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                                                                    EXHIBIT 10-B

                                LICENSE AGREEMENT

         This is an Agreement, entered into as of December 1, 1995 (the
"Effective Date"), between and among Zila, Inc., a Delaware corporation, and
Zila Pharmaceuticals, Inc., a Nevada corporation, each with its principal place
of business at 5227 North 7th Street, Phoenix, Arizona 85014, U.S.A.
(collectively, "Zila"), and The Procter & Gamble Company Inc., an Ohio
corporation, with its principal place of business at One Procter & Gamble Plaza,
Cincinnati, Ohio 45201 ("P&G" or "Licensee").

         Zila is the owner of or has acquired rights in and to certain patents
and trademarks;

         Licensee wishes to obtain from Zila, and Zila is willing to grant to
Licensee, a license under such patents and trademarks on the terms and
conditions of this Agreement;

         NOW, THEREFORE, for and in consideration of the mutual covenants
herein, it is hereby agreed by and between the parties as follows:

         1. Definitions. As used herein the following terms have the following
meanings:

                  1.1 "AFFILIATE" means any wholly-owned (directly or
indirectly) subsidiary or branch of Licensee which conducts business within the
Territory and which makes, has made, uses or sells Licensed Products. The term
"Licensee" shall be deemed to include all such Affiliates.

                  1.2 "ASSETS" means the Licensed Patents, Know-how, Licensed
Marks and Product Registrations.

                  1.3 "COMMENCEMENT OF SALE" means, with respect to any country
in the Territory, the date of the first commercial sale, as evidenced by an
invoice, of the Licensed Product by Licensee in such country following the
Regulatory Approval Date; provided, however, that in no event shall the
Commencement of Sale in any country be later than one hundred twenty (120) days
after the Regulatory Approval Date in such country.

                  1.4 "COMPETITIVE PRODUCT" means any commercially available and
government approved oral cancer detection and screening system using a stain
rinse with toluidine blue dye. As used in the preceding sentence and Section
5.5.2, "commercially available" in any country shall mean that such product has
at least two (2) of the following characteristics: such product is (i)
advertised, marketed or promoted in such country, (ii) found in more than twenty
(20) dental offices in such country or (iii) reimbursed by any third party
health or insurance plans (including government plans) in such country, with
Licensee having the responsibility to provide Zila with written notice of any
such product being "commercially available" containing credible evidence of same
which may include copies of advertisements, price lists, promotional materials,
or written reports from Licensee's employees calling on dentists. As used in the
first sentence of this Section 1.4, "government approved" means that such
product may be sold pursuant to applicable national or international law,
regulation, practice, treaty, judicial ruling or directive.

                  1.5 "CONTRACT(S)" means any agreement, contract, license,
commitment, understanding or similar relationship which relates to the Assets.

                  1.6 "FDA" means the United States Food and Drug
Administration.

                  1.7 "IMPROVEMENT(S)" means any and all ideas, inventions,
Know-how, concepts, and reductions to practice thereof, relating to possible
additions, changes or developments relating to the Licensed Products, including
the manufacturing, testing, safety, efficacy, indications and use thereof for
any and all indications/uses.

                  1.8 "KNOW-HOW" means information, material, documents, data,
and specifications respecting the making, using, marketing and regulatory
approval of the Licensed Products, as comprehensively listed in Schedule 1.8
attached hereto and any future changes, developments and Improvements thereof.

                  1.9 "LIABILITY" or "LIABILITIES" means any liability,
indebtedness, claim, loss, obligation or responsibility, fixed or unfixed,
secured or unsecured, absolute, contingent or otherwise.


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                  1.10 "LICENSED MARKS" means those trademarks and associated
trade dress specified in Schedule 1.10 to this Agreement as may be amended from
time to time by agreement of the parties which includes all registrations of
pending applications for, all common law rights in and goodwill represented by,
the name ORASCREEN in each country within the Territory and each country which
may be added to the Territory as provided for in this Agreement.

                  1.11 "LICENSED PATENTS" means each patent and patent
application identified in Schedule 1.11 of this Agreement, including
continuations, divisions and re-examinations and reissues thereof, international
and foreign applications corresponding thereto or derived therefrom, each patent
issuing upon a patent application referred to above and all other patent
applications and patents owned or controlled by Zila which would be infringed by
the manufacture, sale or use of the Licensed Products in the Territory.

                  1.12 "LICENSED PRODUCTS" means oral cancer detection and
screening systems using a liquid stain or stain rinse covered by or the use or
manufacture of which is covered by the Licensed Patents and/or the Know-how
provided by Zila to Licensee hereunder. The ingredients, formula, test methods
and specifications for the Licensed Products to be adhered to in the manufacture
of same to comply with the Product Registrations are set forth in Schedule 1.12
attached hereto.

                  1.13 "LIEN" means any mortgage, lien, pledge, charge, lease,
security interest, license, claim, restriction, encumbrance, limitation, marital
interest or any other defect of title of any kind in respect to the Assets.

                  1.14 "NET SALES" means the invoice price to customers of
Licensee for sales of Licensed Products in the ordinary course of business, as
recorded in Licensee's audited financial statements in accordance with GAAP,
less deductions from such invoice price for: (1) refunds actually allowed or
taken for rejected or returned Licensed Products, (2) excise, use, value added
and sales taxes, to the extent included in the amounts invoiced, (3) customs,
duties and other imposts, to the extent included in the amounts invoiced, (4)
quantity discounts actually allowed or taken, (5) off- invoice allowances,
actually allowed or taken, (6) credits on account of retroactive price
reductions, actually allowed or taken, (7) promotional dollars which effectively
reduce the price paid by Licensee's customers for the Licensed Products, (8)
cost of insurance, billed to and paid by the customer, (9) cost of
transportation, billed to and paid by the customer, and (10) rebates required by
government rule, regulation, program or fiat, to the extent that any such
rebates may be paid or allowed by Licensee. In determining the Net Sales in each
country, on a country-bycountry basis, the local currency shall be converted to
U.S. dollars quarterly, as of the last day of each calendar quarter, based on
applicable currency conversion rates then in effect as reported by Chemical
Bank, and in a manner consistent with Licensee's audited financial statements
and GAAP; accordingly, the Net Sales figures set forth in Section 5.5 and
Minimum Royalties are stated in U.S. dollars. Licensed Products shall be deemed
to be sold when shipped. For purposes of this definition: (i) Net Sales shall
not be imputed, nor deductions made, for samples, free goods or other marketing
programs pursuant to which Licensee dispenses Licensed Products without charge
in order to induce sales; and (ii) Zila will not be entitled to any compensation
on Licensee's sales to Affiliates.

                  1.15 "PAPER NDA" means a New Drug Application (NDA) submitted
under section 505 (b) (2) of the Federal Food Drug and Cosmetic Act (21 U.S.C.
ss. 355 (b) (2)), the efficacy section of which does not rely upon any clinical
studies in which Zila was the listed sponsor of the study pursuant to an
Investigational New Drug (IND) exemption. This term is being used for
convenience in drafting. The NDA contemplated by the parties, in addition to
relying upon relevant published literature, may contain unpublished non-clinical
toxicology data, unpublished manuscripts (scheduled for publication in the near
future) of clinical trials in which Zila provided partial funding and may
subsequently obtain ownership and/or exclusive rights of access, details of
investigator records regarding clinical trials even though such details are not
intended to be published, and other data (except for clinical data explicitly
sponsored by Zila pursuant to an IND) that would not meet a narrow definition of
a paper NDA as it might be defined for other purposes.

                  1.16 "PRODUCT REGISTRATIONS" means the applications for
regulatory approval and the approvals for the same, allowing the marketing and
sale of the Licensed Products within the countries in the Territory.

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                  1.17 "REGULATORY APPROVAL DATE" in a country shall mean the
date sixty (60) days after the date of receipt by Licensee of documentary proof
that Zila has received the required regulatory approval authorizing the
marketing and sale of a Licensed Product in that country by Licensee.

                  1.18 "TERRITORY" shall initially mean those countries listed
in Schedule 1.18 hereto. Pursuant to a License Agreement dated March 27, 1995
between Zila and Block Drug, Inc. ("Block"), Zila has granted Block an option
(the "Block Option") to take an exclusive license for the following countries:
Germany, France, Spain, Italy, Belgium/Luxembourg, Holland and Sweden (the
"Western European Countries"). If the Block Option is terminated, the Western
European Countries shall be included within the Territory upon payment by
Licensee to Zila of the license fee provided in Section 5.4 hereof. Although
Canada is not included in the Territory, Zila agrees that it will not enter into
any license of the Licensed Patents and Know-how with any third party to make,
use or sell Licensed Products in Canada prior to January 1, 1997, unless such
license is terminable by Zila upon not less than ninety (90) days' notice by
Zila to the licensee thereunder.

                  1.19 "YEAR" shall mean for any country each successive twelve
(12) month period with the first such period ending twelve (12) months after the
first day of the calendar month during which Minimum Royalties in such country
commence pursuant to Section 5.5.3.

         2.       License Grant.

                  2.1 Subject to the terms and conditions of this Agreement,
Zila grants to Licensee a sole and exclusive license (even as to Zila) under the
Licensed Patents and Know-how to make, have made, use and sell the Licensed
Products within the Territory.

                  2.2 Licensee shall not sell the Licensed Products outside of
the Territory or knowingly sell the Licensed Products to others for resale
outside of the Territory.

                  2.3 Licensee may sublicense the rights obtained under this
Agreement to a third party for purposes of manufacturing and/or packaging, in
whole or in part, the Licensed Products only for sale by Licensee in the
Territory; provided however, that Licensee shall remain primarily liable to
Zila.

                  2.4 Subject to the terms and conditions of this Agreement,
Zila grants to Licensee a sole and exclusive license (even as to Zila) to use
the Licensed Marks in connection with Licensed Products sold within the
Territory pursuant to this Agreement.

                  2.5 Licensee shall have the right to use marks other than
Licensed Marks in connection with Licensed Products.

                  2.6 Licensee shall use commercially reasonable efforts to
promote the Licensed Products in the Territory, consistent with Licensee's
commercially reasonable business judgment.

                  2.7 Licensee shall be fully responsible for and obligated to
Zila to ensure the performance of this Agreement in all respects by Affiliates
of Licensee.

         3.       Use of the Licensed Marks.

                  3.1 Licensee acknowledges that Zila is the exclusive owner of
the Licensed Marks, and that all of its uses of the Licensed Marks shall inure
to the benefit of Zila. Licensee agrees not to do anything or cause anything to
be done, which contests, impairs, or tends to contest or impair any of Zila's
rights in the Licensed Marks.

                  3.2 Upon termination of this Agreement with respect to any
country in the Territory or deletion of such country from the Territory as
provided herein prior to the expiration of the full term set forth in Section 9
below, Licensee will immediately cease all use of the Licensed Marks in any such
country other than the sale or other disposition of Licensee's inventory of the
Licensed Products, and, in such event, Licensee shall not thereafter adopt or
use the Licensed Marks or any confusingly similar words or mark without Zila's
prior written consent. If Licensee is

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then using marks other than the Licensed Marks, Licensee shall transfer all of
Licensee's right title and interest in and to such marks in such country to
Zila; provided however, that Licensee shall not be required to transfer any
right, title or interest in any mark which is also used by Licensee with
products sold by Licensee other than the Licensed Products. In addition to the
above obligations, upon termination of this Agreement with respect to any
country in the territory wherein Licensee has registered a Licensed Mark or
deletion of such country from the Territory as provided herein prior to the
expiration of the full term set forth in Section 9 below, Licensee shall
transfer all Licensee's right title and interest in and to such Licensed Mark in
such country to Zila.

                  3.3 Upon expiration of the full term of this Agreement with
respect to any country in the Territory, if this Agreement has not first been
terminated with respect to such country or such country has not first been
deleted from the Territory as provided herein, Licensee will thereafter, and
without any further action of the parties hereto, own all right, title and
interest in and to the Licensed Marks in such country, and Zila shall take all
actions as are reasonably necessary or as reasonably requested by Licensee to
reflect such ownership, including but not limited to the execution of an
assignment thereof in form and substance acceptable to Licensee.

                  3.4 Licensee agrees that it will not use the Licensed Marks in
any manner which tends to damage the goodwill associated with the Licensed
Marks.

                  3.5 Licensee may use the Licensed Marks only on such Licensed
Products that:

                        3.5.1 meet the specifications set forth in Schedule 1.12
as may be amended in writing by the parties from time to time;

                        3.5.2 are manufactured in accordance with "good
manufacturing practices" as defined in the rules and regulations of the FDA; and

                        3.5.3 are manufactured, sold, distributed and advertised
in accordance with all applicable laws and regulations (international, national,
federal, state, local or otherwise), and in compliance with any regulatory
agency that has jurisdiction.

                  3.6 Licensee agrees to cooperate with Zila in facilitating
Zila's review of such standards of quality, to permit reasonable inspection of
Licensee's operation, and to supply Zila with specimens of all uses of the
Licensed Marks upon request; provided, however, that Licensee shall not be
required to perform any such actions in a manner which unreasonably interferes
with the conduct of Licensee's business.

         4.       Know-how and Provision of Component Materials.

                  4.1 Licensee shall not use the Know-how other than in
connection with making, using and selling of Licensed Products under this
Agreement.

                  4.2 At the request of either party, once every calendar
quarter (or at such other interval or intervals as are mutually agreed to by the
parties) during the term hereof, personnel of Zila and Licensee shall meet to
discuss marketing of the Licensed Products.

                  4.3 The parties acknowledge that certain aspects of the
Know-how provided by one party to the other under this Agreement may consist of
confidential and proprietary information or data of the providing party which is
not readily ascertainable by proper means and which derives economic value,
actual or potential, from not being generally known. Each party, therefore,
agrees to hold such material and information provided by the other in confidence
(applying the same standard of care used in protecting the confidentiality of
its own proprietary information), not to make use thereof other than for
performance hereunder, and not to release or disclose such material or
information to another party without prior written consent of the other party to
this agreement. All items of Know-how and other confidential information 
provided by one party under this Agreement to the other party shall be deemed

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to be confidential and proprietary information or data, unless the receiving
party can show, by written record, that the item of Know-how or other
confidential information: (a) at the time of disclosure is generally known to
the public or, after disclosure, becomes generally known to the public other
than through fault of the receiving party; (b) is already in the receiving
party's possession at the time of disclosure, and was not impermissibly acquired
directly or indirectly from the disclosing party; (c) later received on a
non-confidential basis from a third party having the right to impart such
information; or (d) is independently developed by the receiving party.

         5.       Fees.

                  5.1 Effective as of the Effective Date and on the first day of
each month thereafter until the month after the submission of the Paper NDA to
the FDA, in a form approved by Licensee, such approval not to be unreasonably
withheld, Licensee shall make payments to Zila in the amount of * * * * as
non-refundable licensing fees for the Territory.

                  5.2 Commencing on the first day of the month after the month
during which the Paper NDA is accepted for filing by the FDA, and on the first
day of and each month thereafter until the Paper NDA is approved by the FDA, the
Licensee shall make payments to Zila in the amount of * * * * as non-refundable
licensing fees for the Territory; provided, however, that Licensee's payment
obligations under Section 5.1 and 5.2 shall cease at such time as the aggregate
payments thereunder equal * * * *.

                  5.3 Upon approval of the Paper NDA by the FDA, subject to
Section 9.5.2 hereof, Licensee shall pay to Zila an additional non-refundable
licensing fee for the Territory in the amount of * * * *, less the amounts
previously paid by the Licensee to Zila under Sections 5.1 and 5.2.

                  5.4 In addition, upon termination of the Block Option,
Licensee shall pay to Zila an additional non-refundable licensing fee of * * * *
for the Western European Countries, contingent upon Zila being able to
re-acquire the right to grant Licensee an exclusive license in such countries,
and Licensee agrees to accept such countries as part of the Territory.

                  5.5 During the initial term hereof as set forth in Section 9.1
below, Licensee shall pay to Zila royalties in U.S. dollars as follows:

                           5.5.1 * * * * of Net Sales of the Products in the
United States, Canada and the Western European Countries which are included
within the Territory and * * * * of Net Sales in all other countries within the
Territory; provided, however, that Licensee shall be entitled to a credit
against the royalties which would otherwise be payable to Zila hereunder in an
amount equal to * * * * of Net Sales until such time as the aggregate amount of
such credit equals those costs incurred by Licensee to obtain FDA approval of
the Licensed Products, which costs have been approved in advance by Zila (such
approval not to be unreasonably withheld), not to exceed in the aggregate SEVEN
HUNDRED FIFTY THOUSAND DOLLARS ($750,000). Prior to taking any credit provided
hereunder, Licensee shall submit to Zila reasonable evidence of any costs
incurred by Licensee as to which credit is claimed.

                           5.5.2 * * * * of Net Sales in any country in the
Territory where a Competitive Product is commercially available, with such lower
royalties commencing thirty (30) days after Licensee has provided Zila the
notice specified in Section 1.4 that such Competitive Product is first
commercially available in such country and ending when such Competitive Product
is no longer commercially available in such country. A Competitive Product shall
be deemed to be no longer commercially available in a country within the
Territory thirty (30) days after Zila has provided to Licensee by written notice
credible evidence that the specific conditions identified by Licensee as
demonstrating that a Competitive Product has become commercially available in
such country have changed in such a manner as to no longer support the
conclusion that a product remains a Competitive Product in such country as
defined herein.

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* * * * Confidential Portion has been ommitted and filed separately with the
Commission.

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                           5.5.3 In no case shall the royalties paid by Licensee
to Zila in any Year in respect of any country within the Territory be less than
the Minimum Royalties set forth in Schedule 5.5.3 for that year, beginning with
the Commencement of Sale in such country; provided, however, that the Minimum
Royalties for any country shall be reduced by * * * * for any portion of any
Year during which reduced royalties are in effect under Section 5.5.2. In the
event actual royalties paid by Licensee to Zila based upon Net Sales for any
Year in any country are less than the Minimum Royalties required, Licensee may
pay any deficiency to Zila within thirty (30) days after receipt by Licensee of
written notice from Zila of the amount of any deficiency. If Licensee does not
pay such deficiency within such period, Zila may delete such country from the
Territory by written notice to Licensee.

         6.       Regulatory Approval.

                  6.1 The parties agree to use their commercially reasonable
efforts to obtain any and all regulatory approvals required for the marketing
and sale of the Licensed Products in the United States as soon as practicable
hereafter.

         The following is a list of activities required for FDA approval and
start of manufacture of Licensed Product as well as the party having primary
responsibility for the activity and the party responsible for payment of the
costs of such activity:

<TABLE>
<CAPTION>
                                    Party Responsible     Party Responsible
Activity                                for Work              for Payment
--------                                --------              -----------
<S>                                 <C>                   <C>
Toluidine Blue Manufacture                Zila*                  Zila*
Readiness

Product Readiness                         Zila*                  Zila*
CMC Toluidine Blue
Stability

Manufacturing Readiness                   Licensee               Licensee
Finished Product
Plant to Manufacture finished
product

Filing of NDA                             Zila*                  Licensee pay
Costs                                                            preapproved costs
Consultants and attorneys

Toxicology                                Zila*                  Licensee pay
                                                                 preapproved costs

Clinical Work                             Zila*                  Licensee pay
                                                                 preapproved costs
</TABLE>


*Licensee will assist and become involved in activities as Zila requests and P&G
agree.

Wherever it is indicated above that Licensee is responsible for payment of
preapproved costs, Licensee shall pay, in addition to its own costs, any such
costs incurred by Zila from the Effective Date forward, to the extent that such
costs have been approved in advance by the Licensee. Zila shall submit to
Licensee on a monthly basis reasonable evidence of such costs incurred by Zila
and Licensee shall pay the amount of such costs to Zila within twenty (20) days
of receipt thereof. In addition, Licensee agrees to reimburse Zila for the fees
and costs of services requested by personnel of Licensee from Keller & Heckman
in connection with the FDA approval process for the Licensed Products during the
month of November upon submission by Zila to Licensee of reasonable evidence
thereof.

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* * * * Confidential Portion has been ommitted and filed separately with the
Commission.
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                  6.2 Licensee shall use its commercially reasonable efforts to
obtain any and all approvals required for the marketing and sale of the Licensed
Products in the other countries in the Territory in the order in which the
parties mutually agree that the Licensed Products should be registered as
provided in Section 6.4 . Licensee shall pay all regulatory costs in such other
countries in which the Licensed Products are to be registered, from the
Effective Date forward, including costs related to any clinical studies
undertaken in connection with obtaining such regulatory approval, and including
Zila's costs related to regulatory approval from the Effective Date forward, to
the extent that such costs have been approved in advance by the Licensee. Zila
shall submit to Licensee on a monthly basis reasonable evidence of such costs
incurred by Zila and Licensee shall pay the amount of such costs to Zila within
twenty (20) days of receipt thereof.

                  6.3 In the event of any termination of this Agreement with
respect to any country in the Territory or deletion of such country from the
Territory prior to the expiration of the full term as set forth in Section 9
below, all right, title and interest of Licensee in and to such regulatory
approvals shall be transferred to Zila upon payment by Zila to Licensee of the
sum of $1.00. In such event, Licensee shall take such actions as are reasonably
necessary or as reasonably requested by Zila to reflect Zila's ownership
thereof.

                  6.4 Licensee and Zila shall meet quarterly after the Effective
Date to discuss the appropriate regulatory approval strategy and schedule for
the countries in the Territory. By no later than January 1, 1997, Licensee shall
present to Zila a comprehensive regulatory approval strategy for the entire
Territory, which shall include a schedule for filing of required applications
for regulatory approvals in each country in the Territory. Such schedule shall
be subject to Zila's approval, which shall not be unreasonably withheld.
Thereafter, in the event Licensee shall have failed to make any such filing in a
country in accordance with such schedule, or, having made such filing, shall not
have exercised commercially reasonable efforts to secure approval in such
country, Zila shall have the right to delete such country from the Territory
upon thirty (30) days' notice to Licensee, unless within such thirty (30) day
period Licensee shall have made such filing or shall have commenced and
continued such efforts to secure approval.

         7.       Reports and Payments.

                  7.1 Within forty-five (45) days of the end of each calendar
quarter during the term hereof, Licensee shall furnish Zila a report showing the
number of Licensed Products sold during the calendar quarter in each country of
the Territory and the calculation of Net Sales and royalties derived therefrom.
Each report will be accompanied by the appropriate royalty payment.

         8.       Audit.

                  8.1 Zila shall have the right, but only during Licensee's
regular business hours and upon at least ten (10) days prior written notice, to
have the books, records and accounting procedures used by Licensee in the
determination of Net Sales and the calculation of the royalties due thereon,
reviewed by Deloitte & Touche or by another mutually acceptable Big Six
Accounting Firm; provided, however, that the sole purpose of any such review
shall be to verify the accuracy of the computations made by Licensee in
connection therewith and in no event shall the report of such Big Six Accounting
Firm disclose individual customer data. Any disputes relating to the
computations made or accounting procedures used by Licensee in its determination
of Net Sales or the calculation of royalties due thereon shall be resolved by a
different Big Six Accounting Firm acceptable to both parties. If the final
determination of such Big Six Accounting Firm with respect to the computation of
Net Sales varies by more than five percent (5%) in favor of Zila from the figure
originally submitted by Licensee, all costs and expenses of such Big Six
Accounting Firm in connection with its review hereunder shall be borne by
Licensee; otherwise, all such expenses shall be borne by Zila. Such reviews may
occur not more than once in any twelve (12) month period, cover no more than the
previous two (2) years, and cover only such periods which have not been
previously reviewed.

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         9.       Term and Termination.

                  9.1 Unless sooner terminated in accordance with Section 9.4
below, this Agreement shall become effective upon execution and shall continue
for an initial term with respect to any country in the Territory for so long as
any Licensed Patent covering the Licensed Products sold by Licensee is in force
in such country, or, if no such Licensed Patent is then in force with respect to
any such country, the initial term of this Agreement shall expire seven (7)
years from the Commencement of Sale of the Licensed Products in such country.

                  9.2 Following the expiration of the initial term of this
Agreement as set forth in Section 9.1 with respect to any country in the
Territory, this Agreement shall remain in full force and effect with respect to
such country for an additional term of five (5) years; provided, however, that
during such term, Licensee's royalties shall be reduced to * * * * of Net Sales
(allocable to the Know-how and Trademark Licenses hereunder) in such country and
no Minimum Royalty shall be payable with respect to such country during such
additional term.

                  9.3 Upon the expiration of the additional five (5) year term
set forth in Section 9.2 with respect to any country, unless this Agreement has
been first terminated, Licensee shall thereafter have a fully-paid, perpetual,
sole and exclusive license (even as to Zila) to use the Know-how in connection
with the manufacture, sale or use of the Licensed Products in such country.

                  9.4 If either party shall at any time breach this Agreement,
the other party may, at its option, terminate this Agreement by giving the
breaching party thirty (30) days' written notice of its intention to do so,
which notice shall specify the breach; provided, however, that if the breaching
party shall remedy such breach during such thirty (30) day period, then any such
notice of termination shall be null and void. In addition, either party may, at
its option, terminate this Agreement without advance notice in the event of the
institution of legal proceedings against the other party in bankruptcy or
insolvency (if such legal proceedings remain pending for 90 days), or upon an
assignment for the benefit of creditors.

                  9.5 Licensee shall have the right to terminate this Agreement
as follows:

                           9.5.1 At any time prior to approval of the Paper NDA
by the FDA, Licensee may terminate this Agreement upon ninety (90) days' notice
to Zila and payment of the maximum amount payable prior to such FDA approval
under Sections 5.1 and 5.2 hereof.

                           9.5.2 At any time within sixty (60) days of FDA
approval of the Paper NDA, Licensee may terminate this Agreement by notice to
Zila and without making any payments due thereafter other than as provided in
Section 9.5.1, if the claims permitted to be made for the Licensed Products in
accordance with such FDA approval are insufficient to provide Licensee with
reasonable assurance that it can successfully market the Licensed Products.

                           9.5.3 In addition to termination as otherwise
expressly provided in this Section 9, at any time after sixty (60) days from FDA
approval of the Paper NDA, Licensee may terminate this Agreement in any country
upon ninety (90) days' notice to Zila, but only by paying to Zila an amount
equal to one time the Minimum Royalties per Year then payable with respect to
such country.

                  9.6 After the Commencement of Sale in any country, Zila may
terminate this Agreement in such country upon ninety (90) days' notice to
Licensee if Licensee is not then marketing or selling in such country a Licensed
Product covered by a Licensed Patent then in effect in such country, unless
within such ninety (90) day period Licensee commences or renews such marketing
or sale.

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* * * * Confidential Portion has been ommitted and filed separately with the
Commission.

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         10.      Patents.

                  10.1 When applicable, Licensee shall mark all Licensed
Products with appropriate reference to the Licensed Patents.

                  10.2 Zila covenants to diligently prosecute the pending patent
applications with respect to the Licensed Patents in the countries within the
Territory and those which may be added to the Territory and to properly maintain
those patents which issue.

                  10.3 Zila shall provide Licensee with copies of every notice
received by Zila which is related to renewals, maintenance and applications of
the Licensed Patents within twenty (20) days of Zila's receipt thereof, as well
as copies of Zila's responses to such notices.

                  10.4 In the event that either party shall learn of an
infringement of any Licensed Patents or Licensed Marks in the Territory, that
party shall call the other party's attention thereto in writing and shall
provide such other party with reasonable evidence of such infringement. Both
parties shall use their commercially reasonable efforts in cooperation with each
other to terminate such infringement without litigation. If the efforts of the
parties are not successful in abating the infringement within thirty (30) days
after the infringer has been formally notified of the infringement, Zila shall
have the right to:

                           10.4.1 Commence suit on Zila's own account for
infringement of rights owned by Zila, subject to Licensee's right to fully
participate in such suit in order to protect its rights as granted herein;

                           10.4.2 Join with Licensee in such suit if Licensee
brings suit pursuant to Section 10.5 below or;

                           10.4.3 Refuse to participate in such suit; and Zila
shall give notice in writing of its election to Licensee within thirty (30) days
after said thirty (30) day period.

                  10.5 Licensee may bring suit for infringement on its own
account, with the right to name Zila as nominal party plaintiff for violation of
rights owned by Zila, if Zila elects not to commence or join in any suit other
than as nominal party plaintiff.

                  10.6 Such legal action as is decided upon shall be at the
expense of the party bringing suit, and all recoveries recovered thereby shall
belong to such party; provided, however, that legal action brought jointly by
Zila and Licensee and fully participated in by both shall be at the joint
expense of the parties, and all recoveries up to the amount of such expense,
shall be shared jointly by them in proportion to the share of expense paid by
each party, and in the event such recoveries include damages or royalties in
excess of expenses, the amount in excess of expenses shall be shared by the
parties on a proportional basis as to their actual losses (for Licensee, lost
gross profit; for Zila lost royalties).

                  10.7 Each party agrees to cooperate, in all reasonable
respects as requested by the other party in litigation proceedings instituted
hereunder and, upon request of the party bringing suit, the other party shall
make available to the party bringing suit all relevant records, papers,
information, samples, specimens, and the like which may be relevant and in its
possession. The party bringing suit shall have the right to control such
litigation.

                  10.8 If infringement of the Licensed Patents covering the
product sold by Licensee continues in any country following the conclusion of
litigation proceedings, instituted hereunder, or the Licensed Patents covering
the product sold by Licensee are found to be invalid in such country, or if no
litigation is initiated hereunder and such

                                        9
<PAGE>   10



infringement continues in such country for more than ninety (90) days after the
infringer has been formally notified of the infringement, the royalty for the
remainder of the term in such country shall be reduced to * * * * unless
otherwise agreed by Zila and Licensee.

         11.      Warranties and Representations of Zila.

         Zila represents and warrants as of the date of this Agreement as
follows:

                  11.1 Zila, Inc. is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and Zila
Pharmaceuticals, Inc. is a corporation, duly organized, validly existing and in
good standing under the laws of Nevada and each such corporation has the
corporate power to own or lease its properties and assets and to carry on its
business as now conducted. Zila is duly qualified, admitted or otherwise
authorized to transact business and in good standing as a foreign corporation in
all jurisdictions in which the conduct or nature of Zila's business or the
ownership or leasing of its properties or assets requires it to be so qualified,
admitted or otherwise authorized.

                  11.2 Zila has full right, power and authority to execute and
deliver this Agreement and to carry out the transactions contemplated hereby.
Zila has duly authorized the execution and delivery of this Agreement and the
transactions contemplated hereby, and no other corporate action on the part of
Zila is necessary to authorize this Agreement and the transactions contemplated
herein. This Agreement has been duly executed and delivered by a duly authorized
officer of Zila and constitutes the valid and binding obligation of Zila
enforceable in accordance with its terms, except that the availability of the
remedy of specific performance may be limited by general principles of equity.
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby shall not result in a breach of the
terms or conditions of, or constitute a default under, or an event which with
notice or lapse of time or both would become a default, or violate, or require,
as the case may be: (i) any provision of any law, regulation or ordinance, (ii)
the Certificate or Articles of Incorporation or By-Laws of Zila, (iii) any
Contract, license, agreement, lease, mortgage or other instrument or
undertaking, to which Zila is subject or a party or by which any or their
property or assets is or may be bound or affected, and (iv) any judgment, order,
writ, injunction or decree of any court, administrative agency or governmental
body. Nor shall the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby result in the
imposition of any Lien on any property or assets of Zila or the cancellation,
discontinuance or alteration of any Contract, license, permit, agreement or
commitment or of any business of Zila.

                  11.3 Except as described on Schedule 11.3, Zila: (i) is the
owner of, with all right, title and interest in and to, the Assets and has the
right to the use thereof; (ii) is not infringing any of the rights of third
parties concerning any of the Assets, nor are there any facts of which Zila is
aware on which any valid claim of such infringement can be based; and (iii) is
not a party to any agreement or license with any other party pursuant to which
Zila has the right to use the Assets with the exception of the Contracts listed
on Schedule 11.3.

                  11.4 There is no investment banker, broker, finder or other
intermediary which has been retained by, or is authorized to act on behalf of,
Zila nor shall any such person or entity be entitled to any fee or commission
from Licensee or any of its Affiliates upon the consummation of the transactions
contemplated hereby. Zila agrees to indemnify Licensee and hold Licensee
harmless from all liabilities, costs and expenses incurred by Licensee as a
result of any claim by any such person becoming entitled to any such fee or
commission with respect to the transactions contemplated hereby. Zila further
agrees to indemnify Licensee against any claim for payment by any party other
than Zila claiming ownership or license rights under Licensed Products.

--------------------------------------------------------------------------------
* * * * Confidential Portion has been ommitted and filed separately with the
Commission.

                                       10
<PAGE>   11



                  11.5 There is nothing in the Know-how or Zila's books and
records and nothing else to the knowledge of Zila, which suggests or concludes
that the Licensed Products are unsafe and/or ineffective for their intended use.

                  11.6 The representations and warranties made by Zila in this
Agreement and Schedules 1.8, 1.10, 1.11 and 1.12 attached hereto are (i) true,
correct and complete in all respects and (ii) do not contain any statement which
is false or misleading with respect to any material fact. Zila has not failed to
disclose to Licensee any materially adverse information relating to the Assets
which is in Zila's possession or control.

                  11.7 Zila is the owner of or is licensed under the Licensed
Patents, with full power and authority to license or sub-license the Licensed
Patents to Licensee as provided hereunder, without the consent or approval of
any third party. If Zila's ability to license the Licensed Patents to Licensee
on the terms provided herein is lost or impaired, Zila agrees to reimburse
Licensee for all of its unrecovered expenses incurred up to that time related to
the Licensed Products.

         12.      Representations and Warranties of Licensee.

         Licensee hereby represents and warrants as follows:

                  12.1 Licensee is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio.

                  12.2 Licensee has full corporate power and authority to
execute and deliver this Agreement and to carry out the transactions
contemplated hereby. This Agreement has been duly executed and delivered by a
duly authorized officer of Licensee and constitutes the valid and binding
obligation of Licensee, enforceable in accordance with its terms, except that
enforceability may be limited by general principles of equity and the exercise
of judicial discretion in particular cases. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in a breach of the terms or conditions of,
or constitute a default under, or an event which with notice or lapse of time or
both would become a default or violate, or require, as the case may be, (i) any
provision of any law, regulation or ordinance, (ii) the Certificate or Articles
of Incorporation or By-laws of Licensee, (iii) any agreement, lease, mortgage or
other instrument or undertaking, oral or written, to which Licensee is a party
or by which it or any of its properties or assets is or may be bound or
affected, (iv) any judgment, order, writ, injunction or decree of any court,
administrative agency or governmental body or (v) any action of or by, or filing
with, any governmental body, agency or official.

                  12.3 The representations and warranties made by Licensee in
this Agreement are true, correct and complete in all material respects and do
not contain any statement which is false or misleading with respect to any
material fact.

         13.      Indemnification.

                  13.1 Zila shall indemnify and hold harmless Licensee and its
respective affiliates, directors, officers, employees and agents from and
against any liabilities or obligations, damages, losses, claims, encumbrances,
costs or expenses (including reasonable attorneys' fees) (any or all of the
foregoing herein referred to as "Loss") insofar as a Loss or actions in respect
thereof occurs after the date of this Agreement and arises out of or is based
upon any misrepresentation or breach of any of the warranties, covenants or
agreements made by Zila in this Agreement.

                  13.2 Licensee shall indemnify and hold harmless Zila and its
respective affiliates, directors, officers, employees and agents from and
against any Loss insofar as such Loss or actions in respect thereof occurs
subsequent to the date of this Agreement and arises out of or is based upon (i)
any misrepresentation or breach of any

                                       11
<PAGE>   12



of the warranties, covenants or agreements made by Licensee in this Agreement,
or (ii) any action or omission by Licensee in connection with the manufacture,
use or sale of the Licensed Products in the Territory or the purchase or use by
third parties in the Territory after the date of this Agreement of any of the
Licensed Products sold by the Licensee.

                  13.3 No claim for indemnification thereunder shall be valid
unless notice of the matter which may give rise to such claim is given in
writing by the indemnitee (the "Indemnitee") to the persons against whom
indemnification may be sought (the "Indemnitor") as soon as reasonably
practicable after such Indemnitee becomes aware of such claim, provided that the
failure to notify the Indemnitor shall not relieve it from any liability which
it may have to the Indemnitee otherwise than under this Section 13. Such notice
shall state that the Indemnitor is required to indemnify the Indemnitee for a
Loss and shall specify the amount of Loss and relevant details thereof. The
Indemnitor shall notify Indemnitee no later than sixty (60) days from such
notice of its intention to assume the defense of any such claim. In the event
the Indemnitor fails to give such notice within that time the Indemnitor shall
no longer be entitled to assume such defense.

                  13.4 The Indemnitor shall have the right to settle and defend,
through counsel satisfactory to the Indemnitee at its expense, any action which
may be brought in connection with all indemnifiable matters (a "Third Party
Action"). In such event the Indemnitee of the Loss in question and any successor
thereto shall permit the Indemnitor full and free access to its books and
records and otherwise fully cooperate with the Indemnitor in connection with
such action, provided that this Indemnitee shall have the right fully to
participate in such defense at its own expense. The defense by the Indemnitor of
any such actions shall not be deemed a waiver by the Indemnitor of its right to
assert a claim with respect to the responsibility of the Indemnitor with respect
to the Loss in question. The Indemnitor shall have the right to settle or
compromise any claim against the Indemnitee without the consent of the
Indemnitee provided that the terms thereof provide for the unconditional release
of the Indemnitee and require the payment of monetary damages only. No
Indemnitee shall pay or voluntarily permit the determination of any liability
which is subject to any such action while the Indemnitor is negotiating the
settlement thereof or contesting the matter, except with the prior written
consent of the Indemnitor, which consent shall not be unreasonably withheld or
delayed. If the Indemnitor fails to give Indemnitee notice of its intention to
defend any such action as provided herein, the Indemnitee involved shall have
the right to assume the defense thereof with counsel of its choice, at the
Indemnitor's expense, and defend, settle or otherwise dispose of such action.
With respect to any such action which the Indemnitor shall fail to promptly
defend, the Indemnitor shall not thereafter question the liability of the
Indemnitor hereunder to the Indemnitee for any Loss (including counsel fees and
other expenses of defense).

                                       12
<PAGE>   13



         14.      Notices.

                  14.1 Any notice or report provided for in this Agreement shall
be deemed sufficiently given when sent by certified or registered mail, postage
prepaid, or by facsimile transmission if it is for Zila to:

                           Zila Inc.
                           5227 North 7th Street
                           Phoenix, Arizona  85014 USA
                           Attn:  Joseph Hines, President
                           FAX No.: (602) 234-2264

and if it is for Licensee, to:

                           The Procter & Gamble Company
                           One Procter & Gamble Plaza
                           Cincinnati, Ohio 45201
                           Attn:    General Manager Procter & Gamble
                                    Oral Care Products
                           FAX No: _______________

The parties may, from time to time, specify in writing other addresses for this
purpose. Any notice, consent or other communication required or permitted to be
given hereunder shall be deemed to have been given on the date of mailing,
personal delivery or facsimile thereof and shall be conclusively presumed to
have been received on the second business day following the date of mailing or,
in the case of personal delivery, the actual day of personal delivery thereof,
or, in the case of facsimile delivery, when such facsimile is confirmed as
transmitted or has been actually received, except that a change of address shall
not be effective until actually received.

         15.      Integration.

                  15.1 This Agreement supersedes all pre-existing agreements and
negotiations between the parties respecting their subject matter and shall not
be varied, amended or supplemented except by a writing of subsequent or even
date executed by the authorized representatives of the parties.

         16.      Successors and Assigns.

                  16.1 This Agreement and the rights and obligations arising
here from are binding upon the successors or permitted assigns of the parties
hereto.

                  16.2 Licensee (including its Affiliates) may not assign this
Agreement in whole or in part by operation of law or otherwise to a third party
without the prior written consent of Zila which consent shall not be
unreasonably withheld. Any attempted assignment in derogation of this provision
shall be null and void.

         17.      Authorized Representatives.

                  17.1 The individuals signing this Agreement represent and
warrant that they are authorized to execute this Agreement by and on behalf of
their respective corporations and to bind such corporations to the terms and
conditions hereof.

                                       13
<PAGE>   14



         18.      Governing Law.

                  18.1 This agreement is made under and shall be governed by and
construed in accordance with the internal laws of the State of Arizona, without
reference to conflict of law principles.

         19.      Dispute Resolution.

                  19.1 All disputes relating to or arising out of this Agreement
or its subject matter shall be resolved by the parties as set forth in this
Section 19.

                  19.2 Notice of demand for a meeting of the parties to discuss
and settle a dispute(s) ("Notice of Meeting") may be given by either Zila or
Licensee. Such notice shall be in writing, and shall set a date no more than ten
(10) business days from the date of the Notice of Meeting on which the parties
shall meet during normal business hours at Zila's offices in Phoenix, Arizona.
If within five (5) days after the date of the meeting the parties have not
resolved their dispute(s) then the parties shall proceed as provided below.
Notwithstanding anything in this Section 19 to the contrary, Licensee and Zila
shall have the ability to seek equitable and injunctive remedies in any state or
federal court in Phoenix, Arizona.

                  19.3 Any Dispute not resolved pursuant to 19.2 shall be
resolved by means of an arbitration proceeding conducted in accordance with the
rules of the American Arbitration Association before an arbitrator selected in
accordance with such rules.

                  19.4 Notice of a demand for resolution of a dispute hereunder
(a "Notice of Dispute") given by either party shall be in writing specifying the
issue or issues in dispute.

                  19.5 The arbitration proceeding shall be held at a neutral
location within the United States selected by the arbitrator and shall commence
no later than forty (40) days after the Notice of Dispute is given.

                  19.6 The fees payable to the arbitrator shall be the usual
hourly rate of such arbitrator for consulting or dispute resolution services.
All fees and expenses associated with the arbitration proceeding incurred by the
parties, including the arbitrator fees, attorneys' fees and disbursements, shall
be paid by the party against whom the decision is rendered.

         20.      Miscellaneous.

                  20.1 The headings and captions contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of the Agreement.

                  20.2 This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute but one and the same instrument.

                  20.3 If any section, subsection or provision of this
Agreement, or the application of such section, subsection or provision, is held
illegal, invalid or unenforceable under present or future laws effective during
the term of this Agreement, it is the intention of the parties hereto that the
remainder of this Agreement shall not be affected thereby, and it is also the
intention of the parties that in lieu of any such illegal, invalid or
unenforceable clause or provision, there be added to this Agreement by the Court
or other party making such determination a clause or provision as similar in
terms and substance to such clause or provision as may be legal, valid and
enforceable.

                  20.4 The Exhibits and Schedules are part of this Agreement as
if set forth fully herein.

                                       14
<PAGE>   15



                  20.5 Subject to the terms and conditions of this Agreement,
each of the parties will use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable, under applicable laws and regulations or otherwise, to fulfill its
obligations under this Agreement and to consummate the transactions contemplated
by this Agreement.

                  20.6 Except as required by applicable law or judicial order,
neither Zila nor Licensee, nor any of their respective representatives,
successors or assigns, shall issue any press release or make any public
announcement or disclosure with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of the other party hereto.

         IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in duplicate originals by its duly authorized representative as of the
date first written above.

ZILA, INC.                             THE PROCTER & GAMBLE COMPANY

By:/s/ Joseph Hines                    By:  /s/ Thomas A. Moore
   --------------------------             ---------------------------
   Joseph Hines                           Thomas A. Moore
Name - typed or printed                Name - typed or printed

  President                            Group Vice President
-----------------------------          ------------------------------
Title                                  Title

ZILA PHARMACEUTICALS, INC.

By:/s/ Joseph Hines
   --------------------------
   Joseph Hines
Name - typed or printed

 President
-----------------------------
Title

                                       15
<PAGE>   16



Schedule 1.8

                                Licensed Know-how

All technical information (including trade secrets, unpatented inventions,
research and/or development data), clinical /regulatory information and data,
business information (including sources of supply, manufacturing costs) and
marketing information (including customer lists, trade and professional
contacts, sales pricing, advertising and promotional materials) that Zila has
developed or acquired and that relate to the Territory and the Licensed
Products.

                                       16
<PAGE>   17




Schedule 1.10

                                 Licensed Marks

There are presently no trade marks registered for the Licensed Products with the
exception of "Orascreen" in Austria. Zila has pending applications for the
Licensed Products to register the following trademarks:

<TABLE>
<CAPTION>
Trademark            Country                  Application Serial Number
---------            -------                  -------------------------
<S>                  <C>                      <C>
Blu scan             United States                    74/635,844

Orascreen            Australia                        657,157
                     Austria                          AM1959/95
                     Canada                           790,533
                     France                           95576451
                     Germany                          395148197
                     Ireland                          94/3245
                     Italy                            Rm95C/002007
                     Japan                            45607/95
                     Spain                            1964376
                     Switzerland                      7080/1995.2
                     United Kingdom                   2017179
                     United States                    74/635,840

Oratest              United States                    74/635,841

Tol Scan             United States                    74/635,842

Tol Blu              United States                    74/635,843
</TABLE>


                                       17
<PAGE>   18
Schedule 1.11

                               Licensed Patents

1.   U.S. Patent No. 4,321,251 issued March 23, 1982, entitled "Detection of
     Malignant Lesions of the Oral Cavity Utilizing Toluidine Blue Rinse."

2.   Canadian Patent No. 1,180,648 issued January 8, 1985, entitled "Toluidine
     Blue Rinse for the Detection of Squamous Cell Carcinoma of the Oral
     Cavity."

3.   United States Patent No. 5,372,801 issued December 13, 1994, entitled
     "Biological Stain Composition, Method of Preparation and Method of Use" and
     the following corresponding patent applications):

<TABLE>
<CAPTION>                                              
Country                                                     Application Serial Number
-------                                                     -------------------------
<S>                                                      <C>
PCT                                                                 PCT/US92/0872
Australia Patent Office                                             27,788/92
European Patent Office                                              92921881.6
                                                       
         (Designated Countries)                        
                  Austria           Belgium            
                  Denmark           Germany            
                  Greece            Ireland            
                  France            Italy              
                  Luxembourg        Monaco             
                  Netherlands       Portugal           
                  Spain             Switzerland        
                  Sweden            United Kingdom     
Canada                                                              2097695
India                                                               977/DEL/94
Japan                                                               508430/93
Korea                                                               701988/93
</TABLE>                                               


4.   The following patent applications entitled "Method and Kit for Epithelial
     Cancer Screening":

<TABLE>
<CAPTION>
Country                                                       Application Serial Number
-------                                                       -------------------------
<S>                                         <C>               <C>
PCT                                                                   PCT/US93/00352
Australia Patent Office                                               34,740/93
European Patent Office                                                9393503.6

         (Designated Countries)
                  Austria                   Belgium
                  Denmark                   Germany
                  Greece                    Ireland
                  France                    Italy
                  Luxembourg                Monaco
                  Netherlands               Portugal
                  Spain                     Switzerland
Sweden            United Kingdom
Canada

Japan                                                                 516458/94
Korea
United States                                                         07/978,670
</TABLE>

                                       18
<PAGE>   19



                                  Schedule 1.18

                                    Territory

                                     * * * *




--------------------------------------------------------------------------------
* * * * Confidential Portion has been ommitted and filed separately with the
Commission.

                                       19
<PAGE>   20



Schedule 5.5.3               Minimum Royalties

<TABLE>
<CAPTION>
=================================================================
        Year           United States
<S>                    <C>
-----------------------------------------------------------------
1                      $ * * * *
-----------------------------------------------------------------
2                      $ * * * *
-----------------------------------------------------------------
3 and thereafter       $ * * * *
=================================================================
</TABLE>


         Minimum royalties for all countries in the Territory will be based upon
the following formula:

         Estimated Market Potential x Minimum Royalty Percentage x Applicable 
           Royalty Rate.

         "Estimated Market Potential" is to be calculated as follows:

         Population of the country x % of population with access to health care
x % who smoke x % over age forty x % who visit their dentist at least once a
year x gross selling price per unit. The statistics required for the calculation
of Estimated Market Potential in countries in the territory other than the U.S.
will be provided by Licensee based upon a good faith review of the best
available sources. Such figures will be subject to Zila's approval, which shall
not be unreasonably withheld.

Minimum Royalty would be based upon * * * *, * * * *, and * * * * of the
estimated market potential in the U.S. for the first, second and third and
subsequent years after introduction, respectively, and * * * *, * * * * and * *
* * of the estimated market potential for such years in other areas within the
Territory.

The "Applicable Royalty Rate" would be either * * * * or * * * * for each
country in the Territory, as specified in Section 5.5.1.

<TABLE>
<CAPTION>
                                Estimated Market Potential Calculation For The U.S.
================================================================================================================================
Country  Total   % Pop       Tot. Pop.  % of     Tot. Pop.  % of     Tot. Pop. Pop. Visit      Mkt. Pot.   Cost Per    Market
         Pop.    w/Access    w/Access   Pop.     Smokers    Pop.     Smokers   Dentist/Health  Pop.        O.S. Exam   Pot.
         MM      to Health   MM         Smokers             Smokers  Over 40   Ser.            MM                      $MM
                 Care                                       Over 40

--------------------------------------------------------------------------------------------------------------------------------
<S>      <C>     <C>         <C>        <C>     <C>       <C>       <C>         <C>           <C>         <C>         <C>    
U.S.     258      98%        252.8      20%     60.57     40.5%     20.48         60%          12.29       $17.00      $208.90
================================================================================================================================
</TABLE>

--------------------------------------------------------------------------------
* * * * Confidential Portion has been ommitted and filed separately with the
Commission.

                                       20
<PAGE>   21




<TABLE>
<CAPTION>
                                       Mimimum Royalty Calculation For U.S.
=============================================================================================================================
       Country               Year                Est. Mkt.           Min. Royalty           Applicable              Minimum
                                                 Potential              Percent            Royalty Rate             Royalty
                                                    $MM                                                               $MM
-----------------------------------------------------------------------------------------------------------------------------
<S>                          <C>                 <C>                 <C>                   <C>                      <C>      
        U.S.                   1                 $208.896              * * * *               * * * *                $* * * *
        U.S.                   2                 $208.896              * * * *               * * * *                $* * * *
        U.S.                   3                 $206.896              * * * *               * * * *                $* * * *
=============================================================================================================================
</TABLE>

--------------------------------------------------------------------------------
* * * * Confidential Portion has been ommitted and filed separately with the
Commission.

                                       21
<PAGE>   22


Schedule 11.3

                          Asset Licenses and Agreements

1. Zila has the right to use U.S. Patent No. 5,372,801 (and corresponding
foreign patents) under an exclusive sublicense from CTM Associates, Inc.
("CTM"), as set forth in the First Amendment to Assignment and Royalty Agreement
between Zila and CTM dated as of October 31, 1992 (the "First Amendment"). CTM
has the exclusive license to use the foregoing patents under a License Agreement
between CTM and National Technical Information Service, dated September 30,
1992.

2. Zila obtained its rights to the Assets pursuant to and subject to the terms
of the Assignment and Royalty Agreement dated December 31, 1991, between Zila
and CTM, as amended by the First Amendment and the Second Amendment to
Assignment and Royalty Agreement dated July 1, 1994.

                                       22