Document:

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                                                                     Exhibit 4.7

                          REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (the "Agreement") is made and entered
into as of this 28 day of November, 2006, by and among Zila, Inc., a Delaware
corporation (the "Company"), and the "Investors" named in that certain Purchase
Agreement by and among the Company and the Investors (the "Purchase Agreement").

     The parties hereby agree as follows:

     1. Certain Definitions.

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

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

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

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

     "Conversion Shares" means the shares of Common Stock issuable upon the due
conversion of the Notes.

     "Investors" shall mean Roth, the Investors identified in the Purchase
Agreement and any Affiliate or permitted transferee of any Investor who is a
subsequent holder of any Warrants or Registrable Securities.

     "Notes" means the 6% Senior Secured Convertible Notes issued by the Company
to the Investors pursuant to the Purchase Agreement, the form of which is
attached to the Purchase Agreement as Exhibit A.

     "PIPEs Agreement" means the Purchase Agreement, dated as of November 28,
2006, among the Company and the investors party thereto relating to the issuance
and sale by the Company of shares of its Common Stock, its 12% Convertible Notes
and certain warrants relating thereto.

     "PIPEs Securities" means the shares of Common Stock issued pursuant to the
terms of the PIPEs Agreement and issuable upon the conversion or exercise of the
securities issued pursuant to the terms of the PIPEs Agreement.

     "Proposal Date" is as defined in the Purchase Agreement.

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

     "Register," "registered" and "registration" refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document.

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

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

     "Required Investors" means the Investors holding a majority of the
Registrable Securities.

     "Roth" means Roth Capital Partners, Inc. together with its employees and
Affiliates.

     "SEC" means the U.S. Securities and Exchange Commission.

     "Shares" means the shares of Common Stock issued on the Closing Date
pursuant to the Purchase Agreement.

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

     "Warrant Shares" means the shares of Common Stock issuable upon the
exercise of the Warrants.

     "Warrants" means the warrants to purchase shares of Common Stock issuable
to the Investors on the Proposal Date pursuant to the Purchase Agreement, the
form of which is attached to the Purchase Agreement as Exhibit C.

     "1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

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

     2. Registration.

          (a) Registration Statements.

               (i)

                    (A) Promptly following the Proposal Date, and in no event
later than thirty (30) days after the Proposal Date (the "Filing Deadline"), the
Company shall prepare and file with the SEC a Registration Statement on Form S-3
(or, if Form S-3 is not then available to the Company, on such form of
registration statement as is then available to effect a registration for resale
of the Registrable Securities, subject to the Required Investors' consent),
covering the resale of the Conversion Shares and the Warrant Shares and any and
all other securities issued or issuable with respect to or in exchange for such
Registrable Securities. In connection with the second Registration Statement
referred to above, the Company may avail itself of Rule 429 under the 1933 Act.

                    (B) Subject to any SEC comments, each Registration Statement
filed pursuant to Section 2(a)(i) shall include the plan of distribution
attached hereto as Exhibit A. Each such Registration Statement also shall cover,
to the extent allowable under the 1933 Act and the rules promulgated thereunder
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits,

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stock dividends or similar transactions with respect to the Registrable
Securities to which such Registration Statement relates. Such Registration
Statement shall not include any shares of Common Stock or other securities for
the account of any other holder without the prior written consent of the
Required Investors; provided, however, that the Company shall have the right to
include (i) the PIPEs Securities and (ii) the shares of Common Stock issued to
Roth or which Roth may have the right to acquire as compensation for Roth's
services to the Company in connection with the transactions contemplated by the
Purchase Agreement and the PIPEs Agreement. Each Registration Statement (and
each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and/or their counsel prior to its filing or other submission. If the
Registration Statement covering the Conversion Shares and the Warrant Shares and
any and all other securities issued or issuable with respect to or in exchange
for such Registrable Securities is not filed with the SEC on or prior to the
Filing Deadline for such Registrable Securities, the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.0% of the aggregate amount invested by such Investor for the
Registrable Securities included in the applicable Registration Statement for
each 30-day period or pro rata for any portion thereof following the Filing
Deadline for which the applicable Registration Statement is not filed with
respect to the applicable Registrable Securities. Such payments shall constitute
the Investors' exclusive monetary remedy for such events, but shall not affect
the right of the Investors to seek injunctive relief. Such payments shall be
made to each Investor in cash.

               (ii) Additional Registrable Securities. Upon the written demand
of any Investor and upon any change in the Conversion Price (as defined in the
Notes) or in the Warrant Price (as defined in the Warrants) such that additional
shares of Common Stock become issuable upon the conversion of the Notes or the
exercise of the Warrants (the "Additional Shares"), the Company shall prepare
and file with the SEC one or more Registration Statements on Form S-3 or amend
the relevant Registration Statement filed pursuant to clause (i) above, if such
Registration Statement has not previously been declared effective (or, if Form
S-3 is not then available to the Company, on such form of registration statement
as is then available to effect a registration for resale of the Additional
Shares, subject to the Required Investors' consent) covering the resale of the
Additional Shares, but only to the extent the Additional Shares are not at the
time covered by an effective Registration Statement. Such Registration Statement
also shall cover, to the extent allowable under the 1933 Act and the rules
promulgated thereunder (including Rule 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Additional Shares. Such Registration
Statement shall not include any shares of Common Stock or other securities for
the account of any other holder without the prior written consent of the
Required Investors; provided, however, that the Company shall have the right to
include (i) the PIPEs Securities and (ii) the shares of Common Stock issued to
Roth or which Roth may have the right to acquire as compensation for Roth's
services to the Company in connection with the transactions contemplated by the
Purchase Agreement and the PIPEs Agreement. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and/or their counsel prior to its filing or other submission. If a
Registration Statement covering the Additional Shares is required to be filed
under this Section 2(a)(ii) and is not filed with the SEC within thirty (30)
days of the request of any Investor or upon the occurrence of any of the events
specified in this Section 2(a)(ii), the Company will make pro rata payments to
each Investor, as liquidated damages and not as a penalty, in an amount equal to
1.0% of the aggregate amount invested by such Investor with respect to the
securities giving rise to the issuance of such Additional Shares for each 30-day
period or pro rata for any portion thereof following the date by which such
Registration Statement should have been filed for which no Registration
Statement is filed with respect to the Additional Shares. Such payments shall
constitute the Investors' exclusive monetary remedy for such events, but shall
not affect the right of the Investors to seek injunctive relief. Such payments
shall be made to each Investor in cash.

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

          (c) Effectiveness.

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               (i) The Company shall use best efforts to have any Registration
Statement declared effective as soon as practicable. The Company shall notify
the Investors by facsimile or e-mail as promptly as practicable, and in any
event, within twenty-four (24) hours, after (A) any Registration Statement is
declared effective and (B) the filing of any related Prospectus under Rule
424(b), at which time the Company shall also provide the Investors with copies
of such related Prospectus. If (A)(w) a Registration Statement covering the
resale of the Conversion Shares and the Warrant Shares and any and all other
securities issued or issuable with respect to or in exchange for such
Registrable Securities is not declared effective by the SEC prior to the earlier
of (i) five (5) Business Days after the SEC shall have informed the Company that
no review of the Registration Statement will be made or that the SEC has no
further comments on the Registration Statement or (ii) the 90th day after the
Proposal Date (the 120th day after the Proposal Date if the Registration
Statement is reviewed by the SEC) or (y) a Registration Statement covering
Additional Shares is not declared effective by the SEC within ninety (90) days
following the time such Registration Statement was required to be filed pursuant
to Section 2(a)(ii) (the 120th day after such date if the Registration Statement
is reviewed by the SEC), or (B) after a Registration Statement has been declared
effective by the SEC, sales cannot be made pursuant to such Registration
Statement for any reason (including without limitation by reason of a stop
order, or the Company's failure to update the Registration Statement), but
excluding the inability of any Investor to sell the Registrable Securities
covered thereby due to market conditions and except as excused pursuant to
subparagraph (ii) below, then the Company will make pro rata payments to each
Investor, as liquidated damages and not as a penalty, in an amount equal to (i)
1.0% of the aggregate amount invested by such Investor for the Registrable
Securities included in the applicable Registration Statement that has not been
declared effective (or, in the case of a Registration Statement relating to
Additional Shares, the securities giving rise to the issuance of such Additional
Shares) for each 30-day period or pro rata for any portion thereof following the
date by which such Registration Statement should have been effective (the
"Blackout Period") and (ii) 1.0% of the aggregate amount invested by such
Investor for the Registrable Securities included in the applicable Registration
Statement that is not available for resales (or, in the case of a Registration
Statement relating to Additional Shares, the securities giving rise to the
issuance of such Additional Shares) for each 30-day period or pro rata for any
portion thereof that sales could not be made thereunder as provided in clause
(B) above. Such payments shall constitute the Investors' exclusive monetary
remedy for such events, but shall not affect the right of the Investors to seek
injunctive relief. The amounts payable as liquidated damages pursuant to this
paragraph shall be paid monthly within three (3) Business Days of the last day
of each month following the commencement of the Blackout Period until the
termination of the Blackout Period.

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

          (d) Limitation on Liquidated Damages. Notwithstanding the other
provisions of this Section 2, in no event shall the Company be liable for
liquidated damages in excess of an aggregate of 24% of the aggregate purchase
price paid by the Investors pursuant to the Purchase Agreement.

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

          (a) use commercially reasonable efforts to cause each such
Registration Statement to become effective after 4:00 p.m. E.S.T. (the date the
Registration Statement is declared effective shall be referred to as the
"Effective Date") and to remain continuously effective for a period that will
terminate upon the earlier of (i) the date on which all Registrable Securities
covered by such Registration Statement as amended from time to time, have been
sold, and (ii) the date on which all Registrable Securities covered by such
Registration Statement may be sold

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pursuant to Rule 144(k) (the "Effectiveness Period") and advise the Investors in
writing when the Effectiveness Period has expired;

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

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

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

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

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

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

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

          (i) otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act,
including, without limitation, Rule 172 under the 1933 Act, file any final
Prospectus, including any supplement or amendment thereof, with the SEC pursuant
to Rule 424

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under the 1933 Act prior to 9:30 a.m. E.S.T. on the Trading Day immediately
following the Effective Date, promptly inform the Investors in writing if, at
any time during the Effectiveness Period, the Company does not satisfy the
conditions specified in Rule 172 and, as a result thereof, the Investors are
required to deliver a Prospectus in connection with any disposition of
Registrable Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities
hereunder; and make available to its security holders, as soon as reasonably
practicable, but not later than the Availability Date (as defined below), an
earnings statement covering a period of at least twelve (12) months, beginning
after the effective date of each Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933 Act,
including Rule 158 promulgated thereunder (for the purpose of this subsection
3(i), "Availability Date" means the 45th day following the end of the fourth
fiscal quarter that includes the effective date of such Registration Statement,
except that, if such fourth fiscal quarter is the last quarter of the Company's
fiscal year, "Availability Date" means the 90th day after the end of such fourth
fiscal quarter).

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

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

          The Company shall not disclose material nonpublic information to the
Investors, or to advisors to or representatives of the Investors, unless prior
to disclosure of such information the Company identifies such information as
being material nonpublic information and provides the Investors, such advisors
and representatives with the opportunity to accept or refuse to accept such
material nonpublic information for review and any Investor wishing to obtain
such information enters into an appropriate confidentiality agreement with the
Company with respect thereto.

     5. Obligations of the Investors.

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

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such information to the Company at least two (2) Business Days prior to the
first anticipated filing date of such Registration Statement if such Investor
elects to have any of the Registrable Securities included in the Registration
Statement.

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

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

     6. Indemnification.

          (a) Indemnification by the Company. The Company will indemnify and
hold harmless each Investor and its officers, directors, members, employees and
agents, successors and assigns, and each other person, if any, who controls such
Investor within the meaning of the 1933 Act, against any losses, claims, damages
or liabilities, joint or several, to which they may become subject under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon: (i) any untrue
statement or omission or alleged untrue statement or omission of any material
fact in any Registration Statement, any preliminary Prospectus or final
Prospectus, or any amendment or supplement thereof required to be stated therein
or necessary to make the statements therein not misleading; (ii) any blue sky
application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company filed in any
state or other jurisdiction in order to qualify any or all of the Registrable
Securities under the securities laws thereof (any such application, document or
information herein called a "Blue Sky Application"); (iii) any violation by the
Company or its agents of any rule or regulation promulgated under the 1933 Act
applicable to the Company or its agents and relating to action or inaction
required of the Company in connection with such registration; or (iv) any
failure to register or qualify the Registrable Securities included in any such
Registration in any state where the Company or its agents has affirmatively
undertaken or agreed in writing that the Company will undertake such
registration or qualification on an Investor's behalf and will reimburse such
Investor, and each such officer, director or member and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
if and to the extent that any such loss, claim, damage or liability arises out
of or is based upon (i) such Investor's failure to comply with the prospectus
delivery requirements of the Securities Act at any time when the Company does
not meet the conditions for use of Rule 172, has advised the Investor in writing
that the Company does not meet such conditions and that therefore the Investor
is required to deliver a Prospectus in connection with any sale or other
disposition of Registrable Securities and has provided such Investor with a
current Prospectus for such use, (ii) an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by such Investor or any such controlling person in writing
specifically for use in such Registration Statement or Prospectus or (iii) the
use by an Investor of an outdated or defective Prospectus after the Company has
notified the Investor that such Prospectus is outdated or defective and the use
of a corrected or updated Prospectus would have avoided such losses, claims,
damages, liabilities or expenses.

          (b) Indemnification by the Investors. Each Investor agrees, severally
but not jointly, to indemnify and hold harmless, to the fullest extent permitted
by law, the Company, its directors, officers, employees, stockholders and each
person who controls the Company (within the meaning of the 1933 Act) against any
losses, claims, damages, liabilities and expense (including reasonable attorney
fees) resulting from (i) such Investor's failure to comply with the prospectus
delivery requirements of the Securities Act at any time when the Company does
not meet the conditions for use of Rule 172, has advised the Investor in writing
that the Company does not meet such conditions and that therefore the Investor
is required to deliver a Prospectus in connection with any sale or other
disposition of Registrable Securities and has provided such Investor with a
current Prospectus for such use, (ii) the use by an Investor of an outdated or
defective Prospectus after the Company has notified the Investor that

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such Prospectus is outdated or defective and the use of a corrected or updated
Prospectus would have avoided such losses, claims, damages, liabilities or
expenses, and (iii) any untrue statement of a material fact or any omission of a
material fact required to be stated in the Registration Statement or Prospectus
or preliminary Prospectus or amendment or supplement thereto or necessary to
make the statements therein not misleading, to the extent, but only to the
extent that such untrue statement or omission is contained in any information
furnished in writing by such Investor to the Company specifically for inclusion
in such Registration Statement or Prospectus or amendment or supplement thereto.
In no event shall the liability of an Investor be greater in amount than the
dollar amount of the proceeds (net of all expense paid by such Investor in
connection with any claim relating to this Section 6 and the amount of any
damages such Investor has otherwise been required to pay by reason of such
untrue statement or omission) received by such Investor upon the sale of the
Registrable Securities included in the Registration Statement giving rise to
such indemnification obligation.

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

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

     7. Miscellaneous.

          (a) Amendments and Waivers. This Agreement may be amended only by a
writing signed by the Company and the Required Investors. The Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of the Required Investors.

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

                                       8

<PAGE>

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

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

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

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

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

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

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

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

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

                                       9

<PAGE>

REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

                                       10

<PAGE>

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

The Company:                            ZILA, INC.

                                        By:    /s/ Gary V. Klinefelter
                                               ----------------------------
                                        Name:  Gary V. Klinefelter

                                        Title: Vice President and Secretary

                                        11

<PAGE>

                         VISIUM BALANCED OFFSHORE FUND, LTD.

                         By:    /s/ Jacob Gottlieb
                                ----------------------------------------------
                         Name:  Jacob Gottlieb
                         Title: Authorized Signatory

                         VISIUM BALANCED FUND, LP

                         By:    /s/ Jacob Gottlieb
                                ----------------------------------------------
                         Name:  Jacob Gottlieb
                         Title: Authorized Signatory

                         VISIUM LONG BIAS OFFSHORE FUND, LTD.

                         By:    /s/ Jacob Gottlieb
                                ----------------------------------------------
                         Name:  Jacob Gottlieb
                         Title: Authorized Signatory

                         VISIUM LONG BIAS FUND, LP

                         By:    /s/ Jacob Gottlieb
                                ----------------------------------------------
                         Name:  Jacob Gottlieb
                         Title: Authorized Signatory

                         ATLAS MASTER FUND, LTD.

                         By:    /s/ Scott Schroeder
                                ----------------------------------------------
                         Name:  Scott Schroeder
                         Title: Authorized Signatory

                                       12
<PAGE>

                                                                       Exhibit A

                              PLAN OF DISTRIBUTION

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

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

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

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

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

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

     -    privately negotiated transactions;

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

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

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

     -    a combination of any such methods of sale; and

     -    any other method permitted by applicable law.

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

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

                                       A-1

<PAGE>

by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).

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

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

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

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

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

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

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

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

                                       A-2

<PAGE>

                                                                       Exhibit B

                                   Zila, Inc.

                      Selling Securityholder Questionnaire

     The undersigned beneficial owner (the "Selling Securityholder") of common
stock (the "Common Stock"), of Zila, Inc. (the "Company") understands that the
Company has filed or intends to file with the Securities and Exchange Commission
(the "Commission") one or more Registration Statements for the registration and
resale of the Registrable Securities, in accordance with the terms of the
Registration Rights Agreement, dated as of November __, 2006 (the "Registration
Rights Agreement"), among the Company and the Investors named therein. A copy of
the Registration Rights Agreement is available from the Company upon request at
the address set forth below. All capitalized terms used and not otherwise
defined herein shall have the meanings ascribed thereto in the Registration
Rights Agreement.

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

                                  QUESTIONNAIRE

1.   NAME.

     (a) Full legal name of Selling Securityholder:

         -----------------------------------------------------------------------

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

         -----------------------------------------------------------------------

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

         -----------------------------------------------------------------------

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

         -----------------------------------------------------------------------

2.   ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER:

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Telephone:      ________________________
Fax:            ________________________
Contact Person: ________________________
Email:          ________________________

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

                                       B-1

<PAGE>

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

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Telephone:      ________________________
Fax:            ________________________
Contact Person: ________________________
Email:          ________________________

3.   BENEFICIAL OWNERSHIP OF REGISTRABLE SECURITIES:

     Type and principal amount of Registrable Securities beneficially owned:

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

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

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

4.   BROKER-DEALER STATUS:

     (a) Are you a broker-dealer?

                                 Yes [ ] No [ ]

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

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

                                 Yes [ ] No [ ]

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

                                 Yes [ ] No [ ]

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

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

                                       B-2

<PAGE>

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

5.   BENEFICIAL OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED BY THE
     SELLING SECURITYHOLDER.

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

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

          ----------------------------------------------------------------------

          ----------------------------------------------------------------------

6.   RELATIONSHIPS WITH THE COMPANY:

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

     State any exceptions here:

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

7.   PLAN OF DISTRIBUTION:

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

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

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

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

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

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

                                       B-3

<PAGE>

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

Dated:                                  Beneficial Owner:
       ------------------------                           ----------------------

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

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

          Zila, Inc.
          5227 N. 7th Street
          Phoenix, AZ 84014
          Fax No.: (602) 234 2264
          Attn: Gary V. Klinefelter

          with a copy to:

          Snell & Wilmer L.L.P.
          400 East Van Buren Street
          Phoenix, AZ 85004
          Fax No.: (602) 382 6070
          Attn: Michael M. Donahey, Esq.

                                       B-4<PAGE>

                                                                    Exhibit 10.1

                          PLEDGE AND SECURITY AGREEMENT

     PLEDGE AND SECURITY AGREEMENT, dated as of November 28, 2006 (as this
agreement may be amended, restated, supplemented or otherwise modified, renewed
or replaced from time to time, this "Agreement"), is by and among Zila, Inc., a
Delaware corporation (the "Borrower"), Zila Biotechnology, Inc., an Arizona
corporation, and a Subsidiary of Borrower, Zila Pharmaceuticals, Inc., a Nevada
corporation, and a Subsidiary of Borrower, Zila Technical, Inc., an Arizona
corporation, and a Subsidiary of Borrower, and Zila Limited, a United Kingdom
company, and a Subsidiary of Borrower, as guarantors (the "Subsidiary
Guarantors"), and such other parties as may become Grantors hereunder on or
after the date hereof (together with the Borrower and the Subsidiary Guarantors,
the "Grantors" and, individually, a "Grantor"), and Balyasny Asset Management,
L.P., a Delaware limited Partnership, as collateral agent (the "Agent") for the
Investors named in the Purchase Agreement, dated November 28, 2006 (the
"Purchase Agreement"), by and among the Borrower and such Investors
(collectively, the "Purchasers"), and the Purchasers for the purposes only of
Section 30 of this Agreement.

     WHEREAS, pursuant to the terms of the Purchase Agreement, the Purchasers
are purchasing from the Borrower, among other things, $12,000,000 in an
aggregate principal amount of the Borrower's 6% Senior Secured Convertible Notes
(the "Notes");

     WHEREAS, pursuant to the terms of Section 28 of this Security Agreement,
each Subsidiary Guarantor and each other Subsidiary that becomes a Grantor under
this Agreement is guaranteeing the obligations of the Borrower under the Notes
and the other Transaction Documents; and

     WHEREAS, the Grantors are hereby granting continuing duly perfected first
priority security interests in all current and future assets and property of the
Grantors in favor of the Agent for the benefit of the Purchasers and the Agent
(collectively, the "Secured Parties") as herein provided to secure the
obligations of the Borrower under the Notes and the other Transaction Documents
and the obligations of the Subsidiary Grantors (as defined in Section 28) under
their Guarantees (as defined in Section 28);

     NOW THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS.

     1.1 All capitalized terms used herein without definitions shall have the
respective meanings provided therefor in the Purchase Agreement or the Notes. As
used herein the term "Obligations" shall mean all principal, interest (including
interest accrued after the filing of a bankruptcy or similar petition whether or
not a claim therefor is enforceable), fees, expenses and indemnities payable
from time to time by the Grantors under the Notes, the Guarantees and the other
Transaction Documents, including, without limitation, reimbursements under
Section 9.5 of the Purchase Agreement, and all such fees, expenses and
indemnities payable, if any, under this Agreement to the Agent.

<PAGE>

     1.2 The term "State," as used herein, means the State of New York.

     1.3 The term "Post-Petition Interest", as used herein, means interest and
fees accruing after the filing of any petition in bankruptcy, or the
commencement of any case, proceeding or action relating to the bankruptcy,
reorganization or insolvency of Borrower or any other Grantor of any of the
foregoing (or interest that would accrue but for the operation of applicable
bankruptcy, reorganization or insolvency laws), whether or not a claim for
post-filing or post-petition interest and/or fees is allowed or allowable as a
claim in any such case, proceeding or action.

     1.4 All terms defined in the Uniform Commercial Code of the State and used
herein shall have the same definitions herein as specified therein. However, if
a term is defined in Article 9 of the Uniform Commercial Code of the State
differently than in another Article of the Uniform Commercial Code of the State,
the term has the meaning specified in Article 9.

2. GRANT OF SECURITY INTEREST. Borrower, as security for the due and punctual
payment and performance in full of the Obligations (including Post-Petition
Interest), and each of the other Grantors, as security for its obligations under
its guarantee pursuant to the Guaranty and for any other Obligations, hereby
grants, mortgages, pledges, assigns, hypothecates, transfers, sets over, conveys
and delivers to the Agent (for the benefit of the Secured Parties) a continuing
first priority security interest in, and lien on, Borrower's or such other
Grantor's (as applicable) rights, titles and interests in, to and under all
tangible and intangible personal property and Fixtures of every kind and nature,
wherever located and whether now owned or existing, or hereafter acquired,
created or arising, and all proceeds and products thereof or income therefrom
(all of the foregoing and all of the assets set forth below in clauses (i)
through (xiii), being referred to herein as the "Collateral"), including each of
the following:

          (i) goods (including inventory, equipment and any accessions thereto),

          (ii) instruments (including promissory notes),

          (iii) documents,

          (iv) accounts,

          (v) chattel paper (whether tangible or electronic),

          (vi) deposit accounts,

          (vii) letter-of-credit rights (whether or not the letter of credit is
evidenced by a writing),

          (viii) commercial tort claims,

          (ix) securities and all other investment property ("Investment
Property"),

          (x) supporting obligations,

                                         2

<PAGE>

          (xi) contract rights or rights to the payment of money, insurance
claims and proceeds,

          (xii) general intangibles including, without limitation, all payment
intangibles, patents, patent applications, trademarks, trademark applications,
trade names, copyrights, copyright applications, software, engineering drawings,
service marks, customer lists, goodwill, and all licenses, permits, agreements
of any kind or nature pursuant to which the Grantors possess, use or have
authority to possess or use property (whether tangible or intangible) of others
or others possess, use or have authority to possess or use property (whether
tangible or intangible) of the Grantors, and all recorded data of any kind or
nature, regardless of the medium of recording including, without limitation, all
software, writings, plans, specifications and schematics; and

          (xiii) all now existing and hereafter acquired or arising (A) capital
stock, equity securities or interests or other Investment Property (including
the capital stock described on Schedule A hereto), (B) all cash dividends and
cash distributions with respect to the foregoing ("Dividends"), (C) all non-cash
dividends paid on capital securities, liquidating dividends paid on capital
securities, shares of capital securities resulting from (or in connection with
the exercise of) stock splits, reclassifications, warrants, options, non-cash
dividends, mergers, consolidations, and all other distributions (whether similar
or dissimilar to the foregoing) on or with respect to any capital securities
constituting Collateral (excluding Dividends, "Distributions"), and (D) all
certificates, agreements (including stockholders agreements, partnership
agreements, operating agreements and limited liability company agreements),
books, records, writings, data bases, information and other property relating
to, used or useful in connection with, evidencing, embodying, incorporating or
referring to, any of the foregoing.

     The Agent acknowledges that the attachment of the security interest in any
commercial tort claim as original collateral is subject to the Grantor's
compliance with Section 4.7.

     Notwithstanding the foregoing, Collateral shall not include any of the
following (collectively, the "Excluded Collateral"):

     (1) vehicles subject to a certificate of title statute; and

     (2) rights under licenses, permits and contracts and other general
intangibles to the extent that the granting of a security interest therein or
assignment thereof would violate any applicable law or any enforceable provision
of any such license, permit, contract or other general intangible, provided,
that the Grantors shall not permit any such prohibitions in any contracts,
licenses, general intangibles and permits entered into after the date hereof
except in the ordinary course on usual and customary terms or consistent with
past practice.

3. AUTHORIZATION TO FILE FINANCING STATEMENTS. The Grantors hereby irrevocably
authorize the Agent at any time and from time to time to file in any applicable
Uniform Commercial Code jurisdiction any initial financing statements and
amendments thereto against each Grantor that (a) indicate the Collateral (i) as
all assets of such Grantor or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article 9
of the Uniform Commercial Code of the State or such jurisdiction, or (ii) as

                                       3

<PAGE>

being of an equal or lesser scope or with greater detail, and (b) contain any
other information required by part 5 of Article 9 of the Uniform Commercial Code
of the State for the sufficiency or filing office acceptance of any financing
statement or amendment, including whether such Grantor is an organization, the
type of organization and any organization identification number issued to such
Grantor. The Grantors agree to furnish any such information to the Agent and the
other Secured Parties promptly upon request. Each Grantor also ratifies its
authorization for the Agent to have filed in any Uniform Commercial Code
jurisdiction financing statements or amendments thereto if filed prior to the
date hereof.

4. OTHER ACTIONS. Further to insure the attachment, perfection and first
priority (subject to Permitted Liens) of, and the ability of the Agent to
enforce, the Agent's first priority security interest in the Collateral, the
Grantors agree, in each case at the Grantor's own expense, to take the following
actions with respect to the following Collateral:

     4.1 Promissory Notes and Tangible Chattel Paper. If any Grantor shall at
any time hold or acquire any promissory notes or tangible chattel paper, such
Grantor shall forthwith endorse, pledge and deliver the same to the Agent,
accompanied by such instruments of transfer or assignment duly executed in blank
as the Agent may from time to time specify.

     4.2 Deposit Accounts. For each deposit account (each, a "Deposit Account")
that any Grantor at any time opens or maintains at any depository bank (each, a
"Depository Bank"), the Grantor shall, at the Agent's or any other Secured
Party's reasonable request and option, pursuant to an agreement (each, a
"Deposit Account Control Agreement") in form and substance satisfactory to the
Agent and the Requisite Purchasers (as defined in Section 30.3(b)), upon an
Event of Default either (a) cause the Depositary Bank to agree to comply at any
time with instructions from the Agent to such Depositary Bank directing the
disposition of funds from time to time credited to such Deposit Account, without
further consent of the Grantor, or (b) arrange for the Agent to become the
customers of the Depositary Bank with respect to the Deposit Account, with the
Grantors being permitted, only with the consent of the Agent and the Requisite
Purchasers, to exercise rights to withdraw funds from such Deposit Account. The
Agent agrees with the Grantors that the Agent shall not give any such
instructions or withhold any withdrawal rights from the Grantors, unless an
Event of Default has occurred and is continuing, or, after giving effect to any
withdrawal not otherwise permitted by the Transaction Documents, would occur.
The provisions of this paragraph shall not apply to (i) any Deposit Account for
which the Grantors, the Depositary Bank and the Agent and/or the other Secured
Parties have entered into a cash collateral agreement specially negotiated among
any Grantor, the Depositary Bank and the Agent and/or the other Secured Parties
for the specific purpose set forth therein (ii) Deposit Accounts for which any
Secured Party is the depositary, and (iii) any Deposit Account which holds
exclusively sales tax and/or withholding remittances.

     4.3 Investment Property. If any Grantor shall at any time hold or acquire
any certificated securities, the Grantor shall forthwith endorse, pledge and
deliver the same to the Agent, accompanied by such instruments of transfer or
assignment duly executed in blank as the Agent may from time to time specify. If
any securities now or hereafter acquired by any Grantor are uncertificated and
are issued to the Grantor or its nominee directly by the issuer thereof, the
Grantor shall immediately notify the Agent and the other Secured Parties thereof
and, at the Agent's or any other Secured Party's reasonable request and option,
pursuant to an agreement in

                                       4

<PAGE>

form and substance satisfactory to the Agent and the Requisite Purchasers,
either (a) cause the issuer to agree to comply with instructions from the Agent
as to such securities, without further consent of the Grantor or such nominee,
or (b) arrange for the Agent (on behalf of the Secured Parties) to become the
registered owners of the securities. If any securities, whether certificated or
uncertificated, or other investment property now or hereafter acquired by any
Grantor are held by the Grantor or its nominee through a securities intermediary
or commodity intermediary, the Grantor shall immediately notify the Agent and
the other Secured Parties thereof and, at the Agent's or any other Secured
Party's reasonable request and option, pursuant to an agreement in form and
substance satisfactory to the Agent and the Requisite Purchasers, either (i)
cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply with entitlement orders or other instructions
from the Agent to such securities intermediary as to such securities or other
investment property, or (as the case may be) to apply any value distributed on
account of any commodity contract as directed by the Agent to such commodity
intermediary, in each case without further consent of the Grantor or such
nominee, or (ii) in the case of financial assets or other investment property
held through a securities intermediary, arrange for the Agent (on behalf of the
Secured Parties) to become the entitlement holders with respect to such
investment property, with the Grantor being permitted, only with the consent of
the Agent and the Requisite Purchasers, to exercise rights to withdraw or
otherwise deal with such investment property. The Agent agrees with the Grantors
that the Agent shall not give any such entitlement orders or instructions or
directions to any such issuer, securities intermediary or commodity
intermediary, and shall not withhold its consent to the exercise of any
withdrawal or dealing rights by the Grantors, unless an Event of Default has
occurred and is continuing, or, after giving effect to any such investment and
withdrawal rights not otherwise permitted by the Transaction Documents, would
occur. The provisions of this paragraph shall not apply to any financial assets
credited to a securities account for which any Secured Party is the securities
intermediary.

     4.4 Collateral in the Possession of a Bailee. If any goods are at any time
in the possession of a bailee, the Grantors shall promptly notify the Agent and
the other Secured Parties thereof and, if reasonably requested by the Agent or
any other Secured Party, shall promptly obtain an acknowledgment from the
bailee, in form and substance satisfactory to the Agent and the Requisite
Purchasers, that the bailee holds such Collateral for the benefit of the Agent
(on behalf of the Secured Parties) and shall act upon the instructions of the
Agent, without the further consent of the Grantor. The Agent agrees with the
Grantors that the Agent shall not give any such instructions unless an Event of
Default has occurred and is continuing or would occur after taking into account
any action by the Grantors with respect to the bailee.

     4.5 Electronic Chattel Paper and Transferable Records. If any Grantor at
any time holds or acquires an interest in any electronic chattel paper, the
Grantor shall promptly notify the Agent and the other Secured Parties thereof
and, at the reasonable request of the Agent or any other Secured Party, shall
take such action as the Agent or such other Secured Party may reasonably request
to vest in the Agent control, under Section9-105 of the Uniform Commercial Code,
of such electronic chattel paper. The Agent agrees with the Grantors that the
Agent will arrange, pursuant to procedures satisfactory to the Agent and the
Requisite Purchasers and so long as such procedures will not result in the
Agent's loss of control, for the Grantors to make alterations to the electronic
chattel paper or transferable record permitted under UCC Section9-105, unless an
Event of Default has occurred and is continuing or would occur after taking into

                                       5

<PAGE>

account any action by the Grantors with respect to such electronic chattel paper
or transferable record.

     4.6 Letter-of-credit Rights. If any Grantor is at any time a beneficiary
under a letter of credit now or hereafter issued in favor of the Grantor, the
Grantor shall promptly notify the Agent and the other Secured Parties thereof
and, at the reasonable request and option of the Agent or any Secured Party, the
Grantor shall, pursuant to an agreement in form and substance satisfactory to
the Agent and the Requisite Purchasers, either (i) use commercially reasonable
efforts (including, but not limited to, the payment of customary transfer and
assignment fees) to have the issuer and any confirmer of such letter of credit
to consent to an assignment to the Agent of the proceeds of any drawing under
the letter of credit or (ii) use commercially reasonable efforts (including, but
not limited to, the payment of customary transfer and assignment fees) to have
the Agent become the transferee beneficiaries of the letter of credit, with the
Agent agreeing, in each case, that the proceeds of any drawing under the letter
to credit are to be applied as provided in the Notes.

     4.7 Commercial Tort Claims. If any Grantor shall at any time hold or
acquire a commercial tort claim, the Grantor shall immediately notify the Agent
and the other Secured Parties in a writing signed by the Grantor of the brief
details thereof and grant to the Agent (on behalf of the Secured Parties) in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
satisfactory to the Agent and the Requisite Purchasers.

5. OTHER ACTIONS AS TO ANY AND ALL COLLATERAL. The Grantors further agree to
take any other action reasonably requested by the Agent or any other Secured
Party to insure the attachment, perfection and first priority (subject to
Permitted Liens) of, and the ability of the Agent (on behalf of the Secured
Parties) to enforce, the Secured Parties' security interest in any and all of
the Collateral including, without limitation, (a) executing, delivering and,
where appropriate, filing financing statements and amendments relating thereto
under the Uniform Commercial Code, to the extent, if any, that any Grantor's
signature thereon is required therefor, (b) causing the Agent's name to be noted
as the secured party on any certificate of title for a titled good if such
notation is a condition to attachment, perfection or priority of, or ability of
the Agent to enforce, the Agent's security interest in such Collateral, (c)
complying with any provision of any statute, regulation or treaty of the United
States as to any Collateral if compliance with such provision is a condition to
attachment, perfection or priority of, or ability of the Agent to enforce, the
Agent's security interest in such Collateral, (d) obtaining governmental and
other third party consents and approvals, including without limitation any
consent of any licensor, lessor or other person obligated on Collateral, (e)
obtaining waivers from landlords in form and substance satisfactory to the Agent
and the Requisite Purchasers, (f) taking all actions required by other law, as
applicable in any relevant jurisdiction, or by other law as applicable in any
foreign jurisdiction, and (g) delivery to the Agent of stock certificates (and
stock powers duly executed in blank in favor of the Agent) covering all of the
capital stock described on Schedule A.

6. RELATION TO OTHER SECURITY DOCUMENTS. The provisions of this Agreement
supplement the provisions of the other Transaction Documents. Nothing contained
in any such Transaction Document shall derogate from any of the rights or
remedies of the Agent or any other Secured

                                       6

<PAGE>

Party hereunder. The provisions of this Agreement shall be read and construed
with the other Security Documents referred to below in the manner so indicated.

     6.1 Copyright Security Agreements. If reasonably requested by the Agent or
any other Secured Party, each Grantor shall execute and deliver to the Agent the
Copyright Security Agreement (attached hereto as Exhibit I) pursuant to which
the Grantor shall grant to the Agent (on behalf of the Secured Parties) security
interests in certain Collateral consisting of copyrights, and copyright
registrations. The provisions of the Copyright Security Agreement are
supplemental to the provisions of this Agreement, and nothing contained in the
Copyright Security Agreement shall derogate from any of the rights or remedies
of the Agent or any other Secured Party hereunder. Neither the delivery of, nor
anything contained in, the Copyright Security Agreement shall be deemed to
prevent or postpone the time of attachment or perfection of any security
interest in such Collateral created hereby.

     6.2 Trademark Security Agreements. If reasonably requested by the Agent or
any other Secured Party, each Grantor shall execute and deliver to the Agent the
Trademark Security Agreement (attached hereto as Exhibit II) pursuant to which
the Grantor shall grant to the Agent (on behalf of the Secured Parties) security
interests in certain Collateral consisting of trademarks, and trademark
registrations. The provisions of the Trademark Security Agreement are
supplemental to the provisions of this Agreement, and nothing contained in the
Trademark Security Agreement shall derogate from any of the rights or remedies
of the Agent or any other Secured Party hereunder. Neither the delivery of, nor
anything contained in, the Trademark Security Agreement shall be deemed to
prevent or postpone the time of attachment or perfection of any security
interest in such Collateral created hereby.

     6.3 Patent Security Agreements. If reasonably requested by the Agent or any
other Secured Party, each Grantor shall execute and deliver to the Agent the
Patent Security Agreement (attached hereto as Exhibit III) pursuant to which the
Grantor shall grant to the Agent (on behalf of the Secured Parties) security
interests in certain Collateral consisting of patents, and patent registrations.
The provisions of the Patent Security Agreement are supplemental to the
provisions of this Agreement, and nothing contained in the Patent Security
Agreement shall derogate from any of the rights or remedies of the Agent or any
other Secured Party hereunder. Neither the delivery of, nor anything contained
in, the Patent Security Agreement shall be deemed to prevent or postpone the
time of attachment or perfection of any security interest in such Collateral
created hereby.

7. REPRESENTATIONS AND WARRANTIES CONCERNING GRANTOR'S LEGAL STATUS. Each
Grantor has previously delivered to the Agent and the other Secured Parties a
certificate signed by each Grantor and entitled "Perfection Certificate" (the
"Perfection Certificate"). Each Grantor represents and warrants to the Agent and
the other Secured Parties as follows: (a) the Grantor's exact legal name is that
indicated on the Perfection Certificate and on the signature page hereof, (b)
the Grantor is an organization of the type and organized in the jurisdiction set
forth in the Perfection Certificate, (c) the Perfection Certificate accurately
sets forth the Grantor's organizational identification number or accurately
states that the Grantor has none, (d) the Perfection Certificate accurately sets
forth the Grantor's place of business or, if more than one, its chief executive
office as well as the Grantor's mailing address if different and (e) all other

                                       7

<PAGE>

information set forth on the Perfection Certificate pertaining to the Grantor is
accurate and complete.

8. COVENANTS CONCERNING GRANTOR'S LEGAL STATUS. Each Grantor covenants with the
Agent and the other Secured Parties as follows: (a) without providing at least
30 days prior written notice to the Agent and the other Secured Parties, the
Grantor will not change its name, its place of business or, if more than one,
chief executive office, or its mailing address or organizational identification
number if it has one, (b) if the Grantor does not have an organizational
identification number and later obtains one, the Grantor shall forthwith notify
the Agent and the other Secured Parties of such organizational identification
number, and (c) the Grantor will not change its type of organization,
jurisdiction of organization or other legal structure.

9. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL. Each Grantor further
represents and warrants to the Agent and the other Secured Parties as follows:
(a) the Grantor is the owner of or has other rights in the Collateral, free from
any adverse lien, security interest or other encumbrance, except for the
security interest created by this Agreement and the Permitted Liens, (b) none of
the Collateral constitutes, or is the proceeds of, "farm products" as defined in
Section 9-102(a)(34) of the Uniform Commercial Code of the State, (c) none of
the account debtors or other persons obligated on any of the Collateral is a
governmental authority subject to the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such Collateral, (d) the
Grantor holds no commercial tort claim except as indicated on Schedule B hereto
as modified from time to time, (e) to the best of its knowledge, the Grantor has
at all times operated its business in compliance with all applicable provisions
of the federal Fair Labor Standards Act, as amended, and with all applicable
provisions of federal, state and local statutes and ordinances dealing with the
control, shipment, storage or disposal of hazardous materials or substances and
(f) all other information set forth on the Perfection Certificate pertaining to
the Collateral is accurate and complete.

10. COVENANTS CONCERNING COLLATERAL ETC. Each Grantor further covenants with the
Agent and the other Secured Parties as follows:

     10.1 The Collateral, to the extent not delivered to the Agent pursuant to
Section 4 or in transit within the United States will be kept at those locations
listed on the Perfection Certificate and, other than in connection with a
disposition permitted by Section 10.8 hereof, and the Grantor will not remove
the Collateral from such locations, without providing at least 20 days prior
written notice to the Agent.

     10.2 Except for the security interest herein granted and Permitted Liens,
the Grantor shall be the owner of or have other rights in the Collateral free
from any lien, security interest or other encumbrance, and the Grantor shall
defend the same against all claims and demands of all persons at any time
claiming the same or any interests therein adverse to the Purchasers.

     10.3 The Grantor shall not pledge, mortgage or create, or suffer to exist a
security interest in the Collateral in favor of any person other than the Agent
except for Permitted Liens.

                                       8

<PAGE>

     10.4 The Grantor will not use the Collateral in violation of any policy of
insurance thereon.

     10.5 The Grantor will permit the Agent and any Purchaser or their
respective designees, to inspect the Collateral, wherever located, at any
reasonable time during business hours upon prior notice of at least three
Business Days (unless a Default or an Event of Default has occurred and is
continuing, in which event no prior notice shall be required).

     10.6 The Grantor will pay promptly when due all taxes, assessments,
governmental charges and levies upon the Collateral or incurred in connection
with the use or operation of such Collateral or incurred in connection with this
Agreement other than any taxes contested in good faith and for which appropriate
reserves have been established by the Grantor.

     10.7 The Grantor will continue to operate, its business in compliance with
all applicable provisions of the federal Fair Labor Standards Act, as amended,
and with all applicable provisions of federal, state and local statutes and
ordinances dealing with the control, shipment, storage or disposal of hazardous
materials or substances.

     10.8 The Grantor will not sell or otherwise dispose, or offer to sell or
otherwise dispose, of the Collateral or any interest therein except for as
permitted by the Notes and except for (i) equipment not used by the Grantors in
the ordinary course of its business, (ii) obsolete equipment not used by the
Grantors in the ordinary course of its business, and (iii) goods sold by the
Grantors in the ordinary course of its busine

11. INSURANCE.

     11.1 MAINTENANCE OF INSURANCE. Each Grantor will maintain with financially
sound and reputable insurers insurance with respect to its properties and
business against such casualties and contingencies as shall be in accordance
with general practices of businesses engaged in similar activities in similar
geographic areas; provided, however, that the Borrower shall at all times
maintain with financially sound and reputable insurers such insurance in amounts
not less than the insurance maintained by the Borrower as of the date hereof,
except with the Purchasers' prior written consent (which will not be
unreasonably withheld or delayed). Such insurance shall be in such minimum
amounts that the Grantor will not be deemed a co-insurer under applicable
insurance laws, regulations and policies and otherwise shall be in such amounts,
contain such terms, be in such forms and be for such periods as may be
reasonably satisfactory to the Agent and the Requisite Purchasers. In addition,
all such insurance shall be payable to the Agent (on behalf of the Secured
Parties) as loss payee. Without limiting the foregoing, the Grantors will (i)
keep all of its physical property insured with casualty or physical hazard
insurance on an "all risks" basis, with broad form flood and earthquake
coverages and electronic data processing coverage, with a full replacement cost
endorsement and an "agreed amount" clause in an amount equal to 100% of the full
replacement cost of such property, (ii) maintain all such workers' compensation
or similar insurance as may be required by law and (iii) maintain, in amounts
and with deductibles equal to those generally maintained by businesses engaged
in similar activities in similar geographic areas, general public liability
insurance against claims of bodily injury, death or property damage occurring,
on, in or about the properties of the Grantors; business interruption insurance;
and product liability insurance.

                                       9

<PAGE>

     11.2 INSURANCE PROCEEDS. The proceeds of any casualty insurance in respect
of any casualty loss of any of the Collateral shall, subject to the rights, if
any, of other parties with a prior interest in the property covered thereby, (i)
so long as no Default or Event of Default has occurred and is continuing and to
the extent that the amount of such proceeds is less than $150,000, be disbursed
to the Grantor for direct application by the Grantor solely to the repair or
replacement of the Grantor's property so damaged or destroyed and (ii) in all
other circumstances, be held by the Purchasers as cash collateral for the
Obligations and (except to the extent disbursed pursuant to the next sentence)
may be applied to the Obligations. The Agent may, at its sole option, disburse
from time to time all or any part of such proceeds so held as cash collateral,
upon such terms and conditions as the Agent may reasonably prescribe, for direct
application by the Grantor solely to the repair or replacement of the Grantor's
property so damaged or destroyed, or the Agent may apply all or any part of such
proceeds to the Obligations.

     11.3 NOTICE OF CANCELLATION ETC. All policies of insurance shall provide
for at least 30 days prior written cancellation notice to the Agent and the
other Secured Parties, unless a shorter period is mandated under applicable law.
In the event of failure by any Grantor to provide and maintain insurance as
herein provided, the Agent or any other Secured Party may, at their option,
provide such insurance and charge the amount thereof to the Grantor. Each
Grantor shall furnish the Agent and the other Secured Parties with certificates
of insurance and policies evidencing compliance with the foregoing insurance
provision.

12. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.

     12.1 EXPENSES INCURRED BY THE SECURED PARTIES. In their discretion, the
Agent or any other Secured Party may, if any Grantor fails to do so, discharge
encumbrances at any time levied or placed on any of the Collateral (other than
to the extent constituting Permitted Liens), make repairs thereto and pay any
necessary filing fees or, if any Grantor fails to do so, insurance premiums.
Each Grantor agrees to reimburse the Agent or such other applicable Secured
Party on demand for any and all expenditures so made. Neither the Agent nor any
other Secured Party shall have any obligation to the Grantors to make any such
expenditures, nor shall the making thereof relieve the Grantor of any default.
Any expenses incurred under this Section 12 shall constitute Obligations.

     12.2 SECURED PARTIES' OBLIGATIONS AND DUTIES. Anything herein to the
contrary notwithstanding, each Grantor shall remain liable under each contract
or agreement comprised in the Collateral to be observed or performed by the
Grantor thereunder. The Secured Parties shall not have any obligation or
liability under any such contract or agreement by reason of or arising out of
this Agreement or the receipt by the Agent or any other Secured Party of any
payment relating to any of the Collateral, nor shall the Agent or any other
Secured Party be obligated in any manner to perform any of the obligations of
the Grantor under or pursuant to any such contract or agreement, to make inquiry
as to the nature or sufficiency of any payment received by the Agent or any
other Secured Party in respect of the Collateral or as to the sufficiency of any
performance by any party under any such contract or agreement, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to the Agent or any other
Secured Party or to which the Agent or any other Secured Party may be entitled
at any time or times. The Agent's (and any other Secure

                                       10

<PAGE>

Party so receiving Collateral) sole duty with respect to the custody, safe
keeping and physical preservation of the Collateral in its possession, under
Section9-207 of the Uniform Commercial Code of the State or otherwise, shall be
to deal with such Collateral in the same manner as the Agent (or such other
Secured Party) deals with similar property for its own account.

13. SECURITIES AND DEPOSITS. The Agent may at any time following and during the
continuance of an Event of Default, at its option, transfer to itself or any
nominee any securities constituting Collateral, receive any income thereon and
hold such income as additional Collateral or apply it to the Obligations.
Whether or not any Obligations are due, the Agent may following and during the
continuance of an Event of Default demand, sue for, collect, or make any
settlement or compromise which it deems desirable with respect to the
Collateral. Regardless of the adequacy of Collateral or any other security for
the Obligations, any deposits or other sums at any time credited by or due from
the Agent to the Grantors may at any time be applied to or set off against any
of the Obligations then due and owing.

14. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL.
If an Event of Default shall have occurred and be continuing, the Grantors
shall, at the reasonable request of the Agent or any other Secured Party, notify
account debtors and other persons obligated on any of the Collateral of the
security interest of the Agent in any account, chattel paper, general
intangible, instrument or other Collateral and that payment thereof is to be
made directly to the Agent or to any financial institution designated by the
Agent as its agent therefor, and the Agent may, if an Event of Default shall
have occurred and be continuing, without notice to or demand upon the Grantor,
so notify account debtors and other persons obligated on Collateral. After the
making of such a request or the giving of any such notification, the Grantors
shall hold any proceeds of collection of accounts, chattel paper, general
intangibles, instruments and other Collateral received by the Grantor as trustee
for the Agent without commingling the same with other funds of the Grantor and
shall turn the same over to the Agent in the identical form received, together
with any reasonably necessary or advisable endorsements or assignments. The
Agent shall apply the proceeds of collection of accounts, chattel paper, general
intangibles, instruments and other Collateral received by the Agent to the
Obligations, such proceeds to be immediately entered after final payment in cash
or other immediately available funds of the items giving rise to them.

15. INVESTMENT PROPERTY. (i) The Grantors, at their cost and expense (including
the cost and expense of any of the following referenced consents, approvals
etc.) will promptly execute and deliver or cause the execution and delivery of
all applications, certificates, instruments, registration statements, and all
other documents and papers the Purchasers may reasonably request during the
continuance of an Event of Default in connection with the obtaining of any
consent, approval, registration, qualification, permit, license, accreditation,
or authorization of any other official body or other Person reasonably necessary
or appropriate for the effective exercise of any rights hereunder or under the
other Transaction Documents. Without limiting the generality of the foregoing,
the Grantors agree that in the event the Agent shall exercise its rights
hereunder or pursuant to the other Transaction Documents during the continuance
of an Event of Default, to sell, transfer, or otherwise dispose of, or vote,
consent, operate, or take any other action in connection with any of the
Collateral, the Grantors shall execute and deliver (or cause to be executed and
delivered) all applications, certificates, assignments and other documents that
the Agent reasonably requests to facilitate such actions and shall otherwise
promptly, fully, and

                                       11

<PAGE>

diligently cooperate with the Agent and any other Persons in making any
application for the prior consent or approval of any official body or any other
Person to the exercise by the Purchasers of any such rights relating to all or
any of the Collateral.

          (i) The Grantors agree promptly upon the occurrence and continuance of
an Event of Default and without any request therefor by the Agent or any other
Secured Party, so long as such Event of Default shall continue, to deliver
(properly endorsed where required hereby or reasonably requested by the Agent or
any other Secured Party) to the Agent all Dividends and Distributions with
respect to Investment Property and all proceeds of the Collateral, in each case
thereafter received by the Grantor, all of which shall be held by the Agent as
additional Collateral.

          (ii) Except when an Event of Default has occurred and is continuing,
the Grantors may continue to vote all Investment Property included in the
Collateral except in a manner which is inconsistent or in violation of the
Transaction Documents. The Grantors agree promptly upon the occurrence and
during the continuance of an Event of Default, (i) that the Agent may exercise
(to the exclusion of the Grantor) the voting power and all other incidental
rights of ownership with respect to any Collateral constituting Investment
Property of the Grantor and the Grantor hereby grants the Agent an irrevocable
proxy, exercisable under such circumstances, to vote such Investment Property;
and (ii) that it shall promptly deliver to the Agent such additional proxies and
other documents as may be reasonably necessary to allow the Agent to exercise
such voting power.

          (iii) All Dividends, Distributions, interest, principal, cash
payments, payment intangibles and proceeds which may at any time and from time
to time be held by any Grantor but which the Grantor is then obligated to
deliver to the Agent, shall, until delivery to the Agent, be held by the Grantor
separate and apart from its other property in trust for the Agent. The Agent
agrees that unless an Event of Default shall have occurred and be continuing,
the Grantors will have the exclusive voting power with respect to any Investment
Property constituting the Grantor's Collateral and the Agent will, upon the
written request of any Grantor, promptly deliver such proxies and other
documents, if any, as shall be reasonably requested by the Grantor which are
reasonably necessary to allow the Grantor to exercise that voting power;
provided that no vote shall be cast, or consent, waiver, or ratification given,
or action taken by the Grantor that would violate any provision of any
Transaction Document.

     The Grantors hereby acknowledge that the sale by the Agent of any
Investment Property pursuant to the terms hereof in compliance with the
Securities Act, as well as applicable "Blue Sky" or other state securities laws
may require strict limitations as to the manner in which the Agent or any
subsequent transferee of the Investment Property may dispose thereof. The
Grantors acknowledge and agree that, to protect the Agent's interests, it may be
necessary to sell the Investment Property at a price less than the maximum price
attainable if a sale were delayed or made in another manner, such as a public
offering under the Securities Act. The Grantors do not have an objection to a
sale in such manner and the Grantors agree that the Agent does not have an
obligation to obtain the maximum possible price for all or any part of the
Investment Property. Without limiting the generality of the foregoing, the
Grantors agree that the Agent may, pursuant to the terms hereof and subject to
applicable law, from time to time attempt to sell all or any part of the
Investment Property by a private placement, restricting the bidders and

                                       12

<PAGE>

prospective purchasers to those Persons who will represent and agree that they
are purchasing for investment only and not for distribution. In so doing, the
Agent may solicit offers to buy the Investment Property or any part thereof for
cash from a limited number of investors deemed by the Agent, in its reasonable
judgment, to be institutional investors or other responsible Persons who might
be interested in purchasing the Investment Property. If the Agent shall solicit
such offers, then acceptance by Purchasers of one of the offers shall be deemed
to be a commercially reasonable method of disposition of the Collateral.

16. POWER OF ATTORNEY.

     16.1 APPOINTMENT AND POWERS OF PURCHASERS. The Grantors hereby irrevocably
constitute and appoint the Agent and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Grantors or in the
Agent's own name, for the purpose of carrying out the terms of this Agreement,
to take any and all appropriate action and to execute any and all documents and
instruments that may be reasonably necessary or desirable to accomplish the
purposes of this Agreement and, without limiting the generality of the
foregoing, hereby gives said attorney the power and right, on behalf of the
Grantors, without notice to or assent by the Grantors, to do the following:

          (a) upon the occurrence and during the continuance of an Event of
Default, generally to sell, transfer, pledge, make any agreement with respect to
or otherwise deal with any of the Collateral in such manner as is consistent
with the Uniform Commercial Code of the State and as fully and completely as
though the Agent was the absolute owners thereof for all purposes, and to do at
the Grantors' expense, at any time, or from time to time, all acts and things
which the Agent deems reasonably necessary or advisable to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in order
to effect the intent of this Agreement, all as fully and effectively as the
Grantor might do, including, without limitation, (i) the filing and prosecuting
of registration and transfer applications with the appropriate federal or local
agencies or authorities with respect to trademarks, copyrights and patentable
inventions and processes, (ii) upon written notice to the Grantors, the exercise
of voting rights with respect to voting securities, which rights may be
exercised, if the Agent so elects, with a view to causing the liquidation in a
commercially reasonable manner of assets of the issuer of any such securities
and (iii) the execution, delivery and recording, in connection with any sale or
other disposition of any Collateral, of the endorsements, assignments or other
instruments of conveyance or transfer with respect to such Collateral; and

          (b) to the extent that the Grantors' authorization given in Section 3
is not sufficient, to file such financing statements with respect hereto, with
or without the Grantor' signature, as the Agent may deem appropriate and to
execute in the Grantor's name such financing statements and amendments thereto
and continuation statements which may require the Grantor's signature.

     16.2 RATIFICATION BY GRANTORS. To the extent permitted by law, the Grantors
hereby ratify all that said attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is a power coupled with an interest and
shall be irrevocable.

                                       13

<PAGE>

     16.3 NO DUTY ON PURCHASERS. The powers conferred on the Agent hereunder are
solely to protect its interests in the Collateral and shall not impose any duty
upon it to exercise any such powers. The Agent shall be accountable only for the
amounts that it actually receives as a result of the exercise of such powers and
neither the Agent nor any of its officers, directors, employees or agents shall
be responsible to the Grantor for any act or failure to act, except for the
Agent's own gross negligence or willful misconduct.

     16.4 NO EXERCISE IN ABSENCE OF EVENT OF DEFAULT. The Agent hereby agrees
that it will not exercise any rights conferred by this Section 16 absent the
occurrence of an Event of Default.

17. REMEDIES. Notwithstanding anything to the contrary in this Agreement, upon
the occurrence and during the continuation of an Event of Default, the Agent and
the Holders are limited to the remedies set forth in Section 6 of the Notes,
including those with respect to any First Default, Second Default and Third
Default. Upon the occurrence and during any subsequent Event of Default, the
Agent may, without notice to or demand upon the Grantors, declare this Agreement
to be in default, and the Agent shall thereafter have in any jurisdiction in
which enforcement hereof is sought, in addition to all other rights and
remedies, the rights and remedies of a purchaser under the Uniform Commercial
Code of the State or of any jurisdiction in which Collateral is located,
including, without limitation, the right to take possession of the Collateral,
and for that purpose the Agent may, so far as the Grantors can give authority
therefor, enter upon any premises on which the Collateral may be situated and
remove the same therefrom. The Agent may in its discretion require the Grantors
to assemble all or any part of the Collateral at such location or locations
within the jurisdiction(s) of the Grantors' principal office(s) or at such other
locations as the Agent may reasonably designate. Unless the Collateral is
perishable or threatens to decline speedily in value or is otherwise consented
to by the Grantors, the Agent shall give to the Grantors at least ten Business
Days prior written notice of the time and place of any public sale of Collateral
or of the time after which any private sale or any other intended disposition is
to be made. The Grantors hereby acknowledge that ten Business Days prior written
notice of such sale or sales shall be reasonable notice. In addition, the
Grantors waive any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Agent's rights hereunder, including,
without limitation, its right following an Event of Default to take immediate
possession of the Collateral and to exercise its rights with respect thereto.

18. STANDARDS FOR EXERCISING REMEDIES. To the extent that applicable law imposes
duties on the Agent to exercise remedies in a commercially reasonable manner,
the Grantors acknowledge and agree that it is not commercially unreasonable for
the Agent (a) to fail to incur expenses reasonably deemed significant by the
Agent to prepare Collateral for disposition or otherwise to complete raw
material or work in process into finished goods or other finished products for
disposition, in each case after using commercially reasonable efforts, (b) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain governmental or
third party consents for the collection or disposition of Collateral to be
collected or disposed of, in each case after using commercially reasonable
efforts, (c) to fail to exercise collection remedies against account debtors or
other persons obligated on Collateral or to remove liens or encumbrances on or
any adverse claims against Collateral, (d) to exercise collection remedies
against account debtors and other persons

                                       14

<PAGE>

obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (e) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (f) to contact other persons, whether or
not in the same business as the Grantor, for expressions of interest in
acquiring all or any portion of the Collateral, (g) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (h) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (i) to dispose of assets in
wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure the Agent's against
risks of loss, collection or disposition of Collateral or to provide to the
Agent a guaranteed return from the collection or disposition of Collateral, or
(1) to the extent deemed appropriate by the Agent, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Agent in the collection or disposition of any of the Collateral. The
Grantors acknowledge that the purpose of this Section 18 is to provide
non-exhaustive indications of what actions or omissions by the Agent would not
be commercially unreasonable in the Agent's exercise of remedies against the
Collateral and that other actions or omissions by the Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 18. Without limitation upon the foregoing, nothing contained in this
Section 18 shall be construed to grant any rights to the Grantors or to impose
any duties on the Agent that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section 18.

19. NO ORAL CHANGE; AMENDMENTS; SECURITY AGREEMENT SUPPLEMENTS FOR ADDITIONAL
GRANTORS. No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by the Grantors, the Agent and the other
Secured Parties, and no waiver of any provision of this Agreement, and no
consent to any departure by the Grantors therefrom, shall be effective unless it
is in writing and signed by the Agent and the Requisite Purchasers, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. Notwithstanding the foregoing, additional
Persons may become Grantors under this Agreement without consent of any other
Grantor through execution and delivery to the Purchasers of an Assumption
Agreement in the form of Annex 1 hereto or any other form of supplement
acceptable to the Purchasers. Nothing in this Section 19 shall be construed to
permit any Grantor to form a Subsidiary unless expressly permitted to do so
under the Note.

20. SURETYSHIP WAIVERS BY GRANTORS. Each Grantor waives demand, notice, protest,
notice of acceptance of this Agreement, notice of loans made, credit extended,
Collateral received or delivered or other action taken in reliance hereon and
all other demands and notices of any description. With respect to both the
Obligations and the Collateral, the Grantors assent to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of or failure to perfect any security interest
in any Collateral, to the addition or release of any party or person primarily
or secondarily liable, to the acceptance of partial payment thereon and the
settlement, compromising or adjusting of any thereof, all in such manner and at
such time or times as the Agent may deem advisable. The Agent shall have no duty
as to the collection or protection of the Collateral or any income thereon, nor
as to the preservation of rights against prior parties, nor as to the
preservation of any rights pertaining

                                       15

<PAGE>

thereto beyond the safe custody thereof as set forth in Section 11.2. The
Grantors further waive any and all other suretyship defenses.

21. MARSHALLING. The Agent shall not be required to marshal any present or
future collateral security (including but not limited to this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order, and all of its rights hereunder and in respect of such
collateral security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the extent that it
lawfully may, each Grantors hereby agrees that it will not invoke any law
relating to the marshalling of collateral which might cause delay in or impede
the enforcement of the Agent's rights under this Agreement or under any other
instrument creating or evidencing any of the Obligations or under which any of
the Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
each Grantor hereby irrevocably waives the benefits of all such laws.

22. PROCEEDS OF DISPOSITIONS; EXPENSES. The Grantors shall pay to the Agent on
demand any and all expenses, including reasonable attorneys' fees and
disbursements, incurred or paid by any Secured Party in protecting, preserving
or enforcing the Agent's or any other Secured Party's rights under or in respect
of any of the Obligations or any of the Collateral. After deducting all of said
expenses, the residue of any proceeds of collection or sale of the Obligations
or Collateral shall, to the extent actually received in cash, be applied to the
payment of the Obligations in such order or preference as the Agent may
reasonably determine, proper allowance and provision being made for any
Obligations not then due. Upon the final payment and satisfaction in full of all
of the Obligations and after making any payments required by Section
9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial Code of the State, any
excess shall be returned to the Grantors, and the Grantors shall remain liable
for any deficiency in the payment of the Obligations.

23. OVERDUE AMOUNTS. Until paid, all amounts due and payable by the Grantors
hereunder shall be a debt secured by the Collateral and shall bear, whether
before or after judgment, interest at the rate of interest set forth in the
Note.

24. GOVERNING LAW; CONSENT TO JURISDICTION.

          (a) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the State (other than those conflict of law rules
that would defer to the substantive laws of another jurisdiction). Without in
any way limiting the preceding choice of law, the parties elect to be governed
by the law of the State in accordance with, and are relying (at least in part)
on, Section 5-1401 of the General Obligations Law of the State, as amended, or
any corresponding or succeeding provisions thereof.

          (b) Submission to Jurisdiction. The Grantors hereby submit to the
exclusive personal jurisdiction of the United States District Court for the
Southern District of New York and of the Supreme Court of the State of New York
sitting in New York County (including its Appellate Division), and of any other
appellate court in the State of New York, for the purposes

                                       16

<PAGE>

of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby.

          (c) Waiver of Venue. The Grantors hereby irrevocably waive, to the
fullest extent permitted by applicable law, any objection that it may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum. Without in any way limiting the preceding
consents to personal jurisdiction and venue, the parties agree to submit to the
jurisdiction of the courts of the State of New York in accordance with Section
5-1402 of the General Obligations Law of the State, as amended, or any
corresponding or succeeding provisions thereof.

          (d) Service of Process; Notices. Each party to this Agreement
irrevocably consents to service of process and delivery of notices provided for
hereunder in the manner provided for notices in the Purchase Agreement. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law. The Agent's name and address for
notices is set forth opposite it signature on its signature page hereto or as
hereafter shall be provided to the Borrower and the Purchasers in writing in the
manner provide for notices in the Purchase Agreement.

25. WAIVER OF JURY TRIAL. THE GRANTORS, THE AGENT AND THE OTHER SECURED PARTIES
HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

26. MISCELLANEOUS; AGREEMENT TO BE BOUND BY PROVISIONS OF TRANSACTION DOCUMENTS
APPLICABLE TO GRANTOR. The headings of each section of this Agreement are for
convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the
Grantors and their respective successors and assigns, and shall inure to the
benefit of the Secured Parties and their respective successors and assigns. If
any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby, and this Agreement shall be construed and be enforceable as if
such invalid, illegal or unenforceable term had not been included herein. The
Grantors acknowledge receipt of a copy of this Agreement. Each Grantor agrees to
be bound by each provision of every other Transaction Document which purports to
be applicable to it as if such provision were set forth herein.

27. SUBSIDIARIES.

     27.1 Borrower represents and warrants that each of its Subsidiaries with
assets of $10,000 has entered into this Agreement as a Subsidiary Guarantor.

     27.2 Borrower covenants and agrees that it shall cause each future
Subsidiary that has assets of $10,000 or more to complete, execute and deliver
to the Agent, the form of Assumption Agreement attached as Annex 1 and such
other documents as the Agent shall reasonably request,

                                       17

<PAGE>

including, without limitation, evidence of good standing of such Affiliate and
lien searches, all in form and substance acceptable to the Purchasers.

28. LIMITED RECOURSE GUARANTY. Each Subsidiary Guarantor and each other
Subsidiary that becomes a Grantor (each a "Subsidiary Grantor") hereby
unconditionally guarantees the payment when due of all Obligations (the
"Guarantees"), provided, however, that recourse under this provision is limited
to the assets of the Subsidiary Grantor that are, or will be, included as part
of the Collateral. The Guarantees are irrevocable and will not be affected by
any release of any Grantor or surrender, exchange, compromise or release any
Collateral, by any failure to perfect any liens, by any irregularity,
enforceability or invalidity of any Obligations or any part thereof or any
security or guaranty thereof. Each Subsidiary Grantor waives all defenses based
on suretyship or on impairment of Collateral. Without notice to, or the consent
of, any Subsidiary Grantor, the terms of the Obligations and any related
documents may be changed, extended, renewed or compromised.

29. FURTHER ASSURANCES. Borrower and each Subsidiary Grantor shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions contemplated
hereby and to evidence the fulfillment of the agreements herein contained.

30. COLLATERAL AGENCY.

     30.1 APPOINTMENT OF AGENT. Each Purchaser hereby appoints Agent to serve as
collateral agent hereunder and each Purchaser hereby authorizes Agent, in such
capacity, to act as its agent and representative hereunder in accordance with
the terms hereof and with respect to the Guarantees, the Collateral and the
other Security Documents. The provisions of this Section 30 are solely for the
benefit of the Agent and Purchasers and none of the Grantors shall have any
rights as a third party beneficiary of any of the provisions of this Section 30;
provided, however, that the Grantors shall be entitled to rely on consents and
approvals executed by the Agent without investigation as to the existence of
proper authorization by the other Secured Parties. In performing its functions
and duties hereunder, the Agent shall act solely as an agent of the Purchasers
and does not assume and shall not be deemed to have assumed any obligation
towards or relationship of agency or trust with or for any of the Grantors or
any Subsidiary or Affiliate thereof.

     30.2 POWERS AND DUTIES. Each Purchaser irrevocably authorizes the Agent to
take such action on such Purchaser's behalf and to exercise such powers, rights
and remedies hereunder as are specifically delegated or granted to the Agent by
the terms hereof, together with such powers, rights and remedies as are
reasonably incidental thereto. The Agent shall have only those duties and
responsibilities that are expressly specified herein. The Agent may exercise
such powers, rights and remedies and perform such duties by or through its
agents or employees. The Agent shall not have, by reason hereof or of any other
Transaction Document, a fiduciary relationship in respect of any Purchaser; and
nothing herein, expressed or implied, is intended to or shall be so construed as
to impose upon the Agent any obligations in respect hereof or any of the other
Transaction Documents except as expressly set forth herein.

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<PAGE>

     30.3 GENERAL IMMUNITY.

          (a) No Responsibility for Certain Matters. The Agent shall not be
responsible to any Purchaser for the execution, effectiveness, genuineness,
validity, enforceability, collectability or sufficiency hereof or any other
Transaction Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any other statements, instruments, reports or certificates or any other
documents furnished or made by the Agent to Purchasers or by or on behalf of any
Grantor to the Agent or any other Secured Party in connection with this
Agreement or any other Transaction Document and the transactions contemplated
hereby or thereby or for the financial condition or business affairs of any
Grantor or the condition of any of the Collateral, nor shall the Agent be
required to ascertain or inquire as to the performance or observance of any of
the terms, conditions, provisions, covenants or agreements contained in this
Agreement or any of the other Transaction Documents or as to the existence or
possible existence of any Event of Default or Default or to make any disclosures
with respect to the foregoing.

          (b) Exculpatory Provisions. Neither the Agent, nor any Affiliate of
the Agent, nor any of their respective officers, partners, directors, employees,
controlling persons, auditors or agents shall be liable to Purchasers for any
action taken or omitted by the Agent hereunder or in connection with any of the
other Transaction Documents except to the extent found by a final,
non-appealable judgment of a court of competent jurisdiction to have been caused
by the Agent's gross negligence or willful misconduct. The Agent shall be
entitled to refrain from any act or the taking of any action (including the
failure to take an action) in connection herewith or any of the other
Transaction Documents or from the exercise of any power, discretion or authority
vested in it hereunder or thereunder unless and until the Agent shall have
received instructions in respect thereof from Purchasers holding a majority in
principal amount of the Notes then outstanding (the "Requisite Purchasers") and,
upon receipt of such instructions from Requisite Purchasers, the Agent shall be
entitled to act or (where so instructed) refrain from acting, or to exercise
such power, discretion or authority, in accordance with such instructions.
Without prejudice to the generality of the foregoing, (i) the Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper Person or Persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for the Grantors), accountants, experts and
other professional advisors selected by it; and (ii) no Purchaser shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
(where so instructed) refraining from acting hereunder or under any of the other
Transaction Documents in accordance with the instructions of Requisite
Purchasers.

     30.4 AGENT ENTITLED TO ACT AS PURCHASER. The agency hereby created shall in
no way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, the Agent in its individual capacity as a Purchaser hereunder.
With respect to its holding of Notes, the Agent shall have the same rights and
powers hereunder as any other Purchaser and may exercise the same as if it were
not performing the duties and functions delegated to it hereunder, and the term
"Purchaser" shall, unless the context clearly otherwise indicates, include the
Agent in its individual capacity. The Agent and its Affiliates may accept
deposits from, lend money to, own securities of, and generally engage in any
kind of banking, trust, financial advisory or other business with any Grantor or
any of their Affiliates as if it were not performing the duties

                                       19

<PAGE>

specified herein, and may accept fees and other consideration from Borrower for
services in connection herewith and otherwise without having to account for the
same to Purchasers.

     30.5 PURCHASERS' REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENT.

          (a) Each Purchaser represents and warrants that it has made its own
independent investigation of the financial condition and affairs of the Grantors
and the condition and value of the Collateral in connection with its purchase of
Notes. The Agent shall not have any duty or responsibility, either initially or
on a continuing basis, to make any investigation or appraisal of the
creditworthiness of the Grantors or the condition and value of the Collateral on
behalf of the Purchasers or to provide any Purchaser with any information with
respect thereto, and the Agent shall not have any responsibility with respect to
the accuracy of or the completeness of any information provided to the
Purchasers.

          (b) Each Purchaser, by delivering its signature page to this Agreement
and funding its Notes shall be deemed to have acknowledged receipt of, and
consented to and approved, this Agreement, each other Transaction Document and
each other document required to be approved by the Agent, Requisite Purchasers
or Purchasers, as applicable on the date hereof.

     30.6 RIGHT TO INDEMNITY. Each Purchaser, in proportion to the pro rata
share of the principal amount of Notes purchased by it on the date hereof ("Pro
Rata Share"), severally agrees to indemnify the Agent, its Affiliates and their
respective officers, partners, directors, trustees, employees, auditors,
controlling persons and agents (each, an "Indemnitee Agent Party"), to the
extent that such Indemnitee Agent Party shall not have been reimbursed by any
Grantor, for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including counsel fees
and disbursements) or disbursements of any kind or nature whatsoever which may
be imposed on, incurred by or asserted against such Indemnitee Agent Party in
exercising its powers, rights and remedies or performing its duties hereunder or
under the other Transaction Documents or otherwise in its capacity as such
Indemnitee Agent Party in any way relating to or arising out of this Agreement
or the other Transaction Documents, IN ALL CASES, WHETHER OR NOT CAUSED BY OR
ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY, OR SOLE
NEGLIGENCE OF SUCH INDEMNITEE AGENT PARTY; provided, that no Purchaser shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from such Indemnitee Agent Party's gross negligence or willful misconduct to the
extent that such have been found by a final, non-appealable judgment of a court
of competent jurisdiction. If any indemnity furnished to any Indemnitee Agent
Party for any purpose shall, in the opinion of such Indemnitee Agent Party, be
insufficient or become impaired, such Indemnitee Agent Party may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against unless and until such additional indemnity is furnished; provided, that
in no event shall this sentence require any Purchaser to indemnify any
Indemnitee Agent Party against any liability, obligation, loss, damage, penalty,
action, judgment, suit, cost, expense or disbursement in excess of such
Purchaser's Pro Rata Share thereof; and provided, further, that this sentence
shall not be deemed to require any Purchaser to indemnify any Indemnitee Agent
Party against any liability, obligation, loss,

                                       20

<PAGE>

damage, penalty, action, judgment, suit, cost, expense or disbursement described
in the proviso in the immediately preceding sentence.

     30.7 SUCCESSOR AGENT.

          (a) The Agent may resign at any time by giving fifteen (15) Business
Days' prior written notice thereof to Purchasers and Borrower, which resignation
shall be effective as to this Agreement and each other Security Document for
which Agent acts in its capacity as such. Upon any such notice of resignation,
the Requisite Purchasers shall have the right, upon five Business Days' notice
to Borrower, to appoint a successor Agent. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, that successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent and the Agent shall promptly (i) transfer to
such successor Agent all sums, Securities and other items of Collateral and the
other Security Documents creating a security interest in any of the Collateral,
together with all records and other documents necessary or appropriate in
connection with the performance of the duties of the successor Agent under this
Agreement and the other Transaction Documents, and (ii) execute and deliver to
such successor Agent such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Agent of the security interests created under the
Security Documents, whereupon such retiring Agent shall be discharged from its
duties and obligations hereunder. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 30 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent
hereunder.

          (b) Notwithstanding anything herein to the contrary, the Agent may
assign its rights and duties as Agent hereunder to any of its Affiliates (other
than any Grantor or any Subsidiary thereof) without the prior written consent
of, or prior written notice to, the Grantors or the Purchasers under this
Agreement and any other Security Document for which Agent acts in its capacity
as such; provided that the Grantors and the Purchasers may deem and treat such
assigning Agent as the Agent for all purposes hereof, unless and until such
assigning Agent provides written notice to Borrower and the Purchasers of such
assignment. Upon such assignment such Affiliate shall succeed to and become
vested with all rights, powers, privileges and duties as Agent hereunder and
under the other Transaction Documents.

     30.8 COLLATERAL AND GUARANTEES.

          (a) Right to Release Collateral or Guarantees. Subject to Section 19,
without further written consent or authorization from the Purchasers, the Agent
may execute any documents or instruments necessary to (i) release any lien
encumbering any item of Collateral that is the subject of a sale or other
disposition of assets permitted under the terms of Transaction Documents or to
which Requisite Purchasers have otherwise consented, or (ii) release any
Subsidiary Grantor from its Guarantee upon the sale of such Subsidiary as
permitted pursuant to the terms and conditions of the Transaction Documents or
to which Requisite Purchasers have otherwise consented.

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<PAGE>

          (b) Right to Realize on Collateral and Enforce Guarantees. Anything
contained in any of the Transaction Documents to the contrary notwithstanding,
the Grantors, the Agent and each Purchaser hereby agree that (i) no Purchaser
shall have any right individually to realize upon any of the Collateral or to
enforce any of the Guarantees, it being understood and agreed that all powers,
rights and remedies hereunder may be exercised solely by the Agent, on behalf of
Purchasers in accordance with the terms hereof and all powers, rights and
remedies under the other Security Documents may be exercised solely by the
Agent, and (ii) in the event of a foreclosure by the Agent on any of the
Collateral pursuant to a public or private sale, the Agent or any other Secured
Party may be the purchaser of any or all of such Collateral at any such sale and
the Agent, as agent for and representative of Secured Parties (but not any
Purchaser or Purchasers in its or their respective individual capacities unless
Requisite Purchasers shall otherwise agree in writing) shall be entitled, for
the purpose of bidding and making settlement or payment of the purchase price
for all or any portion of the Collateral sold at any such public sale, to use
and apply any of the Obligations as a credit on account of the purchase price
for any collateral payable by the Agent at such sale.

31. TERMINATION. This Agreement shall remain in full force and effect until such
time as all principal and any accrued interest on the Notes is either (a)
converted into Common Stock in accordance with the terms of the Notes or (b)
indefeasibly paid in full and, in the case of either (a) or (b), all other
Obligations then due and owing (including Post-Petition Interest) are
indefeasibly paid in full; provided, however, that, so long as no Event of
Default, or event which, with the giving of notice, the lapse of time for both
would constitute an Event of Default, has occurred and is continuing, the Agent,
upon the written request of a Grantor, shall release and otherwise terminate any
and all Liens and security interests held by Agent with respect to (a) such
Grantor's accounts and such Grantor's inventory in the event that (i) such
Grantor obtains the Future Working Capital Line (as defined in the Note) and
(ii) the release and termination of such Liens and security interests are
necessary for such Grantor to obtain the Future Working Capital Line and (b)
such Grantor's right, title and interest in and to the assets of the Peridex(R)
product line effective upon the consummation of the sale of the Peridex(R)
product line on the terms and conditions approved by such Grantor's board of
directors. Following the termination hereof, upon the request of and at the
expense of the Grantors, the Agent shall reassign to the Grantors all Collateral
held by Agent and shall execute a termination of all security agreements and
security interests given by Grantors to Agent.

         [The remainder of this page has been intentionally left blank.]

                                       22

<PAGE>

      IN WITNESS WHEREOF, intending to be legally bound, the Grantors, the
Agent and, for the purpose of Section 30, only, the Purchasers, have caused this
Agreement to be duly executed as of the date first above written.

                         ZILA, INC.

                         By:    /s/ Gary V. Klinefelter
                                ----------------------------------------------
                                Name:  Gary V. Klinefelter
                                Title: Vice President and Secretary

                         SUBSIDIARY GUARANTORS:

                         ZILA BIOTECHNOLOGY, INC.

                         By:    /s/ Gary V. Klinefelter
                                ----------------------------------------------
                                Name:  Gary V. Klinefelter
                                Title: Vice President and Secretary

                         ZILA PHARMACEUTICALS, INC.

                         By:    /s/ Gary V. Klinefelter
                                ----------------------------------------------
                                Name:  Gary V. Klinefelter
                                Title: Vice President and Secretary

                         ZILA TECHNICAL, INC.

                         By:    /s/ Gary V. Klinefelter
                                ----------------------------------------------
                                Name:  Gary V. Klinefelter
                                Title: Vice President and Secretary

                         ZILA LIMITED

                         By:    /s/ Gary V. Klinefelter
                                ----------------------------------------------
                                Name:  Gary V. Klinefelter
                                Title: Vice President and Secretary

                [Signature Page to Pledge and Security Agreement]

<PAGE>

                                            AGENT:

NOTICE ADDRESS FOR AGENT:                   BALYASNY ASSET MANAGEMENT, L.P.
_________________________________
_________________________________
_________________________________           By: /s/ Scott Schroeder
_________________________________               ------------------------------
                                                Name: Scott Schroeder
Attention:_______________________               Title: Authorized Signatory
Telephone:_______________________
Facsimile:_______________________

PURCHASERS, for the purpose of Section 30, only:

VISIUM LONG BIAS OFFSHORE FUND, LTD.

By: /s/ Jacob Gottlieb
    ----------------------------------------
    Name:  Jacob Gottlieb
    Title: Managing Member

VISIUM LONG BIAS FUND, LP

By: /s/ Jacob Gottlieb
    ----------------------------------------
    Name: Jacob Gottlieb
    Title:   Managing Member

VISIUM BALANCED OFFSHORE FUND, LTD.

By: /s/ Jacob Gottlieb
    ----------------------------------------
    Name: Jacob Gottlieb
    Title:   Managing Member

VISIUM BALANCED FUND, LP

By: /s/ Jacob Gottlieb
    ----------------------------------------
    Name:  Jacob Gottlieb
    Title: Managing Member

ATLAS MASTER FUND, LTD.

By: /s/ Scott Schroeder
    ----------------------------------------
    Name:  Scott Schroeder
    Title: Authorized Signatory

                [Signature Page to Pledge and Security Agreement]

<PAGE>

                                   SCHEDULE A

                                 CAPITAL STOCK
                                 -------------

                                 PLEDGED STOCK
                                 -------------
<TABLE>
<CAPTION>
                                                  SHARES        CERTIFICATE
PLEDEOR        ISSUER                            PLEDGED         NUMBER(S)
-----------    ----------------------------     ----------     ------------
<S>            <C>                              <C>            <C>
Zila, Inc.     Zila Biotechnology, Inc.           1,000             1

Zila, Inc.     Zila Pharmaceuticals, Inc.         1,000             2

Zila, Inc.     Zila Swab Technologies, Inc.        100              1

Zila, Inc.     Zila Technical, Inc                1,000             1

Zila, Inc.     Zila Limited                         2               1

Zila, Inc.     Zila Merger, Inc.                   100              1
</TABLE>
<PAGE>

                                    EXHIBIT I

                          COPYRIGHT SECURITY AGREEMENT

          COPYRIGHT SECURITY AGREEMENT, dated as of November __, 2006 (this
"Agreement"), is by and among the parties identified as "Grantors" on the
signature pages hereto and such other parties as may become Grantors hereunder
after the date hereof (individually a "Grantor", and collectively the
"Grantors"), and Balyasny Asset Management, L.P., a Delaware limited
partnership, as collateral agent (the "Agent").

     WHEREAS, this Agreement is being entered into in accordance with Section
6.1 of that certain Pledge and Security Agreement, dated as of November 28, 2006
(as the same may be amended, restated, supplemented or otherwise modified,
renewed or replaced from time to time, the "Security Agreement"), by and among
the Grantors, the Agent and the parties identified on the signature pages
thereto as Purchasers;

     NOW THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

                                   SECTION 1.

                          DEFINITIONS; INTERPRETATION.

     (a) Defined Terms. All capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned to them in the
Purchase Agreement, dated as of November 28, 2006 (the "Purchase Agreement"), by
and between Zila, Inc. (the "Borrower") and the Investors named therein (the
"Purchasers"), the Notes and the Security Agreement.

     (b) Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:

     "Collateral" has the meaning set forth in Section 2.

     "Copyright Office" means the United States Copyright Office.

     "Notes" means $12,000,000 in aggregate principal amount of the Borrower's
6% Senior Secured Convertible Notes issued by the Borrower to the Purchasers.

     "UCC" means the Uniform Commercial Code as in effect in the State of New
York.

                                      I-1

<PAGE>

     (c) Terms Defined in UCC. Where applicable in the context of this Agreement
and except as otherwise defined herein, terms used in this Agreement shall have
the meanings assigned to them in the UCC.

     (d) Construction. In this Agreement, the following rules of construction
and interpretation shall be applicable: (i) no reference to "proceeds" in this
Agreement authorizes any sale, transfer, or other disposition of any Collateral
by Grantor; (ii) "includes" and "including" are not limiting; (iii) "or" is not
exclusive; and (iv) "all" includes "any" and "any" includes "all." To the extent
not inconsistent with the foregoing, the rules of construction and
interpretation applicable to the Security Agreement shall also be applicable to
this Agreement and are incorporated herein by this reference.

                                   SECTION 2.

                               SECURITY INTEREST.

     (a) Grant of Security Interest. As security for the payment and performance
of the Obligations, each Grantor hereby assigns, transfers and conveys to the
Agent, and grants an ongoing duly perfected first priority security interest in
and mortgage to the Agent of, all such Grantor's right, title and interest in,
to and under the following property, in each case whether now or hereafter
existing or arising or in which such Grantor now has or hereafter owns, acquires
or develops an interest and wherever located (collectively, the "Collateral"):

          (i) All of such Grantor's present and future United States registered
     copyrights and copyright registrations, including such Grantor's United
     States registered copyrights and copyright registrations listed in Schedule
     A to this Agreement, all of such Grantor's present and future United States
     applications for copyright registrations, including such Grantor's United
     States applications for copyright registrations listed in Schedule B to
     this Agreement, and all of such Grantor's present and future copyrights
     that are not registered in the Copyright Office including, without
     limitation, derivative works (collectively, the "Copyrights"), and any and
     all royalties, payments, and other amounts payable to Grantor in connection
     with the Copyrights, together with all renewals and extensions of the
     Copyrights, the right to recover for all past, present, and future
     infringements of the Copyrights, and all manuscripts, documents, writings,
     tapes, disks, storage media, computer programs, computer databases,
     computer program flow diagrams, source codes, object codes and all tangible
     property embodying or incorporating the Copyrights, and all other rights of
     every kind whatsoever accruing thereunder or pertaining thereto;

          (ii) All of such Grantor's right, title and interest in and to any and
     all present and future license agreements with respect to the Copyrights;

          (iii) All present and future accounts and other rights to payment
     arising from, in connection with or relating to the Copyrights; and

                                      I-2

<PAGE>

          (iv) All cash and non-cash proceeds of any and all of the foregoing.

     (b) Continuing Security Interest. Each Grantor agrees that this Agreement
shall create a continuing security interest in the Collateral which shall remain
in effect until terminated in accordance with Section 11.

                                   SECTION 3.

                        SUPPLEMENT TO SECURITY AGREEMENT.

     This Agreement has been entered into in conjunction with the security
interests granted to the Agent under the Security Agreement, and other security
documents referred to therein. The rights and remedies of the Agent and the
other Secured Parties with respect to the security interests granted herein are
without prejudice to, and are in addition to those set forth in the Security
Agreement or any other security documents referred to therein, all terms and
provisions of which are incorporated herein by reference.

                                   SECTION 4.

                         REPRESENTATIONS AND WARRANTIES.

     Each Grantor represents and warrants to the Agent and the other Secured
Parties that:

     (a) Copyright Registrations. A true and correct list of all of such
Grantor's United States registered copyrights and copyright registrations is set
forth in Schedule A.

     (b) Applications for Copyright Registration. A true and correct list of all
of such Grantor's United States applications for copyright registrations is set
forth in Schedule B.

                                   SECTION 5.

                                  FURTHER ACTS.

     On a continuing basis, each Grantor shall make, execute, acknowledge and
deliver, and file and record in the proper filing and recording places, all such
instruments and documents, and take all such action as may be reasonably
necessary or advisable or may be reasonably requested by the Agent or any other
Secured Party to carry out the intent and purposes of this Agreement, or for
assuring, confirming or protecting the grant or perfection of the first priority
security interest granted or purported to be granted hereby, to ensure such
Grantor's compliance with this Agreement or to enable the Agent to exercise and
enforce the rights and remedies of the Agent and the other Secured Parties
hereunder with respect to the Collateral, including any documents for filing
with the Copyright Office or any applicable state office. The Agent may record
this Agreement, an abstract thereof, or any other document describing the
Agent's interest in the

                                      I-3

<PAGE>

Copyrights with the Copyright Office, at the expense of such Grantor. In
addition, each Grantor authorizes the Agent to file financing statements
describing the Collateral in any UCC filing office deemed appropriate by the
Agent. If any Grantor shall at any time hold or acquire a commercial tort claim
arising with respect to the Collateral, such Grantor shall immediately notify
the Agent and the other Secured Parties in a writing signed by such Grantor of
the brief details thereof and grant to the Agent (on behalf of the Secured
Parties) in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance satisfactory to the Agent and the Requisite Purchasers.

                                   SECTION 6.

                          AUTHORIZATION TO SUPPLEMENT.

     Each Grantor shall give the Agent and the other Secured Parties prompt
notice of any additional United States copyright registrations or applications
therefor after the date hereof. Each Grantor authorizes the Agent unilaterally
to modify this Agreement by amending Schedule A or B to include any future
United States registered copyrights or applications therefor of such Grantor.
Notwithstanding the foregoing, no failure to so modify this Agreement or amend
Schedule A or B shall in any way affect, invalidate or detract from Agent's
continuing security interest in all Collateral, whether or not listed on
Schedule A or B.

                                   SECTION 7.

                                 BINDING EFFECT.

     This Agreement shall be binding upon, inure to the benefit of and be
enforceable by each Grantor, the Agent and the other Secured Parties and their
respective successors and assigns. Except as provided in Section 30.7 of the
Security Agreement, no party hereto may assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder except as
agreed to in writing by the other parties hereto.

                                   SECTION 8.

                                 GOVERNING LAW.

     This Agreement shall be governed by, and construed in accordance with, the
law of the State of New York, except as required by mandatory provisions of law
or to the extent the perfection or priority of the security interests hereunder,
or the remedies hereunder, in respect of any Collateral are governed by the law
of a jurisdiction other than the State of New York.

     No amendment of any provision of this Agreement shall be effective unless
it is in writing and signed by the Grantors, the Agent and the Requisite
Purchasers, and no waiver of any provision of this Agreement, and no consent to
any departure by the Grantors therefrom, shall be effective unless it is in
writing and signed by the Agent and

                                      I-4

<PAGE>

consented to in writing by the Requisite Purchasers, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. Notwithstanding the foregoing, (i) additional Persons
may become Grantors under this Agreement without consent of any other Grantor
through execution and delivery to the Agent of an Assumption Agreement in the
form of Annex 1 hereto or any other form of supplement acceptable to the Agent,
and (ii) the Agent unilaterally may re-execute this Agreement or modify, amend
or supplement the Schedules hereto as provided in Section 6 hereof. To the
extent that any provision of this Agreement conflicts with any provision of the
Notes, the provision giving the Secured Parties greater rights or remedies shall
govern, it being understood that the purpose of this Agreement is to add to, and
not detract from, the rights granted to Purchasers under the Notes. Nothing in
this Section 9 shall be construed to permit any Grantor to form a Subsidiary
unless expressly permitted to do so under the Notes.

                                   SECTION 10.

                                  COUNTERPARTS.

     This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement. Delivery of an executed counterpart
of this Agreement by facsimile shall be equally as effective as delivery of a
manually executed counterpart. Any party hereto delivering a counterpart of this
Agreement by facsimile shall also deliver a manually executed counterpart, but
the failure to so deliver a manually executed counterpart shall not affect the
validity, enforceability, or binding effect hereof.

                                   SECTION 11.

                                  TERMINATION.

     Upon the indefeasible payment and performance in full of all Obligations,
the security interests created by this Agreement shall terminate and the Agent
(at the Grantors' expense) shall promptly execute and deliver to the Grantors
such documents and instruments reasonably requested by the Grantors as shall be
necessary to evidence termination of all such security interests given by the
Grantors to Agent hereunder, including cancellation of this Agreement by written
notice from Agent to the Copyright Office.

                                   SECTION 12.

                          NO INCONSISTENT REQUIREMENTS.

     Each Grantor acknowledges that this Agreement and the other documents,
agreements and instruments entered into or executed in connection herewith may
contain covenants and other terms and provisions variously stated regarding the
same or similar matters, and each Grantor agrees that all such covenants, terms
and provisions are

                                      I-5

<PAGE>

cumulative and all shall be performed and satisfied in accordance with their
respective terms.

                                   SECTION 13.

                                  SEVERABILITY.

     If one or more provisions contained in this Agreement shall be invalid,
illegal or unenforceable in any respect in any jurisdiction or with respect to
any party, such invalidity, illegality or unenforceability in such jurisdiction
or with respect to such party shall, to the fullest extent permitted by
applicable law, not invalidate or render illegal or unenforceable any such
provision in any other jurisdiction or with respect to any other party, or any
other provisions of this Agreement.

                                   SECTION 14.

                                    NOTICES.

     All notices and other communications hereunder shall be in writing and
shall be mailed, sent or delivered in accordance with the Purchase Agreement and
the Security Agreement.

                            [Signature Page Follows]

                                      I-6

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
as of the date first above written.

                                        GRANTORS:

                                        ZILA, INC.

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        [NAMES OF SUBSIDIARY GRANTORS]

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

AGENT:

[NAME]

By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

                [Signature Page to Copyright Security Agreement]

<PAGE>

                                   SCHEDULE A

                       TO THE COPYRIGHT SECURITY AGREEMENT

GRANTOR: [___________]

Registered Copyrights

<TABLE>
<CAPTION>
Title of Work   Registration Number   Date of Registration
-------------   -------------------   --------------------
<S>             <C>                   <C>

</TABLE>

                                       A-1

<PAGE>

                                   SCHEDULE B

                       TO THE COPYRIGHT SECURITY AGREEMENT

GRANTOR: [___________]

Copyright Applications

<TABLE>
<CAPTION>
Title of Work   Application Number
-------------   ------------------
<S>             <C>

</TABLE>

                                       B-1
<PAGE>

                                                                      Annex 1 to
                                                    Copyright Security Agreement

          ASSUMPTION AGREEMENT, dated as of ________________, 20__, made by
______________________________ (the "Additional Grantor"), in favor of Balyasny
Asset Management, L.P., a Delaware limited partnership, as collateral agent (the
"Agent"), under that certain Copyright Security Agreement (as defined below).

                                  WITNESSETH :

          WHEREAS, the Grantors have entered into the Copyright Security
Agreement dated as of ________________, 20__ (as it may be amended, supplemented
or otherwise modified from time to time, the "Copyright Security Agreement") in
favor of the Agent; and

          WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Copyright Security
Agreement;

          NOW, THEREFORE, IT IS AGREED:

          1. COPYRIGHT SECURITY AGREEMENT. By executing and delivering this
Assumption Agreement, the Additional Grantor, as provided in Section 9 of the
Copyright Security Agreement, hereby becomes a party to the Copyright Security
Agreement as a Grantor thereunder with the same force and effect as if
originally named therein as a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. All capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned to them in the
Copyright Security Agreement.

          2. REPRESENTATIONS AND WARRANTIES CONCERNING GRANTOR'S LEGAL STATUS.
The Additional Grantor has previously delivered to the Agent and the other
Secured Parties (as defined in the Security Agreement) a certificate signed by
the Additional Grantor and entitled "Perfection Certificate" (the "Perfection
Certificate"). The Additional Grantor represents and warrants to the Agent and
the other Secured Parties as follows: (a) the Additional Grantor's exact legal
name is that indicated on the Perfection Certificate and on the signature page
hereof, (b) the Additional Grantor is an organization of the type and organized
in the jurisdiction set forth in the Perfection Certificate, (c) the Perfection
Certificate accurately sets forth the Additional Grantor's organizational
identification number or accurately states that the Additional Grantor has none,
(d) the Perfection Certificate accurately sets forth the Additional Grantor's
place of business or, if more than one, its chief executive office as well as
the Additional Grantor's mailing address if different, (e) all other information
set forth on the Perfection Certificate pertaining to the Additional Grantor is
accurate and complete including but not limited to information pertaining to
copyrights and (f) each of the representations and warranties contained in the
Transaction Documents relating to it are true and correct on

                                       1

<PAGE>

and as the date hereof (after giving effect to this Assumption Agreement) as if
made on and as of such date.

          3. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
WITHOUT IN ANY WAY LIMITING THE PRECEDING CHOICE OF LAW, THE UNDERSIGNED (AND BY
ITS ACCEPTANCE HEREOF, THE AGENT) ELECTS TO BE GOVERNED BY NEW YORK LAW IN
ACCORDANCE WITH, AND ARE RELYING (AT LEAST IN PART) ON SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, AS AMENDED, OR ANY
CORRESPONDING OR SUCCEEDING PROVISIONS THEREOF.

          IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.

                                        [ADDITIONAL GRANTOR]

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                       2

<PAGE>

                                   EXHIBIT II

                          TRADEMARK SECURITY AGREEMENT

          TRADEMARK SECURITY AGREEMENT, dated as of November __, 2006 (this
"Agreement"), is by and among the parties identified as "Grantors" on the
signature pages hereto and such other parties as may become Grantors hereunder
after the date hereof (individually a "Grantor", and collectively the
"Grantors"), and Balyasny Asset Management, L.P., a Delaware limited
partnership, as collateral agent (the "Agent").

          WHEREAS, this Agreement is being entered into in accordance with
Section 6.2 of that certain Pledge and Security Agreement, dated as of November
28, 2006 (as the same may be amended, restated, supplemented or otherwise
modified, renewed or replaced from time to time, the "Security Agreement"), by
and among the Grantors, the Agent and the parties identified on the signature
pages thereto as Purchasers;

          NOW THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

                                   SECTION 1.

                          DEFINITIONS; INTERPRETATION.

          (a) Defined Terms. All capitalized terms used in this Agreement and
not otherwise defined herein shall have the meanings assigned to them in the
Purchase Agreement, dated as of November 28, 2006 (the "Purchase Agreement"), by
and between Zila, Inc. (the "Borrower") and the Investors named therein (the
"Purchasers"), the Notes and the Security Agreement.

          (b) Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:

          "Collateral" has the meaning set forth in Section 2.

          "Notes" means $12,000,000 in aggregate principal amount of the
Borrower's 6% Senior Secured Convertible Notes issued by the Borrower to the
Purchasers.

          "Trademark Office" means the United States Patent & Trademark Office.

                                      II-1

<PAGE>

                                   SECTION 2.

                                SECURITY INTEREST

     To secure the complete and timely payment and satisfaction of the
Obligations, each Grantor hereby grants to the Agent, and hereby reaffirms its
prior grant pursuant to the Security Agreement of, a continuing first priority
security interest in such Grantor's entire right, title and interest in and to
the following (all of the following items or types of property being herein
collectively referred to as the "Collateral"), whether now owned or existing or
hereafter created or acquired:

     (a) Each trademark listed on Schedule 1 annexed hereto, together with any
reissues, continuations or extensions thereof (each a "Trademark"), and all of
the goodwill of the business connected with the use of, and symbolized by, each
Trademark; and

     (b) All products and proceeds of the forgoing, including without
limitation, any claim by Grantor against third parties for past, present or
future (a) infringement or dilution of any Trademark, or (b) injury to the
goodwill associated with any Trademark.

                                    SECTION 3

                        SUPPLEMENT TO SECURITY AGREEMENT

     This Agreement has been entered into in conjunction with the security
interests granted to the Agent under the Security Agreement, and other security
documents referred to therein. The rights and remedies of the Agent and the
other Secured Parties with respect to the security interests granted herein are
without prejudice to, and are in addition to those set forth in the Security
Agreement or any other security documents referred to therein, all terms and
provisions of which are incorporated herein by reference.

                                    SECTION 4

                         REPRESENTATIONS AND WARRANTIES

     Each Grantor represents and warrants to Agent and the other Secured Parties
that:

     (a) Grantor is the sole and exclusive owner of the entire and unencumbered
right, title and interest in and to each Trademark, free and clear of any liens,
charges and encumbrances, including without limitation licenses and covenants by
Grantor not to sue third persons, except for Permitted Liens.

     (b) Grantor has no notice of any suits or actions commenced or threatened
with reference to any Trademark; and

                                      II-2

<PAGE>

     (c) Grantor has the unqualified right to execute and deliver this Agreement
and perform its terms.

                                    SECTION 5

                                  FURTHER ACTS

     Grantor agrees that until Grantor's Obligations shall have been satisfied
in full, Grantor shall not, without the prior written consent of the Agent, sell
or assign its interest in, or grant any license under, any Trademark or enter
into any other agreement with respect to any Trademark (except as permitted
under the Transaction Documents), and Grantor further agrees that it shall not
take any action or permit any action to be taken by others subject to its
control, including licensees, or fail to take any action which would affect the
validity or enforcement of the rights transferred to the Agent under this
Agreement.

                                    SECTION 6

                              AGENT'S RIGHT TO SUE

     After an Event of Default occurs and while it continues, the Agent shall
have the right, but shall in no way be obligated, to bring suit in its own name
to enforce the Trademarks and, if the Agent shall commence any such suit,
Grantor shall, at the reasonable request of the Agent, do any and all lawful
acts and execute any and all proper documents reasonably required by the Agent
in aid of such enforcement and Grantor shall promptly, upon demand, reimburse
and indemnify the Agent for all reasonable costs and expenses incurred by the
Agent in the exercise of its rights under this Section 6.

                                    SECTION 7

                     CUMULATIVE REMEDIES; POWER OF ATTORNEY

     The Agent hereby acknowledges and affirms that the rights and remedies with
respect to the Trademarks, whether established hereby or by the Security
Agreement, or by any other agreements or by law shall be cumulative and may be
exercised singularly or concurrently. Grantor hereby authorizes the Agent upon
the occurrence and during the continuance of an Event of Default, to make,
constitute and appoint any officer or agent of the Agent as the Agent select, in
its sole discretion, as Grantor's true and lawful attorney-in-fact, with power
to (a) endorse Grantor's name on all applications, documents, papers and
instruments reasonably necessary or desirable for the Agent in the use of the
Trademarks or (b) take any other actions with respect to the Trademarks as the
Agent deems to be in the best interest of the Secured Parties, or (c) grant or
issue any exclusive or non-exclusive license under the Trademarks to anyone, or
(d) assign, pledge, convey or otherwise transfer title in or dispose of the
Trademarks to anyone. Grantor hereby ratifies all that such attorneys shall
lawfully do or cause to be done after the occurrence and during the continuance
of an Event of Default by virtue hereof. This

                                      II-3

<PAGE>

power of attorney shall be irrevocable until Grantor's Obligations shall have
been paid in full. Grantor hereby further acknowledges and agrees that the use
by the Agent of the Trademarks after the occurrence and during the continuance
of an Event of Default shall be worldwide, except as limited by their terms, and
without any liability for royalties or related charges from the Agent to
Grantor.

                                    SECTION 8

                                 BINDING EFFECT

     This Agreement shall be binding upon, inure to the benefit of and be
enforceable by each Grantor, the Agent and the other Secured Parties and their
respective successors and assigns. Except as provided in Section 30.7 of the
Security Agreement, no party hereto may assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder except as
agreed to in writing by the other parties hereto.

                                    SECTION 9

                                  GOVERNING LAW

     This Agreement shall be governed by, and construed in accordance with, the
law of the State of New York, except as required by mandatory provisions of law
or to the extent the perfection or priority of the security interests hereunder,
or the remedies hereunder, in respect of any Collateral are governed by the law
of a jurisdiction other than the State of New York.

                                   SECTION 10

                           ENTIRE AGREEMENT; AMENDMENT

     No amendment of any provision of this Agreement shall be effective unless
it is in writing and signed by the Grantors, the Agent and the Requisite
Purchasers, and no waiver of any provision of this Agreement, and no consent to
any departure by the Grantors therefrom, shall be effective unless it is in
writing and signed by the Agent and consented to in writing by the Requisite
Purchasers, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. Notwithstanding
the foregoing, (a) additional Persons may become Grantors under this Agreement
without consent of any other Grantor through execution and delivery to the Agent
of an Assumption Agreement in the form of Annex 1 hereto or any other form of
supplement acceptable to the Agent, and (b) the Agent unilaterally may modify,
amend or supplement the Schedules hereto, and such modified, amended or
supplemented Schedules shall be deemed to be accurate absent manifest error. To
the extent that any provision of this Agreement conflicts with any provision of
the Notes, the provision giving the Secured Parties greater rights or remedies
shall govern, it being understood that the purpose of this Agreement is to add
to, and not detract from, the rights granted to Purchasers under the Notes.
Nothing in this Section 10 shall be

                                      II-4
<PAGE>
construed to permit any Grantor to form a Subsidiary unless expressly permitted
to do so under the Notes.

                                   SECTION 11

                                  COUNTERPARTS

     This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement. Delivery of an executed counterpart
of this Agreement by facsimile shall be equally as effective as delivery of a
manually executed counterpart. Any party hereto delivering a counterpart of this
Agreement by facsimile shall also deliver a manually executed counterpart, but
the failure to so deliver a manually executed counterpart shall not affect the
validity, enforceability, or binding effect hereof.

                                   SECTION 12.

                                   TERMINATION

     Upon the indefeasible payment and performance in full of all Obligations,
the security interests created by this Agreement shall terminate and the Agent
(at the Grantors' expense) shall promptly execute and deliver to the Grantors
such documents and instruments reasonably requested by the Grantors as shall be
reasonably necessary to evidence termination of all such security interests
given by the Grantors to the Agent hereunder, including cancellation of this
Agreement by written notice from the Agent to the Trademark Office.

                                   SECTION 13

                          NO INCONSISTENT REQUIREMENTS

     Each Grantor acknowledges that this Agreement and the other documents,
agreements and instruments entered into or executed in connection herewith may
contain covenants and other terms and provisions variously stated regarding the
same or similar matters, and each Grantor agrees that all such covenants, terms
and provisions are cumulative and all shall be performed and satisfied in
accordance with their respective terms.

                                   SECTION 14

                                  SEVERABILITY

     If one or more provisions contained in this Agreement shall be invalid,
illegal or unenforceable in any respect in any jurisdiction or with respect to
any party, such invalidity, illegality or unenforceability in such jurisdiction
or with respect to such party

                                      II-5

<PAGE>

shall, to the fullest extent permitted by applicable law, not invalidate or
render illegal or unenforceable any such provision in any other jurisdiction or
with respect to any other party, or any other provisions of this Agreement.

                                   SECTION 15

                                     NOTICES

     All notices and other communications hereunder shall be in writing and
shall be mailed, sent or delivered in accordance with the Purchase Agreement and
the Security Agreement.

                            [Signature Page Follows]

                                      II-6

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.

                                        GRANTORS:

                                        ZILA, INC.

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        [NAMES OF SUBSIDIARY GRANTORS]

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

AGENT:

[NAME]

By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

                [Signature Page to Trademark Security Agreement]

<PAGE>

                                   SCHEDULE A
                       TO THE TRADEMARK SECURITY AGREEMENT

GRANTOR: [_________]

                             TRADEMARK REGISTRATIONS

Trademarks owned by Grantors:

<TABLE>
<CAPTION>
Trademark Description   U.S. Registration No.   Date Registered
---------------------   ---------------------   ---------------
<S>                     <C>                     <C>

</TABLE>

                                       A-1

<PAGE>

                                   SCHEDULE B
                       TO THE TRADEMARK SECURITY AGREEMENT

GRANTOR: [_________]

                             TRADEMARK APPLICATIONS

<TABLE>
<CAPTION>
Trademark Application Description   U.S. Application No.   Date Applied
---------------------------------   --------------------   ------------
<S>                                 <C>                    <C>

</TABLE>

                                       B-1

<PAGE>

                                                                      Annex 1 to
                                                    Trademark Security Agreement

          ASSUMPTION AGREEMENT, dated as of ________________, 20__, made by
______________________________ (the "Additional Grantor"), in favor of Balyasny
Asset Management, L.P., a Delaware limited partnership, as collateral agent (the
"Agent"), under that certain Trademark Security Agreement (as defined below).

                                  WITNESSETH :

          WHEREAS, the Grantors have entered into the Trademark Security
Agreement dated as of ________________, 20__ (as it may be amended, supplemented
or otherwise modified from time to time, the "Trademark Security Agreement") in
favor of the Agent; and

          WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Trademark Security
Agreement;

          NOW, THEREFORE, IT IS AGREED:

          1. TRADEMARK SECURITY AGREEMENT. By executing and delivering this
Assumption Agreement, the Additional Grantor, as provided in Section 10 of the
Trademark Security Agreement, hereby becomes a party to the Trademark Security
Agreement as a Grantor thereunder with the same force and effect as if
originally named therein as a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. All capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned to them in the
Trademark Security Agreement.

          2. REPRESENTATIONS AND WARRANTIES CONCERNING GRANTOR'S LEGAL STATUS.
The Additional Grantor has previously delivered to the Agent and the other
Secured Parties (as defined in the Security Agreement) a certificate signed by
the Additional Grantor and entitled "Perfection Certificate" (the "Perfection
Certificate"). The Additional Grantor represents and warrants to the Agent and
the other Secured Parties as follows: (a) the Additional Grantor's exact legal
name is that indicated on the Perfection Certificate and on the signature page
hereof, (b) the Additional Grantor is an organization of the type and organized
in the jurisdiction set forth in the Perfection Certificate, (c) the Perfection
Certificate accurately sets forth the Additional Grantor's organizational
identification number or accurately states that the Additional Grantor has none,
(d) the Perfection Certificate accurately sets forth the Additional Grantor's
place of business or, if more than one, its chief executive office as well as
the Additional Grantor's mailing address if different (e) all other information
set forth on the Perfection Certificate pertaining to the Additional Grantor is
accurate and complete including but not limited to information pertaining to
trademarks and (f) each of the representations and warranties contained in the
Transaction Documents relating to the Additional Grantor are true and correct on
and as the date hereof (after giving effect to this Assumption Agreement) as if
made on and as of such date.

                                       1

<PAGE>

          3. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
WITHOUT IN ANY WAY LIMITING THE PRECEDING CHOICE OF LAW, THE UNDERSIGNED (AND BY
ITS ACCEPTANCE HEREOF, THE AGENT) ELECTS TO BE GOVERNED BY NEW YORK LAW IN
ACCORDANCE WITH, AND ARE RELYING (AT LEAST IN PART) ON SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, AS AMENDED, OR ANY
CORRESPONDING OR SUCCEEDING PROVISIONS THEREOF.

          IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.

                                        [ADDITIONAL GRANTOR]

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                       2
<PAGE>

                                   EXHIBIT III

                            PATENT SECURITY AGREEMENT

     PATENT SECURITY AGREEMENT, dated as of November __, 2006 (this
"Agreement"), is by and among the parties identified as "Grantors" on the
signature pages hereto and such other parties as may become Grantors hereunder
after the date hereof (individually a "Grantor", and collectively the
"Grantors"), and Balyasny Asset Management, L.P., a Delaware limited
partnership, as collateral agent (the "Agent").

                                   WITNESSETH:

     WHEREAS, this Agreement is being entered into in accordance with Section
6.3 of that certain Pledge and Security Agreement, dated as of November 28, 2006
(as the same may be amended, restated, supplemented or otherwise modified,
renewed or replaced from time to time, the "Security Agreement"), by and among
the Grantors, the Agent and the parties identified on the signature pages
thereto as Purchasers, and in order to obtain the benefits referred to therein,
the Grantors have granted to the Agent a continuing first priority security
interest in substantially all of the Grantor's property, including, without
limitation, the Collateral referred to in Section 2 below; and

     WHEREAS, pursuant to the Security Agreement, the Grantors have agreed to
execute this Agreement in respect of its Collateral for recording with the
Patent Office and any other office in which a security interest in the
Collateral may be recorded under the laws of any other applicable jurisdiction;

     NOW THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

                                   SECTION 1.

                          Definitions; Interpretation.

     (a) Defined Terms. All capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned to them in the
Purchase Agreement, dated as of November 28, 2006 (the "Purchase Agreement"), by
and between Zila, Inc. (the "Borrower") and the Investors named therein (the
"Purchasers"), the Notes and the Security Agreement.

     (b) Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:

     "Collateral" has the meaning set forth in Section 2.

     "Notes" means $12,000,000 in aggregate principal amount of the Borrower's
6% Senior Secured Convertible Notes issued by the Borrower to the Purchasers.

                                      III-1

<PAGE>

     "Patent Office" means the United States Patent and Trademark Office.

     "UCC" means the Uniform Commercial Code as in effect in the State of New
York.

     (c) Terms Defined in UCC. Where applicable in the context of this Agreement
and except as otherwise defined herein, terms used in this Agreement shall have
the meanings assigned to them in the UCC.

     (d) Construction. In this Agreement, the following rules of construction
and interpretation shall be applicable: (i) no reference to "proceeds" in this
Agreement authorizes any sale, transfer, or other disposition of any Collateral
by Grantor; (ii) "includes" and "including" are not limiting; (iii) "or" is not
exclusive; and (iv) "all" includes "any" and "any" includes "all." To the extent
not inconsistent with the foregoing, the rules of construction and
interpretation applicable to the Security Agreement shall also be applicable to
this Agreement and are incorporated herein by this reference.

                                    SECTION 2

                                GRANT OF SECURITY

     (a) Each Grantor hereby grants to the Agent a continuing first priority
security interest in and to all of the Grantor's right, title and interest in
and to the following (the "Collateral"):

          (i) the United States, international, and foreign patents, patent
     applications and patent licenses set forth on Schedule A and B hereto, as
     Schedule A and B may be supplemented from time to time by supplements to
     the Security Agreement and this Agreement which may be executed and
     delivered by the Grantor to the Agent, from time to time, together with all
     reissues, divisions, continuations, continuations-in-part, extensions and
     reexaminations thereof, and all rights therein provided by international
     treaties or conventions (the "Patents");

          (ii) any and all claims for damages for past, present and future
     infringement, misappropriation or breach with respect to the Patents, with
     the right, but not the obligation, to sue for and collect, or otherwise
     recover, such damages; and

          (iii) any and all proceeds of the foregoing.

     (b) The pledge and collateral assignment of, and the grant of a first
priority security interest in, the Collateral by the Grantor under this
Agreement secures the payment of all Obligations of the Grantor now or hereafter
existing, whether direct or indirect, absolute or contingent, and whether for
principal, reimbursement obligations, interest, premiums, penalties, fees,
indemnifications, contract causes of action, costs, expenses or otherwise.

     (c) The Grantor authorizes and requests that the Commissioner of Patents
and Trademarks and any other applicable government officer record this
Agreement.

                                     III-2

<PAGE>

                                   SECTION 3.

                        SUPPLEMENT TO SECURITY AGREEMENT.

          This Agreement has been entered into in conjunction with the
continuing first priority security interests granted to the Agent under the
Security Agreement, and other security documents referred to therein. The rights
and remedies of the Agent and the other Secured Parties with respect to the
security interests granted herein are without prejudice to, and are in addition
to those set forth in the Security Agreement or any other security documents
referred to therein, all terms and provisions of which are incorporated herein
by reference.

                                   SECTION 4.

                         REPRESENTATIONS AND WARRANTIES.

     Each Grantor represents and warrants to Secured Parties that:

          (a) Patent Registrations. A true and correct list of all of such
Grantor's Patents is set forth on Schedule A.

          (b) Applications for Patents. A true and correct list of all of such
Grantor's applications for Patents is set forth on Schedule B.

                                   SECTION 5.

                                  FURTHER ACTS.

     On a continuing basis, each Grantor shall make, execute, acknowledge and
deliver, and file and record in the proper filing and recording places, all such
instruments and documents, and take all such action as may be reasonably
necessary or advisable or may be reasonably requested by the Agent to carry out
the intent and purposes of this Agreement, or for assuring, confirming or
protecting the grant or perfection of the continuing first priority security
interest granted or purported to be granted hereby, to ensure such Grantor's
compliance with this Agreement or to enable the Agent to exercise and enforce
the rights and remedies of the Agent and the other Secured Parties hereunder
with respect to the Collateral, including any documents for filing with the
Patent Office or any applicable state office. The Agent may record this
Agreement, an abstract thereof, or any other document describing the Agent's
interest in the Patents with the Patent Office, at the expense of such Grantor.
In addition, each Grantor authorizes the Agent to file financing statements
describing the Collateral in any UCC filing office deemed appropriate by the
Agent. If any Grantor shall at any time hold or acquire a commercial tort claim
arising with respect to the Collateral, such Grantor shall immediately notify
the Agent and the other Secured Parties in a writing signed by such Grantor of
the brief details thereof and grant to the Agent (on behalf of the Secured
Parties) in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance satisfactory to the Agent and the Requisite Purchasers.

                                     III-3

<PAGE>

                                   SECTION 6.

                          AUTHORIZATION TO SUPPLEMENT.

     Each Grantor shall give the Agent and the other Secured Parties prompt
notice of any additional United States Patent registrations or applications
therefor after the date hereof. Each Grantor authorizes the Agent unilaterally
to modify this Agreement by amending Schedule A or B to include any future
United States registered Patents or applications therefor of such Grantor.
Notwithstanding the foregoing, no failure to so modify this Agreement or amend
Schedule A or B shall in any way affect, invalidate or detract from Agent's
continuing security interest in all Collateral, whether or not listed on
Schedule A or B.

                                   SECTION 7.

                                 BINDING EFFECT.

     This Agreement shall be binding upon, inure to the benefit of and be
enforceable by each Grantor, the Agent and the other Secured Parties and their
respective successors and assigns. Except as provided in Section 30.7 of the
Security Agreement, no party hereto may assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder except as
agreed to in writing by the other parties hereto.

                                   SECTION 8.

                                 GOVERNING LAW.

     This Agreement shall be governed by, and construed in accordance with, the
law of the State of New York, except as required by mandatory provisions of law
or to the extent the perfection or priority of the security interests hereunder,
or the remedies hereunder, in respect of any Collateral are governed by the law
of a jurisdiction other than the State of New York.

                                   SECTION 9.

                          ENTIRE AGREEMENT; AMENDMENT.

     No amendment of any provision of this Agreement shall be effective unless
it is in writing and signed by the Grantors, the Agent and the Requisite
Purchasers, and no waiver of any provision of this Agreement, and no consent to
any departure by the Grantors therefrom, shall be effective unless it is in
writing and signed by the Agent and consented to in writing by the Requisite
Purchasers, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. Notwithstanding
the foregoing, (i) additional Persons may become Grantors under this Agreement
without consent of any other Grantor through execution and delivery to the Agent
of an Assumption Agreement in the form of Annex 1 hereto or any other form of
supplement acceptable to the Agent, and (ii) the Agent unilaterally may
re-execute this Agreement, to the extent reasonably necessary, to modify, amend
or supplement Schedule A or B hereto as provided in Section 6 hereof, and such
modified, amended or supplemented Schedules shall be deemed to be accurate
absent manifest error. To the extent that any provision of this Agreement
conflicts with any provision of the

                                     III-4

<PAGE>

Notes, the provision giving the Secured Parties greater rights or remedies shall
govern, it being understood that the purpose of this Agreement is to add to, and
not detract from, the rights granted to Purchasers under the Notes. Nothing in
this Section 9 shall be construed to permit any Grantor to form a Subsidiary
unless expressly permitted to do so under the Notes.

                                   SECTION 10.

                                  COUNTERPARTS.

     This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement. Delivery of an executed counterpart
of this Agreement by facsimile shall be equally as effective as delivery of a
manually executed counterpart. Any party hereto delivering a counterpart of this
Agreement by facsimile shall also deliver a manually executed counterpart, but
the failure to so deliver a manually executed counterpart shall not affect the
validity, enforceability, or binding effect hereof.

                                   SECTION 11.

                                  TERMINATION.

     Upon the indefeasible payment and performance in full of all Obligations,
the security interests created by this Agreement shall terminate and the Agent
(at the Grantors' expense) shall promptly execute and deliver to the Grantors
such documents and instruments reasonably requested by the Grantors as shall be
necessary to evidence termination of all such security interests given by the
Grantors to the Agent hereunder, including cancellation of this Agreement by
written notice from Purchasers to the Patent Office.

                                   SECTION 12.

                          NO INCONSISTENT REQUIREMENTS.

     Each Grantor acknowledges that this Agreement and the other documents,
agreements and instruments entered into or executed in connection herewith may
contain covenants and other terms and provisions variously stated regarding the
same or similar matters, and each Grantor agrees that all such covenants, terms
and provisions are cumulative and all shall be performed and satisfied in
accordance with their respective terms.

                                   SECTION 13.

                                  SEVERABILITY.

     If one or more provisions contained in this Agreement shall be invalid,
illegal or unenforceable in any respect in any jurisdiction or with respect to
any party, such invalidity, illegality or unenforceability in such jurisdiction
or with respect to such party shall, to the fullest extent permitted by
applicable law, not invalidate or render illegal or unenforceable any such

                                     III-5

<PAGE>

provision in any other jurisdiction or with respect to any other party, or any
other provisions of this Agreement.

                                   SECTION 14.

                                    NOTICES.

     All notices and other communications hereunder shall be in writing and
shall be mailed, sent or delivered in accordance with the Purchase Agreement and
the Security Agreement.

                            [Signature Page Follows]

                                     III-6

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.

                                        GRANTORS:

                                        ZILA, INC.

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        [NAMES OF SUBSIDIARY GRANTORS]

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

AGENT:

[NAME]

By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

                  [Signature Page to Patent Security Agreement]

<PAGE>

                                   SCHEDULE A

                        TO THE PATENT SECURITY AGREEMENT

GRANTOR: [_________]

Registered Patents:

<TABLE>
<CAPTION>
Patent No.   Date of Registration   Date of Expiration
----------   --------------------   ------------------
<S>          <C>                    <C>

</TABLE>

                                       A-1

<PAGE>

                                   SCHEDULE B

                          TO PATENT SECURITY AGREEMENT

GRANTOR: [_________]

Applications for Patents:

<TABLE>
<CAPTION>
Patent No.   Date of Registration   Date of Expiration
----------   --------------------   ------------------
<S>          <C>                    <C>

</TABLE>

                                       B-1

<PAGE>

                                                                      Annex 1 to
                                                       Patent Security Agreement

          ASSUMPTION AGREEMENT, dated as of ________________, 20__, made by
______________________________ (the "Additional Grantor"), in favor of Balyasny
Asset Management, L.P., a Delaware limited partnership, as collateral agent (the
"Agent"), under that certain Patent Security Agreement (as defined below).

                                   WITNESSETH:

          WHEREAS, the Grantors have entered into the Patent Security Agreement
dated as of ________________, 20__ (as it may be amended, supplemented or
otherwise modified from time to time, the "Patent Security Agreement") in favor
of the Agent; and

          WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Patent Security
Agreement;

          NOW, THEREFORE, IT IS AGREED:

          1. PATENT SECURITY AGREEMENT. By executing and delivering this
Assumption Agreement, the Additional Grantor, as provided in Section 9 of the
Patent Security Agreement, hereby becomes a party to the Patent Security
Agreement as a Grantor thereunder with the same force and effect as if
originally named therein as a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. All capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned to them in the Patent
Security Agreement.

          2. REPRESENTATIONS AND WARRANTIES CONCERNING GRANTOR'S LEGAL STATUS.
The Additional Grantor has previously delivered to the Agent and the other
Secured Parties (as defined in the Security Agreement) a certificate signed by
the Additional Grantor and entitled "Perfection Certificate" (the "Perfection
Certificate"). The Additional Grantor represents and warrants to the Agent and
the other Secured Parties as follows: (a) the Additional Grantor's exact legal
name is that indicated on the Perfection Certificate and on the signature page
hereof, (b) the Additional Grantor is an organization of the type and organized
in the jurisdiction set forth in the Perfection Certificate, (c) the Perfection
Certificate accurately sets forth the Additional Grantor's organizational
identification number or accurately states that the Additional Grantor has none,
(d) the Perfection Certificate accurately sets forth the Additional Grantor's
place of business or, if more than one, its chief executive office as well as
the Additional Grantor's mailing address if different (e) all other information
set forth on the Perfection Certificate pertaining to the Additional Grantor is
accurate and complete including but

                                       1

<PAGE>

not limited to information pertaining to Patents and (f) each of the
representations and warranties contained in the Transaction Documents relating
to the Additional Grantor are true and correct on and as the date hereof (after
giving effect to this Assumption Agreement) as if made on and as of such date.

          3. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
WITHOUT IN ANY WAY LIMITING THE PRECEDING CHOICE OF LAW, THE UNDERSIGNED (AND BY
ITS ACCEPTANCE HEREOF, THE AGENT) ELECTS TO BE GOVERNED BY NEW YORK LAW IN
ACCORDANCE WITH, AND ARE RELYING (AT LEAST IN PART) ON SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, AS AMENDED, OR ANY
CORRESPONDING OR SUCCEEDING PROVISIONS THEREOF.

          IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.

                                        [ADDITIONAL GRANTOR]

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                       2
<PAGE>

                                   SCHEDULE B

                             COMMERCIAL TORT CLAIMS

1

<PAGE>

                                                                      Annex 1 to
                                                   Pledge and Security Agreement

          ASSUMPTION AGREEMENT, dated as of ________________, 20__, made by
______________________________ (the "Additional Grantor"), in favor of Balyasny
Asset Management, L.P., a Delaware limited partnership, as collateral agent (the
"Agent"), under that certain Security Agreement (as defined below).

                                   WITNESSETH:

          WHEREAS, the Grantors have entered into the Pledge and Security
Agreement dated as of November 28, 2006 (as it may be amended, supplemented or
otherwise modified from time to time, the "Security Agreement") in favor of the
Agent; and

          WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Security Agreement;

          NOW, THEREFORE, IT IS AGREED:

          1. SECURITY AGREEMENT. By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 19 of the Security
Agreement, hereby becomes a party to the Security Agreement as a Grantor
thereunder with the same force and effect as if originally named therein as a
Grantor and, without limiting the generality of the foregoing, hereby expressly
assumes all obligations and liabilities of a Grantor thereunder. All capitalized
terms used in this Agreement and not otherwise defined herein shall have the
meanings assigned to them in the Security Agreement.

          2. REPRESENTATIONS AND WARRANTIES CONCERNING GRANTOR'S LEGAL STATUS.
The Additional Grantor has previously delivered to the Agent and the other
Secured Parties (as defined in the Security Agreement) a certificate signed by
the Additional Grantor and entitled "Perfection Certificate" (the "Perfection
Certificate"). The Additional Grantor represents and warrants to the Agent and
the other Secured Parties as follows: (a) the Additional Grantor's exact legal
name is that indicated on the Perfection Certificate and on the signature page
hereof, (b) the Additional Grantor is an organization of the type and organized
in the jurisdiction set forth in the Perfection Certificate, (c) the Perfection
Certificate accurately sets forth the Additional Grantor's organizational
identification number or accurately states that the Additional Grantor has none,
(d) the Perfection Certificate accurately sets forth the Additional Grantor's
place of business or, if more than one, its chief executive office as well as
the Additional Grantor's mailing address if different (e) all other information
set forth on the Perfection Certificate pertaining to the Additional Grantor is
accurate and complete including but not limited to information pertaining to
Patents and (f) each of the representations and

                                       1

<PAGE>

warranties contained in the Transaction Documents relating to the Additional
Grantor are true and correct on and as the date hereof (after giving effect to
this Assumption Agreement) as if made on and as of such date.

          3. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
WITHOUT IN ANY WAY LIMITING THE PRECEDING CHOICE OF LAW, THE UNDERSIGNED (AND BY
ITS ACCEPTANCE HEREOF, THE AGENT) ELECTS TO BE GOVERNED BY NEW YORK LAW IN
ACCORDANCE WITH, AND ARE RELYING (AT LEAST IN PART) ON SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, AS AMENDED, OR ANY
CORRESPONDING OR SUCCEEDING PROVISIONS THEREOF.

          IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.

                                        [ADDITIONAL GRANTOR]

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                       2

<PAGE>

                                   SCHEDULE 1

                                       TO

              ASSUMPTION AGREEMENT TO PLEDGE AND SECURITY AGREEMENT
                             PERFECTION CERTIFICATE

     The undersigned, the ____________________ and ____________________ of
[Additional Grantor] a [state of organization] [entity] (the "Company"), hereby
certifies, with reference to a certain Pledge and Security Agreement, dated as
of November 28, 2006 (the "Security Agreement"; terms defined in the Security
Agreement having the same meanings herein as specified therein), between the
Grantors named therein, Balyasny Asset Management, L.P., a Delaware limited
partnership, as collateral agent ("Agent"), and the Purchasers named therein, to
Agent and the other Secured Parties:

     1. Names. (a) The exact corporate name of the Company as that name appears
on its [Certificate of Incorporation] is as follows:

     (b) The following is a list of all other names (including trade names or
similar appellations) used by the Company, or any other business or organization
to which the Company became the successor by merger, consolidation, acquisition,
change in form, nature or jurisdiction of organization or otherwise, now or at
any time during the past five years:

     2. Other Identifying Factors. (a)The following is the type of organization
of the Company:

     (b) The following is the jurisdiction of the Company's organization:

     (c) The following is the Company's state issued organizational
identification number [state "None" if the state does not issue such a number]:

     (d) The following is the Company's federal employer identification number:

     (e) Attached hereto as Schedule 2 is the information required above in this
Section 2 for any other business or organization to which the Company became the
successor by merger, consolidation, acquisition, change in form, nature or
jurisdiction of organization or otherwise, now or at any time during the past
five years:

     3. Chief Executive Office.

     (a) The chief executive office of the Company is located at the following
address:

                                      S1-1

<PAGE>

<TABLE>
<CAPTION>
Address   County   State
-------   ------   -----
<S>       <C>      <C>

</TABLE>

     (b) The principal mailing address of the Company is the following address,
if different from the chief executive office address:

<TABLE>
<CAPTION>
Mailing Address   County   State
---------------   ------   -----
<S>               <C>      <C>

</TABLE>

     4. Other Current Locations.

     (a) The following are all other locations in the United States of America
in which the Company maintains any books or records relating to any of the
Collateral consisting of accounts, contract rights, chattel paper, general
intangibles or mobile goods:

<TABLE>
<CAPTION>
Address   County   State
-------   ------   -----
<S>       <C>      <C>

</TABLE>

     (b) The following are all other places of business of the Company in the
United States of America:

<TABLE>
<CAPTION>
Address   County   State
-------   ------   -----
<S>       <C>      <C>

</TABLE>

     (c) The following are all other locations in the United States of America
where any of the Collateral consisting of inventory or equipment is located:

                                     S1-2

<PAGE>

<TABLE>
<CAPTION>
Address   County   State
-------   ------   -----
<S>       <C>      <C>

</TABLE>

     (d) The following are the names and addresses of all persons or entities
other than the Company, such as lessees, consignees, warehousemen or purchasers
of chattel paper, which have possession or are intended to have possession of
any of the Collateral consisting of chattel paper, inventory or equipment:

<TABLE>
<CAPTION>
Name   Mailing Address   County   State
----   ---------------   ------   -----
<S>    <C>               <C>      <C>

</TABLE>

     5. Prior Locations. (a) Set forth below is the information required by
Section 3 and by subparagraphs (a) and (b) of Section 4 with respect to each
location or place of business previously maintained by the Company at any time
during the past five years in a state in which the Company has previously
maintained a location or place of business at any time during the past four
months:

<TABLE>
<CAPTION>
Address   County   State
-------   ------   -----
<S>       <C>      <C>

</TABLE>

     (b) Set forth below is the information required by subparagraphs (c) and
(d) of Section 4 with respect to each other location at which, or other person
or entity with which, any of the Collateral consisting of inventory or equipment
has been previously held at any time during the past twelve months:

<TABLE>
<CAPTION>
Name   Address   County   State
----   -------   ------   -----
<S>    <C>       <C>      <C>

</TABLE>

                                      S1-3

<PAGE>

     6. Fixtures. Attached hereto as Schedule 6 is the information required by
UCC Section9-402(5) or by Rev. UCC Section9-502(b) of each state in which any of
the Collateral consisting of fixtures are or are to be located and the name and
address of each real estate recording office where a mortgage on the real estate
on which such fixtures are or are to be located would be recorded.

     7. Intellectual Property. Attached hereto as Schedule 7 is a complete list
of all United States and foreign patents, copyrights, trademarks, trade names
and service marks registered or for which applications are pending in the name
of the Company.

     8. Securities; Instruments. Attached hereto as Schedule 8 is a complete
list of all stocks, bonds, debentures, notes and other securities and investment
property owned by the Company (provide name of issuer, a description of security
and value):

     9. Motor Vehicles. The following is a complete list of all motor vehicles
owned by the Company (describe each vehicle by make, model and year and indicate
for each the state in which registered and the state in which based):

<TABLE>
<CAPTION>
Vehicle   State of Registration   State in Which Based
-------   ---------------------   --------------------
<S>       <C>                     <C>

</TABLE>

     10. Other Titled Collateral. The following is a complete list of aircraft
and boats and all other inventory, equipment and other goods of the Company
which are subject to any certificate of title or other registration statute of
the United States, any state or any other jurisdiction (provide description of
covered goods and indicate registration system and jurisdiction):

<TABLE>
<CAPTION>
Goods   Registration System   Jurisdiction
-----   -------------------   ------------
<S>     <C>                   <C>

</TABLE>

                                      S1-4

<PAGE>

     11. Bank Accounts. The following is a complete list of all bank accounts
(including securities and commodities accounts) maintained by the Company
(provide name and address of depository bank, type of account and account
number):

<TABLE>
<CAPTION>
Depository Bank   Bank Address   Type of Account   Acct. No.
---------------   ------------   ---------------   ---------
<S>               <C>            <C>               <C>

</TABLE>

     12. Unusual Transactions. Except for those purchases, acquisitions and
other transactions described on Schedule 2 or on Schedule 12 attached hereto,
all of the Collateral has been originated by the Company in the ordinary course
of the Company's business or consists of goods which have been acquired by the
Company in the ordinary course from a person in the business of selling goods of
that kind.

     13. Termination Statements. An authorized termination statement on Form
UCC-3 in form acceptable to the Agent has been duly filed in each applicable
jurisdiction identified in Section 2, 3, 4 and 5 or on Schedule 2 and Schedule
12 hereto [or, in the case of Schedule 2 or Schedule 12 a release acceptable to
the Agent and the Requisite Purchasers from the person from which the Company
purchased or otherwise acquired the Collateral identified on such schedule] and
has been delivered to Agent. Attached hereto as Schedule 13 is a true copy of
each such filing duly acknowledged by the filing officer[ and of each such
release].

     14. Schedule of Filing. Attached hereto as Schedule 14 is a schedule
setting forth filing information with respect to the filings described in
Section 13 above.

     15. Filing Fees. All filing fees and taxes payable in connection with the
filings described in Section 13 have been paid.

                                      S1-5

<PAGE>

     IN WITNESS WHEREOF, we have hereunto signed this Certificate on __________.

                                        ----------------------------------------
                                        Title:

                                        ----------------------------------------
                                        Title:

                   [Signature Page to Perfection Certificate]

<PAGE>

                                   SCHEDULE 2

                                      S2-1

<PAGE>

                                   SCHEDULE 6

                                      S6-1

<PAGE>

                                   SCHEDULE 7

                                      S7-1

<PAGE>

                                   SCHEDULE 8

                                      S8-1

<PAGE>

                                   SCHEDULE 12

                                      S12-1

<PAGE>

                                   SCHEDULE 13

                                      S13-1

<PAGE>

                                   SCHEDULE 14

                                      S14-1

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