Exhibit 10.5


 


PHOTOGEN TECHNOLOGIES, INC.


140 Union Square Drive


New Hope, PA 18938


 


 


Photogen Technologies, Inc.


140 Union Square Drive


New Hope, PA 18938


 


 


July 23, 2003


 


 


Taffy J. Williams, Ph.D.


103 Colwyn Terrace


Landsdale, PA  19446


 


Dear Dr. Williams:


 


As of July 23,
2003, we agree that the terms of your employment and your relationship with
Photogen Technologies, Inc. (the “Company”) will be as specified in this
letter, and that all previous terms and agreements governing your employment
(including the letter agreement dated October 28, 2002 between you and the
Company) are no longer effective except that all stock options in effect, will
remain in effect, but shall terminate in accordance with their terms.


 


I.                                         Title,
Reporting Relationship and Duties


 


Your title and
reporting will remain unchanged until a new President and Chief Executive
Officer is hired:  You will continue as
President, Chief Executive Officer and Chairman of the Board, reporting
directly to the Board of Directors. 
Until the new President and CEO is hired and actively assumes his/her
duties, you will be expected to work full-time for the Company out of the New
Hope, PA office (with appropriate travel as the Company’s business requires)
and your duties will remain the same, with the addition of participating as a
member of the Search Committee for a new President and CEO.  Once a new President and CEO is hired and
actively assumes his/her duties, you will resign as President and CEO but you
will remain a Board member, retain the title of Chairman of the Board and
continue as an employee of the Company. 
Your duties as a Chairman although non-executive in nature, will be to
preside at all Board meetings.  Your
duties as an employee will be to actively participate in the transition of your
management of the operations of the Company to the new President and CEO.  You will continue as Chairman of the Board
for six months after a new President and CEO is hired.  The Company will also recommend and support
your election as a member of the Board of Directors for at least years 2004 and
2005.  The shareholders signing below
agree to vote the shares opposite their names for you as a Board member for
years 2004 and 2005.


 


If a new
President/CEO is not hired within six months from the date of this Agreement,
then you will have the option, upon written notice at that time to the Company
to terminate your


 

















 


employment sixty (60) days
hence, and the same will be deemed a termination for Good Reason.  You will receive all benefits accrued to the
date of termination and will be eligible to receive the bonuses under Section
IV(a), IV(b) and the stock options under Section III if the financing and/or
sale of assets referred to in these sections occur within 12 months after you
cease employment with the Company.


 


II.                                     Salary
and Benefits


 


Your current
annual salary of $275,000 (less applicable withholding and deductions) and
benefits described in clauses (i) through (v) below, will remain in effect
until the new President and CEO is hired. 
Thereafter, your annual salary will be increased to a rate of $290,000
per year for a transition period lasting for at least the six months following
the hiring and assumption of duties by the new President and CEO and for any
longer period the Board of Directors believes is necessary for your active
participation in the transition of your management of the operations of the
Company to the new President and CEO. 
You will also receive the benefits described below.  During the transition period, you will
continue to be a salaried employee. 
Salary payments will be made on a semi-monthly basis in accordance with
the Company’s policies.  Bonuses, if
any, will be at the sole discretion of the Board of Directors except for the
one-time bonuses referred to in Paragraph IV below.  Your expenses for Company-approved travel and similar items will
be reimbursed, subject to proper documentation.


 


The Company
will provide you with the following benefits while you are a salaried employee:


 


(i)                                     Vacation of 4
weeks annually of which only one week can be carried into the following year;


 


(ii)                                  Nine Company
holidays plus two discretionary “floating” days;


 


(iii)                               Company-paid
medical and dental coverage for you and eligible dependents;


 


(iv)                              Salary deferral
under 401K plan (currently the Company does not make any contributions to the
401K Plan); and


 


(v)                                 Other benefits
at the discretion of the Board and its Compensation Committee.


 


At the time of
your termination as a salaried employee, you will receive severance payments
subject to the terms set forth in Paragraph V below.


 


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III.                                 Stock
Options


 


You currently
hold the following options for shares of Common Stock of the Company:


 


(i)                                     Options for
750,000 shares granted on May 17, 2000, with an exercise price of $60 per
share;


 


(ii)                                  Options for
300,000 shares granted on December 1, 2000, with an exercise price of $11 per
share; and


 


(iii)                               Options for
1,233,450 shares granted on November 12, 2002, with an exercise price of $1.08
per share.


 


The Company
agrees to grant you an additional new non-qualified option for 1,050,000 of
Common Stock shares for a 10-year term at an exercise price of $1.08 per
share.  This option will fully vest at
the earlier of a Change of Control or at such time as you cease to be a
salaried employee of the Company.


 


In addition,
the option award under clause (iii) above shall be amended to fully vest at the
earlier of a Change of Control or at such time as you cease to be a salaried
employee of the Company and shall be exercisable for 10 years from the new
date of vesting.


 


In addition,
if the Company closes a financing transaction (or series of related financings)
during the next 12 months, the Company will grant you an additional
non-qualified option for 10 years, exercisable at the deal price of the
new financing.  This option will also
fully vest at the earlier of a Change of Control or such time as you cease to
be a salaried employee of the Company and shall remain exercisable for the
remainder of the 10-year term.  The
number of shares covered by this option will be for an amount that, when added
to your current options (other than the options referred to in clauses (i) and
(ii) above), will equal 6% of the Company’s outstanding common stock on a fully
diluted basis excluding in such computation the options covered by clauses (i)
and (ii) above.


 


The option
agreements covering these new options will follow the format currently used by
the Company; and with terms consistent with this letter and any other terms
mutually acceptable to the parties, which acceptance will not be unreasonably
withheld.


 


To the extent
shareholder approval is required for the grant of the foregoing options
pursuant to newly adopted rules of NASDAQ, the Company will seek approval at
its next shareholders’ meeting.  In that
event, the Company will recommend approval by the shareholders and the
shareholders noted below, constituting a majority of the outstanding shares of
the Company, agree that they will support and vote for such approval.


 


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Within ninety
(90) days of the close of the financing, an S-8 Registration will be filed by
the Company to cover options of all employees, including any new option grants
you may receive before your employment with the Company ceases.  If legally required, the Company will also
file an S-1 or S-3 Registration.


 


A “Change of
Control” shall occur when the Company is required to file a Form 8-K,
Item 1 or the Company is required to disclose a change of control under any
other SEC form.


 


IV.                                Special
Incentives


 


(a)                                  The Company
will pay you a one-time bonus of 75% of your annual salary at the closing of a
financing (or the first closing on a series of related financings) which occur
as a result of the Company’s current efforts associated with its recent
acquisition of certain Alliance imaging assets.


 


(b)                                 The Company
will pay you an additional one-time bonus at the closing of the sale of the
Company, including the sale of substantially all of its assets or the sale of
either the Company’s imaging assets recently acquired from Alliance or any part
thereof, or the Company’s PH-50 and/or N-1177 assets or any part thereof, in
either case, other than inventory in the ordinary course of business, in the
following amounts:


 


(i)                                     25% of your
annual salary for the sale of any such assets in the range of  $50 million to $65 million;


 


(ii)                                  50% of your
annual salary for the sale of any such assets in the range of more than $65
million to $99 million; and


 


(iii)                               75% of your
annual salary for the sale of such assets in excess of $100 million.


 


In valuing the sale price, assumed debt of the Company shall be
included as part of the purchase price.


 


For purposes
of this paragraph, the term “sale” includes a lease, license or similar
transaction, whether for cash or other property, and if for property, valued at
its fair market value.


 


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V.                                    Severance


 


Your
employment as a salaried employee beyond six months (including 60 days hence,
when applicable) after the new President and CEO is hired is at-will and can be
terminated by you or the Company at any time with or without Cause.  If before or after a new President and CEO
is hired the Company terminates you for any reason other than for Cause, the
Company will pay you severance equal to one year of your then-current salary
plus so much of the six months transition period (including 60 days hence, when
applicable) that you have not been paid for (less applicable withholding and
deductions).  All severance payments
will be paid on a semi-monthly basis by the Company in accordance with the
Company’s regular payroll schedule.  If
before a new President and CEO is hired you terminate your employment without
Good Reason or are terminated by the Company for Cause, the Company will not
make any severance payments.  “Cause”
means:


 


(i)                                     A material
breach of this Agreement by you where such breach, if curable, is not remedied
to the Company’s reasonable satisfaction within 30 days after written notice to
you (and termination shall be effective as of the end of such 30-day period);
or


 


(ii)                                  Committing an
act of fraud, embezzlement, theft or another act involving moral turpitude that
materially and adversely affects the Company (and termination shall be
effective upon written notice to you).


 


“Good Reason”
includes:  a material breach of this
Agreement by the Company where such breach, if curable, is not remedied to your
reasonable satisfaction within 30 days after written notice to the Company (and
termination shall be effective as of the end of such 30-day period) and
termination by you pursuant to the last paragraph of Section I of this
Agreement.


 


VI.                                Other
Items


 


As promptly as
practicable after the date hereof and as a condition to this letter, the
parties shall enter into commercially reasonable and otherwise standard
agreements mutually acceptable to the parties, which acceptance will not be
unreasonably withheld by either party, regarding the following, to the extent
required:  indemnification, mutual
releases of claims, nondisclosure of confidential information, noncompetition,
nondisparagement, business goodwill and similar provisions.


 


The Company
will pay your reasonable legal expenses for your counsel in connection with the
negotiation and preparation of this and its related agreements.


 


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As promptly as
practicable after the date hereof, the parties will prepare a press release
mutually acceptable to the Company (and its counsel) and you regarding the subject
matter of this agreement and its related agreements and make a public release
thereof at a mutually acceptable time. 
A full disclosure of the management changes of the Company will be made
to all prospective and final investors in the Company’s contemplated financing
at a time and in content mutually acceptable to the Company (and its counsel)
and you (and your counsel).


 


Please
indicate your acceptance of the foregoing by signing below.


 


	
   

  	
  Photogen Technologies, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Brooks Boveroux

  
	
   

  	
   

  	
  Brooks Boveroux

  
	
   

  	
   

  	
  Chief Financial Officer

  
				



 


 


Accepted and agreed to as of

July 23, 2003


 


 


	
  /s/ Taffy J. Williams

  	
   

  
	
  Taffy J. Williams, Ph.D.

  



 


The following shareholders constituting a majority of the outstanding
shares of the Company, agree to vote for you as a member of the Board for the
years 2004 and 2005 and to approve the new options referred to in Paragraph III
above.


 


 


	
  Robert J. Weinstein, M.D., individually and as General Partner of the
  W.F. Investment Enterprises Limited Partnership, as Director of the Robert
  and Lois Weinstein Family Foundation, Inc. and as Trustee of the Robert and
  Lois Weinstein Joint Revocable Trust

  
	
   

  
	
  Stuart Levine, individually and as General Partner of SL Investment
  Enterprises, L.P. and as President of the Stuart and Sherri Levine Family
  Foundation, Inc.

  
	
   

  
	
  Tannebaum, LLC

  
	
  Mi3 L.P.

  
	
  Oxford Bioscience Partners IV L.P.

  
	
  MRNA Fund II L.P.

  



 


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