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Exhibit 10(aaaa)

FORM OF SECURITY AGREEMENT

        This SECURITY AGREEMENT, dated as of the 23rd day of July, 2002, made by
Alliance Pharmaceutical Corp., a New York corporation (the "Grantor"), in favor
of [            ], a [                        ] and [                        ],
a [                        ] (the "Secured Parties").

WITNESSETH

        WHEREAS, the Grantor and the Secured Parties are entering into a Secured
Note Purchase Agreement, dated as of the date hereof (the "Secured Note Purchase
Agreement").

        WHEREAS, pursuant to the Secured Note Purchase Agreement, dated as of
the date hereof, the Secured Parties purchased [$            ] in aggregate face
amount of the Grantor's Promissory Notes (the "Initial Notes");

        WHEREAS, under the Secured Note Purchase Agreement the Grantor has the
right in certain circumstances to require the Secured Parties to purchase
additional notes in the aggregate face amount of [$            ] (the
"Subsequent Notes");

        WHEREAS, the Grantor has agreed to grant to the Secured Parties a
security interest in certain of its property and assets relating to the Product
(as defined below) to secure the performance of the obligations of the Grantor
under the Secured Note Purchase Agreement, the Initial Notes and the Subsequent
Notes (collectively, the "Notes"); and

        WHEREAS, the Grantor is contemporaneously entering into a Patent and
Trademark Security Agreement with the Secured Parties.

        NOW, THEREFORE, in consideration of the premises set forth above the
Grantor hereby agrees with the Secured Parties as follows:

TERMS

        1.    Defined Terms.    The terms set forth below have the following
meanings:

        "Accounts" shall have the meaning assigned to such term under the Code.

        "Chattel Paper" shall have the meaning assigned to such term under the
Code.

        "Code" means the Uniform Commercial Code as from time to time in effect
in the State of New York.

        "Documents" shall have the meaning assigned to such term under the Code.

        "Event of Default" means:

        (1)  the failure by the Grantor to perform in any material respect any
obligation of the Grantor under this Security Agreement as and when required by
this Security Agreement; or

        (2)  any representation or warranty made by the Grantor pursuant to this
Security Agreement is untrue in any material respect when made; or

        (3)  the failure by the Grantor to perform in any material respect any
obligation of the Grantor under the Patent and Trademark Security Agreement as
and when required by the Patent and Trademark Security Agreement; or

        (4)  any representation or warranty made by the Grantor pursuant to the
Patent and Trademark Security Agreement is untrue in any material respect when
made; or

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        (5)  any of the events specified in Section 1(d) of the Notes occurs and
is continuing; or

        (6)  the security interests granted herein and pursuant to the Patent
and Trademark Security Agreement do not constitute for any reason a first
priority perfected security interest in the Collateral covered thereby (other
than as a result of a failure to make the filings specified in Schedule II of
this Security Agreement and Exhibits E, F and G of the Patent and Trademark
Security Agreement); or

        (7)  the Grantor shall file a petition under bankruptcy, insolvency or
debtor's relief law or make an assignment for the benefit of its creditors; or

        (8)  a court of competent jurisdiction enters an order or decree under
any federal or state bankruptcy law that (X) is for relief against the Grantor
in an involuntary case brought with respect to the Grantor in such court,
(Y) appoints a custodian, receiver or other similar official for all or
substantially all the Grantor's property or (Z) orders the liquidation of the
Grantor, and the order or decree remains unstayed and in effect for 60 days; or

        (9)  the loss or suspension of the Food and Drug Administration approval
relating to the Product; or

      (10)  failure of the Grantor to pay any Obligation when due; or

      (11)  the Grantor shall fail to pay when due any principal of, premium or
interest on or any amount payable in respect of any borrowed money indebtedness.

        "General Intangibles" shall have the meaning assigned to such term under
the Code.

        "Instrument" shall have the meaning assigned to such term under the
Code.

        "Inventory" shall have the meaning assigned to such term under the Code,
and in any event, including all inventory, merchandise, goods and other personal
property that are held by or on behalf of a person for sale or lease or to be
furnished under a contract of service or which give rise to any Account,
including returned goods.

        "Investment Property" shall have the meaning assigned to such term under
the Code.

        "Lease" shall mean the lease, between Equity Office Properties Trust and
the Grantor, dated November 7, 1997, for the property located at 6175 Lusk
Boulevard, San Diego, California 92121.

        "License Agreement" shall mean the amended and restated License
Agreement, dated February 22, 2002, between Schering Aktiengesellschaft and the
Grantor, as amended in accordance with the terms of this Security Agreement.

        "Lien" shall mean any lien, mortgage, security interest, chattel
mortgage, pledge or other encumbrance (statutory or otherwise) of any kind
securing satisfaction or performance of an obligation, including any agreement
to give any of the foregoing, any conditional sales or other title retention
agreement, any lease in the nature thereof, and the filing of or the agreement
to give any financing statement under the Code of any jurisdiction or similar
evidence of any encumbrance, whether within or outside the United States.

        "Obligations" shall mean:

        (1)  all obligations and liabilities to the Secured Parties, whether now
existing or hereafter arising, under the Secured Note Purchase Agreement, the
Notes, this Security Agreement, the Patent and Trademark Security Agreement
and/or any document or agreement related to any of the foregoing and the due
performance and compliance with the terms of the Secured Note Purchase
Agreement, the Notes, this Security Agreement, the Patent and Trademark Security
Agreement and/or any document or agreement related to any of the foregoing;

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        (2)  any and all sums advanced by the Secured Parties in order to
preserve the Collateral or to preserve the Secured Parties' security interest in
the Collateral; and

        (3)  in the event of any proceeding for the collection or enforcement of
any obligations or liabilities of the Grantor referred to in the immediately
preceding clauses (1) through (2) in accordance with the terms of the Secured
Note Purchase Agreement, the Notes, this Security Agreement, the Patent and
Trademark Security Agreement and/or any document or agreement related to the
foregoing, the expenses of re-taking, holding, preparing for sale, selling or
otherwise disposing of or realizing on the Collateral, or of any other exercise
by the Secured Parties of their rights hereunder, together with reasonable
attorneys' fees and court costs.

        "Patent and Trademark Security Agreement" shall mean that certain Patent
and Trademark Security Agreement dated as of the date hereof between the Grantor
and the Secured Parties.

        "Proceeds" shall have the meaning assigned to such term under the Code.

        "Product" means Imagent® a sterile, non-pyrogenic white powder with a
diluted perflexane headspace that, after reconstitution into a suspension of
microspheres, is used for contrast enhancement during the indicated ultrasound
imaging procedures and is indicated for use in patients with suboptimal
echocardiograms to opacify the left ventricular chamber and to improve the
delineation of the left ventricular endocardial border.

        "Proprietary Information" means information generally unavailable to the
public that has been created, discovered, developed or otherwise become known to
the Grantor or in which property rights have been assigned or otherwise conveyed
to the Grantor, which information has economic value or potential economic value
to the marketing, sale and distribution of the Product. Proprietary Information
shall include, but not be limited to, trade secrets, processes, formulas,
writings data, know-how, negative know-how, improvements, discoveries,
developments, designs, inventions, techniques, technical data, customer and
supplier lists, financial information, business plans or projections and
modifications or enhancements to any of the above. Proprietary Information shall
include all information existing on the date hereof and all information
developed or acquired hereafter.

        "Security Agreement" means this Security Agreement, as amended,
supplemented or otherwise modified from time to time.

        "Territory" shall mean the United States of America, its territories and
possessions.

        "Vendor Agreement" means the Vendor Agreement, dated February 28, 2002,
between RedKey, Inc., an Ohio corporation doing business as Cardinal Health
Sales and Marketing Services, and the Grantor, as amended in accordance with the
terms of this Security Agreement.

        2.    Grant of Security Interest.    As collateral security for the
prompt and complete payment and performance when due of the Obligations, the
Grantor hereby grants to the Secured Parties a continuing first priority
security interest in all of the following property now owned or at any time
hereafter acquired by the Grantor or in which the Grantor now has or at any time
in the future may acquire right, title or interest (collectively, the
"Collateral"):

          (i)  the Vendor Agreement, to the extent and only to the extent that
the Vendor Agreement authorizes the marketing and sale of the Product in the
Territory;

        (ii)  the License Agreement;

        (iii)  the Lease;

        (iv)  all Proprietary Information, whether existing on the date hereof
or developed or acquired hereafter;

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        (v)  contracts, Documents and General Intangibles developed or acquired
by the Grantor, whether now existing or hereafter arising, to the extent and
only to the extent related to the use, sale, manufacture, marketing or
distribution of the Product and all amnedments, modifications and supplements
thereto;

        (vi)  the manufacturing facility described on Schedule I hereto and all
of the equipment located therein used in connection with the manufacture and
distribution of the Product;

      (vii)  the approved new drug application NDA #21-191 for the Product, and
all amendments, modifications and supplements thereto;

      (viii)  all books, records, ledgercards, files, correspondence, computer
programs, tapes, disks and related data processing software (owned by the
Grantor or in which it has an interest) which at any time evidence or contain
information relating to any or all of (i), (ii), (iii), (iv) and (v) above or
are otherwise necessary or helpful in the collection thereof or realization
thereupon;

        (ix)  documents of title, policies and certificates of insurance,
securities, Chattel Paper, other documents or instruments evidencing or
pertaining to any or all of (i), (ii), (iii), (iv), (v) and (vi) above;

        (x)  all Supporting Obligations (as defined in the Code) and guaranties,
including letters of credit and guarantees issued in support of Accounts and
Chattel Paper. General Intangibles and Investment Property (as defined in the
Code), Liens on real or personal property, leases, and other agreements and
property which in any way secure or relate to any or all of (i), (ii), (iii),
(iv), (v), (vi), (vii), (viii) and (ix) above, or are acquired for the purpose
of securing and enforcing any item thereof;

        (xi)  (A) all cash held as cash collateral to the extent not otherwise
constituting Collateral, all other cash or property at any time on deposit with
or held by the Secured Parties for the account of the Grantor (whether for
safekeeping, custody, pledge, transmission or otherwise), (B) all present or
future deposit accounts (whether time or demand or interest or non-interest
bearing) of the Grantor with the Secured Parties or any other individual or
entity including those to which any such cash may at any time and from time to
time be credited, (C) all Payment Intangibles (as defined in the Code), (D) all
letter of credit obligations, (E) all investments and reinvestments (however
evidenced) of amounts from time to time credited to such accounts, and (F) all
interest, dividends, distributions and other proceeds payable on or with respect
to (1) such investments and reinvestments and (2) such accounts, and (3) all
Investment Property; and

      (xii)  all products and proceeds of (i), (ii), (iii), (iv), (v), (vi),
(vii), (viii), (ix), (x) and (xi) above (including, but not limited to, all
claims to items referred to in (i), (ii), (iii), (iv), (v), (vi), (vii), (viii),
(ix), (x) and (xi) above) and all claims of the Grantor against third parties
(x) for (i) loss of, damage to, or destruction of, and (ii) payments due or to
become due under leases, rentals and hires of any or all of (i), (ii), (iii),
(iv), (v), (vi), (vii), (viii), (ix), (x) and (xi) above and (y) proceeds
payable under, or unearned premiums with respect to policies of insurance in
whatever form; and

      (xiii)  all inventory, equipment, accounts, Chattel Paper, letter of
credit rights, Instruments, commercial tort claims, and investment property to
the extent it is related to the Product or necessary for the manufacture and
sale of the Product.

        3.    Rights of the Secured Parties; Limitations on the Secured Parties'
Obligations.    

        (a)    Grantor Remains Liable under Accounts and Contracts.    Anything
herein to the contrary notwithstanding, the Grantor shall remain liable under
each of the Accounts and contracts that constitute part of the Collateral to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
giving

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rise to each such Account and in accordance with and pursuant to the terms and
provisions of each such contract. The Secured Parties shall not have any
obligation or liability under any Account that constitutes part of the
Collateral (or any agreement giving rise thereto) or under any contract that
constitutes part of the Collateral by reason of or arising out of this Security
Agreement or the receipt by the Secured Parties of any payment relating to such
Account or contract pursuant hereto, nor shall the Secured Parties be obligated
in any manner to perform any of the obligations of the Grantor under or pursuant
to any such Account (or any agreement giving rise thereto) or under or pursuant
to any such contract, to make any payment, to make any inquiry as to the nature
or the sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any such Account (or any agreement giving rise
thereto) or under any such contract, 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 it or to which it may be entitled at any time or
times.

        (b)    Verification and Analysis of Accounts.    If an Event of Default
has occurred and is continuing under the Notes, the Secured Parties shall have
the right to communicate with account debtors on the Accounts that constitute
part of the Collateral and parties to the contracts that constitute part of the
Collateral to verify with them to its satisfaction the existence, amount and
terms of any such Accounts or contracts and to make test verifications of such
Accounts in any manner and through any medium that it reasonably considers
advisable, and the Grantor shall furnish all such assistance and information as
the Secured Parties may require in connection therewith. At any time and from
time to time, upon the Secured Parties' reasonable request and at the expense of
the Grantor, the Grantor shall cause independent public accountants or others
satisfactory to the Secured Parties to furnish to the Secured Parties reports
showing reconciliations, aging and test verifications of, and trial balances
for, such Accounts.

        4.    Representations and Warranties.    The Grantor hereby represents
and warrants that:

        (a)    Title; No Other Liens.    Except for the Lien granted to the
Secured Parties pursuant to this Security Agreement and the Lien granted to the
Secured Parties pursuant to the terms of the Patent and Trademark Security
Agreement, the Grantor owns each item of the Collateral free and clear of any
and all Liens or claims of others. No security agreement, financing statement or
other public notice with respect to all or any part of the Collateral is on file
or of record in any public office, except such as may have been filed in favor
of the Secured Parties pursuant to this Security Agreement and the Patent and
Trademark Security Agreement.

        (b)    Perfected First Priority Liens.    The Liens granted pursuant to
this Security Agreement will constitute upon the completion of all the filings
or notices listed in Schedule II hereto, perfected Liens on all Collateral,
which are prior to all other Liens on such Collateral and which are enforceable
as such against all creditors of the Grantor.

        (c)    Accounts.    No amount payable to the Grantor under or in
connection with any Account that constitutes part of the Collateral is evidenced
by any Instrument (other than checks in the ordinary course of business) or
Chattel Paper which has not been delivered to the Secured Parties. The place
where the Grantor keeps its records concerning the Accounts that constitute part
of the Collateral is set forth on Schedule III hereto.

        (d)    Consents.    No consent (other than consents that have been
obtained and those set forth in items 5, 6 and 7 on Schedule 3(e) of the
Purchase Agreement) of any party (other than the Grantor) to any contract that
constitutes part of the Collateral is required, or purports to be required, in
connection with the execution, delivery and performance of this Security
Agreement.

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        (e)    Inventory.    The Inventory that constitutes part of the
Collateral is, as of the date hereof, kept at the locations listed on
Schedule IV hereto and has not been kept at any other location within the
five-month period ending on the date hereof.

        (f)    Chief Executive Office.    The Grantor's chief executive office
and chief place of business is located at 3040 Science Park Road, San Diego,
California 92121.

        (g)    Power and Authority.    The Grantor has full power, authority and
legal right to enter into this Security Agreement and to grant the Secured
Parties the Lien on the Collateral pursuant to this Security Agreement.

        (h)    Binding Obligation.    This Security Agreement has been duly
executed and delivered by the Grantor and constitutes a legal, valid and binding
obligation of the Grantor enforceable in accordance with its terms.

        (i)    Non Violation.    The execution, delivery and performance of this
Security Agreement will not violate any provision of any applicable law or
regulation or of any order, judgment, writ, award or decree of any court,
arbitrator or governmental authority, domestic or foreign, or of any securities
issued by the Grantor, or of any mortgage, indenture, lease, contract or other
agreement (upon receipt of the consents set forth in items 5, 6 and 7 of the
Secured Note Purchase Agreement), instrument or undertaking to which the Grantor
is a party or which purports to be binding upon the Grantor or upon any of its
assets and will not result in the creation or imposition of any Lien on any of
the assets of the Grantor except as contemplated by this Security Agreement and
the Patent and Trademark Security Agreement.

        (j)    Consents.    No consent, filing, approval, registration,
recording, or other action is required (x) for the grant by the Grantor of the
Lien on the Collateral pursuant to this Security Agreement or for the execution,
delivery or performance of this Security Agreement by the Grantor, or (y) to
perfect the Lien purported to be created by this Security Agreement, in each
case except as set forth in items 5, 6 and 7 on Schedule 3(e) of the Secured
Note Purchase Agreement with respect to consents to be obtained after the date
hereof and as contemplated by Section 4(b) above.

        (k)    Validity of Collateral.    To the knowledge of the Grantor, all
of the Collateral is subsisting and is valid.

        (l)    Organization.    The Grantor is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and duly qualified and in good standing in every other state or jurisdiction in
which the nature of the Grantor's business or the ownership of its assets
requires such qualification.

        5.    FDA Representations, Warranties and Covenants.    

        (a)    Compliance with FDC Act.    The Grantor represents and warrants
that it has at all times prior to the date hereof complied with and, so long as
any Obligations are outstanding, will continue to comply with all provisions of
the Federal Food, Drug, and Cosmetic Act and its implementing regulations, and
all other federal and state regulatory requirements, governing the
manufacturing, holding, processing, sale, and marketing of the Product,
including, but not limited to:

          (i)  the terms and specifications set forth in the approved new drug
application NDA #21-191 (the "NDA") for the Product, and any supplements and
amendments relating thereto;

        (ii)  postapproval commitments and/or requirements outlined in the Food
and Drug Administration's (the "FDA") NDA approval letter for the Product, a
copy of which is attached hereto as Exhibit A;

        (iii)  FDA's good manufacturing practices regulations that apply to
drugs;

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        (iv)  adverse event reporting;

        (v)  establishment registration and drug listing;

        (vi)  submission of all required NDA supplements for changes to the
terms and specifications set forth in the NDA;

      (vii)  promotional requirements and restrictions, including but not
limited to applicable advertising laws and requirements;

      (viii)  label and labeling requirements; and

        (ix)  not making any misrepresentation of fact to the FDA with regard to
the NDA and/or the Product.

        (b)    Transfer of Documentation.    Within 5 days following written
notice by the Secured Parties, the Grantor shall provide the Secured Parties
with a copy of all documentation necessary for the Grantor and/or the Secured
Parties to be in and remain in full compliance with the NDA, pursuant to
section 314.72 of Title 21 of the Code of Federal Regulations, including, but
not limited to: the NDA and any amendments and supplements thereto; all
correspondence concerning the NDA between the FDA and Grantor whether written
before or after the NDA was approved; all contracts with suppliers of
ingredients and raw materials for the Product; all batch records regarding the
Product; all validation studies; all stability reports; all standard operating
procedures; all postmarket surveillance files, including adverse event reports;
and postmarket studies. At that same time, Grantor shall also provide the
Secured Parties with a copy of the following additional documentation:

          (i)  a list of the names, addresses, and job descriptions of all
employees involved in the manufacturing, sale and distribution of the Product;

        (ii)  a list of the names, addresses and job descriptions of all
employees involved in purchasing ingredients or raw materials for the Product;

        (iii)  a list of the names, addresses and job descriptions of all
employees involved in quality control and quality assurance for the Product;

        (iv)  all employment and consulting agreements for any person or entity
involved in the manufacturing, sale and/or distribution of the Product;

        (v)  all audit and consulting reports done by any person or entity
concerning Grantor's compliance with, or potential failure to comply with,
obligations relating to the Federal Food, Drug, and Cosmetic Act and/or all
other applicable federal and state regulatory requirements; and

        (vi)  a list of the names and addresses of all customers for, and
suppliers of, the Product or any of its ingredients.

        (c)    Recalls etc.    The Grantor agrees to handle the administration
of, and be responsible for all costs and expenses relating to, all court
actions, claims, governmental investigations or inquiries, recalls, stock
recoveries or market withdrawals of the Product, including but not limited to,
making all necessary and appropriate contacts with federal and state
authorities, notifications to third parties, and Product disposition. The
Grantor shall indemnify and hold the Secured Parties harmless from all claims,
actions, losses, liabilities, damages and expenses arising from such matters,
regardless of whether such claims, actions, losses, liabilities, damages and
expenses relate to the period prior to or after the occurrence of an Event of
Default.

        (d)    Withdrawal of Product.    Grantor represents that there exists no
set of facts which could furnish a basis for the withdrawal, suspension or
termination of the NDA or any threatened or

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potential request for the recall or cessation of sales of the Product covered by
that NDA by the FDA or any other governmental authority.

        6.    Covenants.    

        (a)    The Grantor covenants and agrees with the Secured Parties that
from and after the date of this Security Agreement until the payment or
performance in full by the Grantor of all of its Obligations:

        (i)    Further Documentation; Pledge of Instruments and Chattel
Paper.    At any time and from time to time, upon the written request of the
Secured Parties, and at the sole expense of the Grantor, the Grantor will
promptly and duly execute and deliver such further instruments and documents and
take such further action as the Secured Parties may reasonably request for the
purpose of obtaining or preserving the full benefits of this Security Agreement
and of the rights and powers herein granted, including, without limitation,
(i) the filing of any financing or continuation statements under the Code in
effect in any such jurisdiction with respect to the Liens created hereby. The
Grantor also hereby authorizes the Secured Parties to file any such financing or
continuation statement without the signature of the Grantor to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Security Agreement shall be sufficient as a financing statement for filing
in any jurisdiction. If any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any Instrument or Chattel Paper,
such Instrument or Chattel Paper shall be immediately delivered to the Secured
Parties, duly endorsed in a manner satisfactory to the Secured Parties, to be
held as Collateral pursuant to this Security Agreement.

        (ii)    Indemnification.    The Grantor agrees to pay, and to save the
Secured Parties harmless from, any and all liabilities, costs and expenses
(including, without limitation, legal fees and expenses) (i) with respect to, or
resulting from, any delay in paying, any and all excise, sales or other taxes
which may be payable or determined to be payable with respect to any of the
Collateral, (ii) with respect to, or resulting from, any delay by the Grantor in
complying with any law or regulation applicable to any of the Collateral,
(iii) in connection with any action taken by the Secured Parties in exercising
its rights under this Security Agreement, and (iv) in connection with the
preparation and enforcement of this Security Agreement and the related
documents. In any suit, proceeding or action brought by the Secured Parties
under any Account or contract that constitutes part of the Collateral for any
sum owing thereunder, or to enforce any provisions of any such Account or
contract, the Grantor will save, indemnify and keep the Secured Parties harmless
from and against all expense, loss or damage suffered by reason of any defense,
setoff, counterclaim, recoupment or reduction or liability whatsoever of the
account debtor or obligor thereunder, arising out of a breach by the Grantor of
any obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such account debtor or obligor or
its successors from the Grantor.

        (iii)    Maintenance of Records.    The Grantor will keep and maintain
at its own cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Accounts that constitute part of the Collateral. The
Grantor hereby grants to the Secured Parties access to all of the Grantor's
books and records pertaining to the Collateral, and the Grantor shall turn over
any such books and records for inspection at the office of the Grantor to the
Secured Parties or to their representatives during normal business hours at the
request of the Secured Parties.

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        (iv)    Limitation on Liens on Collateral.    The Grantor (x) will not
create, incur or permit to exist, will defend, at its own expense, the
Collateral against, and will take such other action as is necessary to remove,
any Lien or claim on or to the Collateral, and (y) will defend the right, title
and interest of the Secured Parties in and to any of the Collateral against the
claims and demands of all persons whomsoever.

        (v)    Limitations on Dispositions of Collateral.    The Grantor will
not sell, transfer, lease or otherwise dispose of any of the Collateral, or
attempt, offer or contract to do so except for sales of Inventory and the
collection and use of cash proceeds in the ordinary course of its business
without express, written agreement by the Secured Parties.

        (vi)    Limitations on Performance of Contracts and Agreements Giving
Rise to Accounts.    The Grantor will not (i) fail to exercise promptly and
diligently each and every material right or fail to perform each material
obligation which it may have under each contract that constitutes part of the
Collateral and each agreement giving rise to an Account that constitutes part of
the Collateral (other than any right of termination) except where the Grantor
determines in its reasonable business judgment that the failure to exercise such
right or perform such obligation is in the best interest of the Grantor and
consistent with the protection and preservation of the rights and interests of
the Secured Parties in the Collateral or (ii) fail to deliver to the Secured
Parties, upon request, a copy of each material demand, notice or document
received by it relating in any way to any contract that constitutes part of the
Collateral or any agreement giving rise to an Account that constitutes part of
the Collateral. The Grantor will not amend or modify the terms of, or waive any
rights under, any contracts, including the Vendor Agreement, without the express
written consent of Secured Parties.

        (vii)    Further Identification of Collateral.    The Grantor will
furnish to the Secured Parties from time to time, upon the request of the
Secured Parties, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Secured Parties may reasonably request, all in reasonable detail.

        (viii)    Notices.    The Grantor will advise the Secured Parties
promptly, in reasonable detail, at its address in accordance with Section 14,
(i) of any Lien (other than Liens permitted hereunder) on, or claim asserted
against, any of the Collateral and (ii) of the occurrence of any other event
which could reasonably be expected to have a material adverse effect on the
value of any material portion of the Collateral or on the Liens created
hereunder.

        (ix)    Change of Name; Location of Collateral; Records; Place of
Business.    The Grantor shall not make any change (a) in its name, (b) in the
location of its chief executive office, its principal place of business, any
office in which it maintains books or records relating to Collateral owned by it
or any office facility at which Collateral owned by it is located (including the
establishment of any such new office or facility) from the locations set forth
on Schedule I attached hereto, (c) in its identity or type of organization or
corporate structure (d) in its Federal Taxpayer Identification Number or
organizational identification number or (e) in its jurisdiction or organization
unless (i) the Guarantor provides the Secured Parties at least 30 days prior
written notice of such change and (ii) all filings have been made under the Code
or otherwise that are required in order for the Secured Parties to continue at
all times following such change to have a valid, legal and perfected first
priority security interest in all the Collateral.

        (x)    Subsidiaries.    This Security Agreement is entered into on
behalf of and for the benefit of the Grantor and its subsidiaries and other
entities controlled by the Grantor which have rights in the Collateral. The
security interest granted by the Grantor hereunder is

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intended to include all rights of the Grantor in and to the Collateral,
including any rights of its subsidiaries and such other entities in and to such
Collateral, and the Grantor will not permit such subsidiaries and entities to
exercise any of their rights with respect to the Collateral.

        (xi)    Payment of Taxes and Other Claims.    The Grantor shall pay or
discharge when due all taxes, assessments and governmental charges or levies
imposed upon it unless same are not delinquent, provided, however, that the
Grantor shall have the right to challenge in good faith by appropriate
proceedings any disputed taxes, assessments or governmental charges or levies
provided that the Grantor establishes appropriate reserves therefor in
accordance with generally accepted accouting principles; and, provided, further,
that notwithstanding any such contest, the Grantor shall pay such disputed
taxes, assessments and governmental charges or levies if nonpayment would result
in the imposition of any Lien on the Grantor's assets or properties.

        (xii)    Indebtedness; Distributions; Investments; Consolidation and
Merger; Subsidiaries; Nature of Business; Affiliate Transactions;
Invoices.    The Grantor shall not (i) create, incur, assume or suffer to exist
any indebtedness (exclusive of trade debt) whether secured or unsecured other
than the Grantor's indebtedness to the Secured Parties; (ii) declare, pay or
make any dividend or distribution on any shares of the common stock or preferred
stock of the Grantor or apply any of its funds, property or assets to the
purchase, redemption or other retirement of any common or preferred stock of the
Grantor; (iii) directly or indirectly, prepay any indebtedness (other than to
the Secured Parties), or repurchase, redeem, retire or otherwise acquire any
indebtedness of the Grantor; (iv) make advances, loans or extensions of credit
to any person; (v) become either directly or contingently liable upon the
obligations of any person by assumption, endorsement or guaranty thereof or
otherwise; (vi) enter into any merger, consolidation or other reorganization
with or into any other person or acquire all or a portion of the assets or stock
of any person or permit any other person to consolidate with or merge with it;
(vii) form any Subsidiary or enter into any partnership, joint venture or
similar arrangement; (viii) materially change the nature of the business in
which it is presently engaged; (ix) enter into any transaction with any
affiliate, except in ordinary course on arms-length terms; or (xi) bill accounts
under any name except the present name of the Grantor.

        (xiii)    Maintain Operations and Manufacturing.    Following an Event
of Default, the Grantor shall use commercially reasonable efforts to continue to
maintain and operate the manufacturing facility described on Schedule I hereto
and to manufacture and distribute the Product. In the event that the Grantor for
any reason is unable or unwilling to maintain and operate such manufacturing
facility and manufacture and distribute the Product, the Secured Parties or
their designee shall have the right to maintain and operate such manufacturing
facility and use the Collateral in order to manufacture and distribute the
Product, subject to the terms of the lease of the manufacturing facility and any
applicable Food and Drug Administration requirements and the Grantor shall take
all actions reasonably requested by the Secured Parties (including obtaining any
required consents) in connection therewith.

        (xiv)    Use and Disposition of Collateral.    The Grantor shall (i) not
dispose of any of the Collateral whether by sale, lease or otherwise except for
(A) the sale of Inventory in the ordinary course of business, and (B) the
disposition or transfer of obsolete and worn-out Equipment in the ordinary
course of business and (ii) keep and maintain the Equipment in good operating
condition, except for ordinary wear and tear, and shall make all necessary
repairs and replacements thereof so that the value and operating efficiency
shall at all times be maintained and preserved.

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        (xv)    Risk of Loss; Insurance.    The Grantor shall bear the full risk
of loss from any loss of any nature whatsoever with respect to the Collateral.
At it's own cost and expense in amounts and with carriers acceptable to the
Secured Parties, it shall (a) keep all its insurable properties and properties
in which it has an interest insured against the hazards of fire, flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such
other hazards, and for such amounts, as is customary in the case of companies
engaged in businesses similar to the Grantor's including, without limitation,
public and product liability insurance, worker's compensation, insurance against
larceny, embezzlement or other criminal misappropriation of insured's officers
and employees and business interruption insurance; (b) furnish the Secured
Parties with (i) copies of all policies and evidence of the maintenance of such
policies at least 30 days before any expiration date, and (ii) appropriate loss
payable endorsements in form and substance satisfactory to the Secured Parties,
naming the Secured Parties as loss payees and providing that as to the Secured
Parties the insurance coverage shall not be impaired or invalidated by any act
or neglect of the Grantor and the insurer will provide the Secured Parties with
at least 30 days notice prior to cancellation. The Grantor shall instruct the
insurance carriers that in the event of any loss thereunder, the carriers shall
make payment for such loss to the Secured Parties and not to the Grantor and the
Secured Parties jointly. If any insurance losses are paid by check, draft or
other instrument payable to the Grantor and the Secured Parties jointly, the
Secured Parties may endorse the Grantor's name thereon and do such other things
as the Secured Parties may deem advisable to reduce the same to cash. The
Secured Parties are hereby authorized to adjust and compromise claims. All loss
recoveries received by the Secured Parties upon any such insurance may be
applied to the Obligations, in such order as the Secured Parties in their sole
discretion shall determine. Any surplus shall be paid by the Secured Parties to
the Grantor or applied as may be otherwise required by law. Any deficiency
thereon shall be paid by the Grantor to the Secured Parties, on demand.

        (xvi)    Notice of Certain Events.    The Grantor shall promptly inform
the Secured Parties in writing of: (a) the commencement of all proceedings and
investigations by or before and/or the receipt of any notices from, any
governmental or nongovernmental body and all actions and proceedings in any
court or before any arbitrator against or in any way concerning any of the
Grantor's properties, assets or business, which might singly or in the
aggregate, have a materially adverse effect on the Grantor; (b) any amendment of
the Grantor's certificate of incorporation or by-laws; (c) any change in the
Grantor's business, assets, liabilities, condition (financial or otherwise),
results of operations or business prospects which has had or might have a
materially adverse effect on the Grantor; (d) any Event of Default or Default;
(e) any default or any event which with the passage of time or giving of notice
or both would constitute a default under any agreement for the payment of money
to which the Grantor is a party or by which the Grantor or any of the Grantor's
properties may be bound which would have a material adverse effect on the
Grantor's business, operations, property or condition (financial or otherwise)
or the Collateral; (f) any change in the location of the Grantor's executive
offices; (g) any change in the location of the Grantor's Inventory or Equipment
from the locations listed on Schedule I attached hereto, (h) any material delay
in the Grantor's performance of any of its obligations to any Customer and of
any assertion of any material claims, offsets or counterclaims by any Customer
and of any allowances, credits and/or other monies granted by it to any
Customer; (i) and furnish to the Secured Parties all material adverse
information relating to the financial condition of any Customer; and (k) any
material return of goods.

        (xvii)    Attorney-in-fact.    The Grantor hereby irrevocably appoints
the Secured Parties or any other person whom the Secured Parties may designate
as the Grantor's attorney-in-fact, with full power and authority in place and
stead of the Grantor and in the name of the

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Grantor or in its own name to: (i) endorse the Grantor's name on any checks,
notes, acceptances, money orders, drafts or other forms of payment or security
that may come into the Secured Parties' possession; (ii) sign the Grantor's name
on any invoice or bill of lading relating to any Accounts, drafts against
customers, schedules and assignments of Accounts, notices of assignment,
financing statements and other public records, verifications of account and
notices to or from Customers; (iii) verify the validity, amount or any other
matter relating to any Receivable by mail, telephone, telegraph or otherwise
with Customers; (iv) execute customs declarations and such other documents as
may be required to clear Inventory through United States Customs; (v) do all
things necessary to carry out this Agreement and all other Loan Documents;
(vi) continue any insurance existing pursuant to the terms of this Agreement and
pay all or any part of the premium therefor and the cost thereof; and (vii) on
or after the occurrence and continuation of an Event of Default, notify the post
office authorities to change the address for delivery of the Grantor's mail to
an address designated by the Secured Parties, and to receive, open and dispose
of all mail addressed to the Grantor. The Grantor hereby ratifies and approves
all acts of the attorney. The powers conferred on the Secured Parties hereunder
are solely to protect their interests in the Collateral and shall not impose any
duty upon them to exercise any such powers. Neither the Secured Parties nor the
attorney will be liable for any acts or omissions or for any error of judgment
or mistake of fact or law. This power, being coupled with an interest, is
irrevocable so long as an account which is assigned to the Secured Parties or in
which the Secured Parties have a security interest remains unpaid and until the
Obligations have been fully satisfied.

        (b)    Consent to License Agreement.    The Secured Parties covenant and
agree with the Grantor that in the event that the Secured Parties exercise their
rights hereunder and the Collateral is sold to a third party, the Secured
Parties shall use commercially reasonable efforts to (i) ensure that such third
party purchaser of any of the Collateral licensed under the License Agreement
agrees to be bound by the terms and conditions thereof, until the expiration or
termination thereof, and (ii) ensure that such third-party purchaser shall agree
to use commercially reasonable efforts to ensure that all subsequent transferees
of any of the Collateral licensed under the License Agreement shall agree to be
bound by the terms and conditions of the License Agreement, until the expiration
or termination thereof.

        (c)    Food and Drug Administration.    The Grantor shall comply in all
material respects with all Food and Drug Administration requirements necessary
for the Secured Parties to exercise their rights hereunder and to realize on the
Collateral.

        7.    Performance by Secured Parties of Grantor's Obligations.    If the
Grantor fails to perform or comply with any of its agreements contained herein
and the Secured Parties, as provided for by the terms of this Security Agreement
and following reasonable written notice to the Grantor, shall itself perform or
comply, or otherwise cause performance or compliance, with such agreements, the
expenses of the Secured Parties incurred in connection with such performance or
compliance shall be payable by the Grantor to the Secured Parties on demand and
shall constitute Obligations secured hereby.

        8.    Remedies.    If an Event of Default (i) has occurred and has
continued for a period of 30 consecutive days without cure by the Grantor with
respect to items 1, 2, 3, and 4 set forth in the definition of Event of Default,
or (ii) has occurred and is continuing with respect to all other items in the
definition of Event of Default, the Secured Parties may exercise, in addition to
all other rights and remedies granted to it in this Security Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Secured Parties, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below or expressly
provided for) to or upon the Grantor or any other person (all and each of which
demands, defenses, advertisements and notices are, to the extent permitted by

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applicable law, hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, license, assign, give option or options to purchase,
or otherwise dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), at public or private sale or sales, at any
exchange, broker's board or office of the Secured Parties or elsewhere upon such
terms and conditions as they may deem advisable and at such prices as they may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Secured Parties shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Grantor, which right or equity is
hereby waived, to the extent permitted by applicable law, or released.

        The Grantor further agrees that, if an Event of Default has occurred and
is continuing, at the Secured Parties' request, to assemble the Collateral and
make it available to the Secured Parties at places which the Secured Parties
shall reasonably select, whether at the Grantor's premises or elsewhere. The
Secured Parties shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Secured Parties hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Secured Parties may elect, and only
after such application and after the payment by the Secured Parties of any other
amount required by any provision of law, must the Secured Parties account for
the surplus, if any, to the Grantor. To the extent permitted by applicable law,
the Grantor waives all claims, damages and demands it may acquire against the
Secured Parties arising out of the exercise by it of any rights hereunder,
provided, that nothing contained in this Section shall relieve the Secured
Parties from liability arising solely from its gross negligence or willful
misconduct. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Grantor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by the Secured Parties to
collect such deficiency.

        For the purpose of enabling the Secured Parties to exercise rights and
remedies under this Section 8 at such time as the Secured Parties shall be
lawfully entitled to exercise such rights and remedies, the Grantor hereby
grants to the Secured Parties an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to the Grantor) to use, license
or sublicense any of the Collateral consisting of Intellectual Property now
owned or hereafter acquired by the Grantor or as to which the Grantor has the
right to use, and wherever the same may be located, and including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license by the Secured Parties
shall be exercised, at the option of the Secured Parties, upon the occurrence
and during the continuation of an Event of Default; provided that any license,
sublicense or other transaction entered into by the Secured Parties in
accordance herewith shall be binding upon the Grantor notwithstanding any
subsequent cure of an Event of Default.

        9.    Severability.    Any provision of this Security Agreement which 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

        10.    Paragraph Headings.    The paragraph headings used in this
Security Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.

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        11.    Cumulative Remedies.    The rights and remedies provided herein,
in the Secured Note Purchase Agreement and in the Notes are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law or in equity or by statute.

        12.    Waivers and Amendments; Successors and Assigns.    None of the
terms or provisions of this Security Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the party to be charged with enforcement. This Security Agreement shall be
binding upon the successors and permitted assigns of the Grantor and shall inure
to the benefit of the Secured Parties and their successors and assigns. The
Grantor may not assign its rights or obligations under this Security Agreement
without the prior written consent of the Secured Parties.

        13.    Termination of Security Interest; Release of Collateral.    

        (a)  Upon the payment and performance in full by the Grantor of its
Obligations, the security interest granted in the Collateral pursuant to this
Agreement (the "Security Interest") shall terminate and all rights to the
Collateral shall revert to the Grantor.

        (b)  Upon any such termination of the Security Interest, the Secured
Parties will, at the expense of the Grantor, execute and deliver to the Grantor
such documents and take such other actions as the Grantor shall reasonably
request to evidence the termination of the Security Interest and deliver to the
Grantor all Collateral so released then in its possession.

        14.    Notices.    Any notices required or permitted to be given under
the terms of this Security Agreement shall be in writing and shall be sent by
mail, personal delivery, telephone line facsimile transmission or courier and
shall be effective 5 days after being placed in the mail, if mailed, or upon
receipt, if delivered personally, by telephone line facsimile transmission or by
courier, in each case addressed to a party at such party's address (or telephone
line facsimile transmission number) shown below or such other address (or
telephone line facsimile transmission number) as a party shall have provided by
notice to the other party in accordance with this provision. In the case of any
notice to the Grantor, such notice shall be addressed to the Grantor 3040
Science Park Road, San Diego, California 92121, Attention: President (telephone
line facsimile number (858) 410-5306), and a copy shall also be given to:
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038,
Attention: Melvin Epstein, Esq. (telephone line facsimile transmission number
(212) 806-6006), and in the case of any notice to the Secured Parties, such
notice shall be addressed to the Secured Parties at Brown Simpson Asset
Management, LLC, 152 West 57th Street, 21st Floor, New York, New York 10019,
Attention: Mitchell D. Kaye (telephone line facsimile transmission number
(212) 247-1329), and a copy shall be given to: Lowenstein Sandler PC, 65
Livingston Avenue, Roseland, New Jersey 07068 Attention: John D. Hogoboom, Esq.
(telephone line facsimile transmission number (973) 597-2383).

        15.    Integration.    This Security Agreement represents the agreement
of the Grantor and the Secured Parties with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Secured Parties relative to subject matter hereof not expressly set forth
or referred to herein.

        16.    Governing Law.    This Security Agreement and the rights and
obligations of the Grantor hereunder shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York, except to the
extent that under the New York Uniform Commercial Code the laws of another
jurisdiction govern matters of perfection and the effect of perfection or
non-perfection of any security interest granted hereunder.

        17.    Counterparts.    This Security Agreement may be executed in
counterparts and by the parties hereto on separate counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument. A telephone line facsimile transmission of this
Security Agreement bearing a signature on behalf of a party hereto shall be
legal and binding on such party.

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        18.    Waiver of Jury Trial.    To the extent permitted by applicable
law, each of the Grantor and the Secured Parties waives any right to have a jury
participate in resolving any dispute, whether sounding in contract, tort, or
otherwise between the parties hereto arising out of, connected with, related to,
or incidental to the relationship between any of them in connection with this
Security Agreement or the transactions contemplated hereby. Instead, any such
dispute resolved in court will be resolved in a bench trial without a jury,
submitted to jurisdiction in the Southern District of New York and New York
State Courts located in the County of New York.

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

 
 
 
 
 
 
ALLIANCE PHARMACEUTICAL CORP.
 
 
 
 
 
 
By:
 

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                Name:   Theodore D. Roth                 Title:   President and
Chief Operating Officer
ACKNOWLEDGED AND AGREED:
[                                                 ]
 
 
 
 
 
 
By:
 
 
 
 
 
 
 
 
 
 
 
 
Name:
 

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Title:
 

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ACKNOWLEDGED AND AGREED:
[                                                 ]
 
 
 
 
 
 
By:
 
 
 
 
 
 
 
 
 
 
 
 
Name:
 

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Title:
 

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STATE OF
 
 
 
)
 
     

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)
 
ss.:
COUNTY OF
 
 
 
)
 
     

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        On this    day of July 2002, before me personally appeared Theodore D.
Roth proved to me on the basis of satisfactory evidence to be the person who
executed the above Security Agreement as President and Chief Operating Officer
on behalf of Alliance Pharmaceutical Corp., and acknowledged to me that the
corporation executed it.

WITNESS my hand and official seal.

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NOTARY PUBLIC
 
 
 
 
STATE OF
 
 
 
)
 
     

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)
 
ss.:
COUNTY OF
 
 
 
)
 
     

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        On this            day of July 2002, before me personally
appeared                        proved to me on the basis of satisfactory
evidence to be the person who executed the above Security Agreement as an
authorized representative on behalf of [                        ], and
acknowledged to me that the corporation executed it.

WITNESS my hand and official seal.

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NOTARY PUBLIC
 
 
 
 
STATE OF
 
 
 
)
 
     

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)
 
ss.:
COUNTY OF
 
 
 
)
 
     

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        On this            day of July 2002, before me personally
appeared                        proved to me on the basis of satisfactory
evidence to be the person who executed the above Security Agreement as an
authorized representative on behalf of [                        ], and
acknowledged to me that the corporation executed it.

WITNESS my hand and official seal.

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NOTARY PUBLIC
 
 
 
 

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Exhibit A

Food and Drug Administration's NDA #21-191 approval letter for the Product

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SCHEDULE I

Location of Manufacturing Facility

6175 Lusk Blvd.
San Diego, California 92121

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SCHEDULE II

Filings Required to Perfect Security Interest

UCC-1 Financing Statement filed with the Secretary of State of the State of New
York.

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SCHEDULE III

Location of Records Concerning Accounts

3040 Science Park Road
San Diego, California 92121

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SCHEDULE IV

Location of Inventory

6175 Lusk Blvd.
San Diego, California 92121

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FORM OF SECURITY AGREEMENT