of any covenant or obligation of Cygnus; and

              (d) any event, condition, fact or circumstance that would make the
         timely satisfaction of any of the conditions set forth in Article 4
         impossible or unlikely.

                                    ARTICLE 7
                                     CLOSING

         7.1  General. The Closing shall take place at __________ __.m. on
_______________, 1997, at the offices of Squire, Sanders & Dempsey L.L.P., 40
North Central Ave., Suite 2700, Phoenix, Arizona 84004, or at such other time,
date or place as shall be mutually agreed upon by the parties.

         7.2  Actions by Shareholders. At the Closing, Shareholders shall
deliver or cause to be delivered to Zila (and to the other parties to the
instruments referred to below as applicable), in form and substance reasonably
acceptable to Zila, each of the following instruments or materials, duly
executed:

              (a) A certified copy of the Articles of Incorporation of Cygnus as
         in effect on the Closing Date.

              (b) A certificate executed by the Secretary and by the President
         of Cygnus, dated the Closing Date, to the effect that: (i) the copy of
         the Bylaws of Cygnus attached to such certificate is a true, correct
         and complete copy of the Bylaws of such corporation as currently in
         effect; (ii) Cygnus owns no shares of capital stock of any other
         corporation; (iii) the Contract Amendments are in full force and
         effect; and (iv) a true copy of each consent required by a Material
         Contract is attached to such certificate and each such consent is in
         effect.

              (c) A certificate executed by Cygnus and Cianciosi, dated the
         Closing Date, to the effect that: (i) Cygnus and Shareholders are in
         compliance with all the terms, covenants and conditions contained in
         this Agreement on their part to be complied with; (ii) all
         representations and warranties of Cygnus and Cianciosi contained in
         this Agreement were true and correct when made and are true and correct
         as of the Closing Date except as to changes required or contemplated by
         this Agreement; (iii) the 12/96 Financials are correct and complete,
         present fairly the financial position, results of operations, and
         changes in financial position of the consolidated business and
         operations of Cygnus as of the dates or for the periods indicated, are
         consistent with the books and records of the entities to which they
         relate and have been prepared in accordance with generally accepted
         accounting principles consistent with those followed in the preparation
         of the Financial Statements; (iv) the inventories of Cygnus in the
         12/96 Financials, including finished goods, work in process, raw
         materials and supplies, consisted of items,



                                      -17-
<PAGE>   18
         valued at cost or market, whichever is lower, that were merchantable or
         usable in the ordinary course of the businesses of Cygnus in quantities
         and amounts not in excess of the reasonable needs of such businesses
         except only for obsolete, defective and excess items for which the
         carrying value (net of applicable reserves, if any) did not exceed net
         realizable values, after giving full consideration to the cost of
         carrying or disposing of or marketing such items; and since December
         31, 1996, there have been no changes in such inventories except as a
         consequence of sales and purchases in the ordinary course of business;
         (v) except as disclosed in the Disclosure Materials, all of the
         accounts receivable, notes, and other obligations for payment of money
         to Cygnus as of December 31, 1996 are valid and legally enforceable
         obligations of and collectible from the persons purported to be liable
         thereon and are free of any defense, counterclaim, setoff or deduction;
         and since December 31, 1996, there have been no changes in such
         receivables, notes and other obligations except for changes arising in
         the ordinary course of business; (vi) no Shareholder or member of the
         family of a Shareholder has any unsatisfied claim against Cygnus or any
         asset thereof, except as specifically set forth on an Exhibit to this
         Agreement; and (vii) upon the Effective Time, all of the common stock
         of the Surviving Corporation will be validly issued, fully paid,
         nonassessable and owned of record by Zila.

              (d)  The resignation of Shareholders from all directorships held
         by them respecting Cygnus.

              (e)  The opinion of counsel to Shareholders and to Cygnus,
         satisfactory in form and substance to Zila, dated the Closing Date, to
         the effect that:

                   (i)   Cygnus is duly organized, validly existing and in good
              standing under the laws of the State of Arizona, is qualified as a
              foreign corporation in each jurisdiction in which its owning,
              leasing or licensing of property or conduct of business requires
              such qualification and has all requisite power to own all of its
              properties and to carry on its business as presently being
              conducted;

                   (ii)  Shareholders are the record owners of the Cygnus Common
              Stock and have good and marketable title to the Cygnus Common
              Stock;

                   (iii) Upon the Effective Time, the common stock of the
              Surviving Corporation will be validly issued, fully paid,
              nonassessable and owned of record by Zila, and such shares will
              constitute 100% of the issued and outstanding capital stock of
              Cygnus;



                                      -18-
<PAGE>   19
                   (iv)   To the knowledge of such counsel after reasonable
              inquiry, there are no outstanding subscriptions, warrants or
              options for the purchase of shares of capital stock or any
              securities convertible into or exchangeable for shares of capital
              stock or any other commitments of any kind for the issuance of
              additional shares of capital stock of Cygnus;

                   (v)    Neither the execution and delivery of this Agreement
              nor the performance of the transactions contemplated hereby will
              constitute a breach or violation of the Articles of Incorporation
              or Bylaws (or the equivalent instruments) of Cygnus or of any
              Material Contract, or of any law, order, regulation or decree by
              which Cygnus or any Shareholder is bound;

                   (vi)   This Agreement has been duly authorized, executed and
              delivered by Shareholders and constitutes the valid and legally
              binding obligation of Shareholders enforceable in accordance with
              its terms;

                   (vii)  Such counsel is not aware of any action, suit,
              proceeding or claim pending or threatened against Cygnus or its
              properties or businesses, except as set forth in Exhibit 2.14 to
              this Agreement;

                   (viii) The Contract Amendments have been duly and validly
              authorized, executed and delivered by the parties thereto,
              constitute the valid and legally binding obligation of such
              parties and each such Contract Amendment is enforceable in
              accordance with its terms;

                   (ix)   Nothing has come to the attention of such counsel
              which would give them reasonable cause to believe that any of the
              representations and warranties of Shareholders contained in
              Article 2 of this Agreement or in any certificate delivered to
              Zila pursuant to this Section 7.2 are false or misleading.

         With respect to any opinion of such counsel relating to the
         enforceability of any agreement or contract, such opinion may be
         qualified as to the application of bankruptcy, receivership or similar
         laws of general application restricting the enforcement of contractual
         rights, and no opinion need be expressed as to the ability to
         specifically enforce any of the provisions, other than obligations to
         pay money, of such agreements. Insofar as the opinion of such counsel
         involves matters governed by the laws of any jurisdiction other than
         the State of Arizona and the United States of America, such counsel may
         render their opinion as to such



                                      -19-
<PAGE>   20
         matters in reliance upon an opinion of counsel in such jurisdiction, a
         copy of which shall be attached to their opinion.

         7.3  Actions by Zila. At the Closing, Zila shall deliver or cause to be
delivered to Shareholders and Cygnus, in form and substance reasonably
acceptable to Shareholders and Cygnus, each of the following instruments or
materials, duly executed:

              (a)  The opinion of counsel to Zila, Squire, Sanders & Dempsey
         L.L.P., dated the Closing Date, to the effect that:

                   (i)   Each of Zila and CMC is duly organized, validly
              existing and in good standing under the laws of the State of
              Delaware;

                   (ii)  This Agreement has been duly authorized, executed and
              delivered by Zila and CMC and constitutes the valid and legally
              binding obligation of Zila an CMC enforceable in accordance with
              its terms;

                   (iii) Neither the execution and delivery of this Agreement
              nor the performance of the transactions contemplated hereby will
              constitute a breach or violation of the Articles of Incorporation
              or Bylaws of Zila or CMC or, to the knowledge of such counsel, of
              any law, order, regulation or decree by which Zila or CMC is
              bound.

         With respect to any opinion of such counsel relating to the
         enforceability of any agreement or contract, such opinion may be
         qualified as to the application of bankruptcy, receivership or similar
         laws of general application restricting the enforcement of contractual
         rights, and no opinion need be expressed as to the ability to
         specifically enforce any of the provisions, other than obligations to
         pay money, of such agreements. Insofar as the opinion of such counsel
         involves matters governed by the laws of any jurisdiction other than
         the State of Arizona and the United States of America, such counsel may
         render their opinion as to such matters in reliance upon an opinion of
         counsel in such jurisdiction, a copy of which shall be attached to
         their opinion.

              (b)  A certificate executed by the President of Zila to the effect
         that: (i) Zila is in compliance with all the terms, covenants and
         conditions contained in this Agreement on its part to be complied with;
         and (ii) all representations and warranties of Zila contained in this
         Agreement were true and correct in all material respects when made and
         are true and correct in all material respects as of the Closing Date.



                                      -20-
<PAGE>   21
         7.4 Simultaneous Action. All actions taken at the Closing shall be
deemed to occur simultaneously.

         7.5 Employment Agreement. Zila and Mr. Egidio Cianciosi shall use
commercially reasonable efforts to enter into an employment agreement within 10
business days following the Closing Date, pursuant to which Mr. Cianciosi shall
be employed as an employee of Zila or a subsidiary of Zila. Such employment
agreement shall be in form and substance acceptable to Zila and Mr. Cianciosi
and shall provide, among other things, for a three-year term, for a base salary
in the first year of $90,000 annually and for participation by Mr. Cianciosi in
Zila's existing Incentive Bonus Plan.

                                    ARTICLE 8
                                 INDEMNIFICATION

         8.1 General. Cianciosi shall indemnify and hold Zila harmless against
any damage (including costs, fees of counsel and expenses reasonably incurred),
loss or reduction in value suffered by Zila by reason of the incorrectness or
breach of any of the representations or warranties of Cygnus, Cianciosi or any
of the other Shareholders contained in this Agreement or in any certificate
delivered to Zila at the Closing or otherwise in connection with the
transactions contemplated by this Agreement.

         8.2 Limitations on Indemnification Under Section 8.1. Unless the
indemnification right provided to Zila in Section 8.1 shall arise by reason of
fraud or fraudulent concealment on the part of any Shareholder, then (a) Zila
shall be entitled to recover its damages, losses or reductions in value
resulting from all such breaches or incorrectness, up to a maximum aggregate
amount of $1,725,000; and (b) the indemnification rights of Zila set forth in
Section 8.1 shall expire on the second anniversary of the Effective Time, except
as to claims to an indemnification asserted by Zila prior to such anniversary
date which had not been satisfied or otherwise resolved as of such date. The
assertion, waiver or failure to assert any indemnification rights provided in
this Article 8 shall not preclude Zila from seeking any other rights or remedies
to which it may be entitled.

                                    ARTICLE 9
                              APPOINTMENT OF AGENT

         9.1 Grant of Authority. Mr. Egidio Cianciosi is hereby appointed
attorney-in-fact, agent and representative for Shareholders for any and all
purposes arising out of or in connection with this Agreement. Mr. Cianciosi
shall have full power and authority on behalf of each Shareholder (i) to deal
with Zila as to any matter arising under this Agreement; (ii) to accept any
payment by Zila on behalf of any Shareholder; (iii) to accept and give Notices
and other communications relating to this Agreement; (iv) to settle any dispute
relating to the terms of this Agreement; (v) to waive any condition to the
obligations of any Shareholder arising under this Agreement or waive any breach,
circumstance of nonperformance or default by Zila arising under this Agreement;
(vi) to modify or amend this Agreement; and (vii) to execute any instrument or



                                      -21-
<PAGE>   22
document that Mr. Cianciosi may, in his sole discretion, consider necessary or
desirable in the exercise of his authority under this Article 9.

         9.2  Termination of Authority. The authority of Mr. Cianciosi pursuant
to this Article 9 shall terminate upon (i) his resignation (accomplished by
Notice to all parties to this Agreement); (ii) his death; or (iii) the
revocation of his authority as to a Shareholder by such Shareholder
(accomplished by Notice to all parties to this Agreement). Prior to the
effectiveness of any Notice of resignation or revocation of authority, Zila
shall have no duty to inquire into the authority of Mr. Cianciosi, shall have
the right to rely upon all acts of Mr. Cianciosi and all such acts shall be
fully binding upon each Shareholder.

                                   ARTICLE 10
                                  MISCELLANEOUS

         10.1 Survival. All covenants, agreements, representations and
warranties contained in this Agreement or any certificate or other document
delivered pursuant to this Agreement shall survive the Closing, the payment of
all amounts due hereunder and any investigation conducted by or on behalf of
Zila or Shareholders.

         10.2 Finders. Each of Zila, Cygnus and Shareholders represent and
warrant to each other that they have no obligation to any third party which
might give rise to a claim for a brokerage commission, finder's fee or similar
payment to any person in connection with the Merger or the other transactions
contemplated by this Agreement. Zila and Shareholders shall indemnify and hold
the other harmless, and Shareholders shall indemnify and hold Cygnus harmless,
against all claims by their respective finder, broker or similar person, with
respect to the consummation of this Agreement and all transactions contemplated
hereby.

         10.3 Expenses. All expenses incurred by Zila, CMC or Shareholders
(including fees of counsel and accountants) in connection with the preparation
of this Agreement and the transactions contemplated hereby shall be borne by the
party incurring the same. All expenses incurred by Cygnus in connection with the
transactions contemplated by this Agreement shall be borne by Shareholders.

         10.4 Attorneys' Fees. In the event either party hereto institutes an
action or other proceeding to enforce any rights arising under this Agreement,
the party prevailing in such action or other proceeding shall be paid all
reasonable costs and attorneys' fees by the other party, such fees to be set by
the court or arbitrators, as the case may be, and not by a jury and to be
included in any judgment entered in such proceeding.

         10.5 Further Actions. Cygnus and Shareholders shall, without further
consideration, execute and deliver any further or additional instruments and
perform any acts which may become reasonably necessary in order to effectuate
and carry out the purposes of this Agreement.



                                      -22-
<PAGE>   23
         10.6  Severability. In the event any term or provision of this
Agreement is declared to be invalid or illegal, for any reason, this Agreement
shall remain in full force and effect and the same shall be interpreted as
though such invalid and illegal provision were not a part hereof.

         10.7  Notices. Any notice or communication to be given under the terms
of this Agreement ("Notice") shall be in writing and shall be personally
delivered or sent by telex or mail. Notice shall be effective (i) if personally
delivered, when delivered; (ii) if by telex, on the second business day after
transmission thereof on a proper telex or TWX machine with confirmed answerback;
(iii) if mailed, at midnight on the fourth business day after deposit in the
mail with airmail postage prepaid. Notices shall be addressed as follows:

               If to Zila:            Joseph Hines, President
                                      Zila, Inc.
                                      5227 North 7th Street
                                      Phoenix, Arizona 85014
                                      Telephone:  (602) 266-6700
                                      Fax:  (602) 234-2264

               With copy to:          Christopher D. Johnson, Esq.
                                      Squire, Sanders & Dempsey L.L.P.
                                      40 North Central Ave., Suite 2700
                                      Phoenix, Arizona 85004
                                      Telephone:  (602) 528-4000
                                      Fax: (602) 253-8129

               If to Mr. Cianciosi
               or to Shareholders:    Mr. Egidio Cianciosi
                                      8260 East Gelding Drive
                                      Scottsdale, Arizona 85260
                                      Telephone:  (602) ___-_____
                                      Fax: (602) ___-_____

               With copy to:          David D. Dodge, Esq.
                                      Lieberman, Dodge, Sendrow & Gerding, Ltd.
                                      3550 North Central Avenue, Suite 1801
                                      Phoenix, Arizona 85012
                                      Telephone:  (602) 277-3000
                                      Fax: (602) 277-7478

or at such other address as a party may from time to time designate by Notice
hereunder.

         10.8 Modification and Amendments. No provision of this Agreement may be
modified or amended except by a writing executed by the party sought to be
charged with such modification or amendment.



                                      -23-
<PAGE>   24
         10.9 Waiver. Any waiver by any party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of any other provision of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement. Any waiver shall be effective only if in writing and executed by
the party sought to be charged with such waiver.

         10.10 Entire Agreement. This Agreement, together with any other and
further documents executed and delivered at the Closing, constitutes and
embodies the full and complete understanding and agreement of the parties hereto
and supersedes all prior understandings or agreements whether oral or in
writing.

         10.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Arizona (without reference to the
provisions thereof relating to conflicts of laws).

         10.12 Headings; Interpretation. The Section headings and Article
headings used herein are for convenience and reference only and are not intended
to define, limit or describe the scope or intent of any provision of this
Agreement. When used in this Agreement, the term "including" shall mean without
limitation by reason of enumeration. The definition of a term in the plural form
shall include the singular form, and the singular the plural, as the context
requires. Any masculine personal pronoun shall be considered to mean the
corresponding feminine personal pronoun, as the context requires.

         10.13 Successors. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors or assigns, as the case may be. Zila or CMC may
assign any of its respective rights or obligations hereunder to a wholly owned
subsidiary of Zila, provided that as a condition to any such assignment, Zila
shall not be released from its liabilities and obligations arising under this
Agreement.

         10.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed a duplicate original.

         10.15 Satisfaction of Conditions Precedent. Each party shall cooperate
with the other parties hereto and use its or his best efforts to satisfy each of
the conditions precedent to the accomplishment of the transactions contemplated
by this Agreement.

                            [signature page follows]



                                      -24-
<PAGE>   25
         IN WITNESS WHEREOF, the parties hereto have caused this Merger
Agreement to be executed as of the 3rd day of April, 1997.

                                       ZILA, INC.


                                       By
                                         ---------------------------------------

                                       Its      President
                                          --------------------------------------


                                       CYGNUS MERGER CORPORATION


                                       By
                                         ---------------------------------------

                                       Its      President
                                          --------------------------------------


                                       CYGNUS IMAGING, INC.


                                       By
                                         ---------------------------------------

                                       Its      President
                                          --------------------------------------



                                       -----------------------------------------
                                       EGIDIO CIANCIOSI



                                       -----------------------------------------
                                       JAMES T. JENSEN



                                       -----------------------------------------
                                       KENNETH D. KIRK


                                                                  "SHAREHOLDERS"



                                      -25-