<PAGE>


                                                                   Exhibit 10.11
                       SETTLEMENT AGREEMENT AND MUTUAL RELEASE

         THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE

("Agreement") is entered into as of the 10th day of September, 1996 by and
between SHIONOGI & CO., LTD., a Japanese corporation, having its principal
offices at 1-8 Doshomachi 3-chome, Chuo-ku, Osaka 541, Japan  ("Shionogi")
and MOLECULAR BIOSYSTEMS, INC., a Delaware corporation, having its principal
offices at 10030 Barnes Canyon Road, San Diego, California, 92121 USA ("MBI")
to resolve any and all pending disputes between them.


                                 W I T N E S S E T H:


         WHEREAS, Shionogi and MBI (jointly referred to as the "Parties") have
entered into a License and Cooperative Development Agreement dated March 2,
1989, as amended September 14, 1993, which provided, INTER ALIA, for MBI's
granting of a license to Shionogi for certain rights to AlbunexR in Japan, The
Republic of China (Taiwan) and The Republic of Korea (South Korea) ("License
Agreement");

         WHEREAS, the Parties have served each other with notices of
termination of the License Agreement;

         WHEREAS, the License Agreement contains an arbitration clause
requiring the Parties to resolve their respective disputes through the American
Arbitration Association;

         WHEREAS, each of the Parties has filed a Demand for Arbitration
(collectively, "Demands for Arbitration") against the other, and such Demands
for Arbitration are currently pending before the American Arbitration
Association in New York, New York, in a proceeding entitled SHIONOGI & CO., LTD.
V. MOLECULAR BIOSYSTEMS, INC., AAA Case No. 13-T-133-00300-96 ("Arbitration");


                                     Page 1 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

         WHEREAS, the Parties recognize the risks and expense inherent in all
arbitration, litigation or formal dispute resolution;

         WHEREAS, the Parties desire to enter into this Agreement to compromise
and settle the issues of the Arbitration and other related matters without an
admission of liability or fault by either Shionogi or MBI;

         WHEREAS, the Parties desire to resolve and settle all disputes between
the Parties including, but not limited to, the claims raised in the Arbitration,
upon the terms and subject to the conditions hereinafter set forth;


         NOW, THEREFORE, in consideration of the mutual promises and agreements
contained in this Agreement, the Parties do promise and agree as follows:

1.  INCORPORATION OF RECITALS.  The foregoing recitals are hereby incorporated
    into this Agreement as fully and effectually as if they were set forth at
    length in this paragraph.

2.  DEFINITIONS.  The terms used in this Agreement have the meanings given them
    in the License Agreement, except as follows:

         a.   "Agreement" means this Settlement Agreement and Mutual Release.


         b.   "AlbunexR Demand" means any request from a customer or potential
              customer for AlbunexR, or for an ultrasound contrast imaging
              agent, within the indications approved for AlbunexR by the MHW.

         c.   "AlbunexR-related Business" means the business activities
              involved in Shionogi's role with regard to AlbunexR.

         d.   "Clinical Data" means any data maintained, gathered, compiled, or


                                     Page 2 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

              generated by Shionogi or anyone acting on Shionogi's behalf and
              submitted to the MHW for the purpose of obtaining NDA Approval.

         e.   "FS069" means MBI's second generation ultrasound contrast imaging
              agent consisting of perfluoropropane-filled microspheres in human
              serum albumin.

         f.   "Import License" means approval obtained from the MHW to import
              AlbunexR into Japan.

         g.   "MHW" means the Ministry of Health and Welfare of Japan.

         h.   "NDA" means a new drug application submitted to the MHW by
              Shionogi pertaining to AlbunexR.

         i.   "NDA Approval" means the AlbunexR NDA approval granted to
              Shionogi by the MHW to import and manufacture AlbunexR.

         j.   "New Licensee" means a person or entity to whom or which MBI
              grants some or all of MBI's rights to market and sell AlbunexR in
              Japan.

3.  DATE AND TIME REFERENCE.  All acts, obligations or events required to be
    performed or to take place under this Agreement by a given date shall be
    performed according to the date and time zone of Japan.

4.  MONETARY SETTLEMENT.  MBI shall pay Shionogi a total of eight million, five
    hundred thousand U.S. dollars ($8,500,000.00), payable via wire transfer of
    immediately available federal funds to an account specified by Shionogi, as
    follows:

         a.   Three million U.S. dollars ($3,000,000.00) before the close of
              the third business day following the complete execution of this
              Agreement by the


                                     Page 3 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

              Parties and their counsel.

         b.   Two million U.S. dollars ($2,000,000.00) on or before September
              10, 1997;

         c.   Two million U.S. dollars ($2,000,000.00) on or before September
              10, 1998; and

         d.   One million five-hundred thousand U.S. dollars ($1,500,000.00) on
              or before September 10, 1999.

5.  CONSENT TO JURISDICTION AND STIPULATED JUDGMENT IN THE EVENT OF
    NON-PAYMENT.
              a.Concurrently with the execution of the Agreement, MBI shall
              execute a Confession of Judgment and Statement Authorizing Entry
              of Judgment and shall obtain from qualified counsel an Attorney's
              Certificate of Examination (collectively, "Stipulated Judgment"),
              all in the forms attached hereto as Exhibits A-1, A-2 and A-3,
              which could be filed in Los Angeles County Superior Court for
              entry and enforcement in the event of non-payment of any of the
              payments provided for in Paragraph 4, above.

    b.   In the event of non-payment, prior to the filing and enforcement
         of the Stipulated Judgment, Shionogi shall tender notice of
         non-payment in accordance with Paragraph 17, below, and shall
         provide MBI a three (3) business day period within which to
         tender payment to Shionogi of those sums then due under Paragraph
         4, above.  If Shionogi does not receive such payment within such
         three (3) business day period, then all sums due under Paragraph
         4, above, shall be accelerated and payable immediately without
         further regard to the dates otherwise set forth in said


                                     Page 4 of 22
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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

          paragraph, and Shionogi may proceed to file and to otherwise
          enforce the Stipulated Judgment without further notice to MBI.

     c.   MBI shall not contest the jurisdiction of the Los Angeles County
          Superior Court for purposes of permitting the filing and
          enforcement of the Stipulated Judgment.  For jurisdictional
          purposes, performance of the Agreement shall be deemed to be in
          Los Angeles County and within the territorial limits of the
          Central District of the Los Angeles County Superior Court.

     d.   The Stipulated Judgment shall be kept confidential by Shionogi
          and shall not be filed, published or released to anyone until
          such time MBI has failed to make a payment called for in
          Paragraph 4, above, or other than as reasonably necessary to
          Shionogi's employees, accountants, attorneys, or other
          professional representatives, or other than as Shionogi may be
          legally required to disclose the Stipulated Judgment by
          appropriate governmental authorities, and only then by reason of
          a court order, subpoena or request bearing the force of law.  The
          provisions of this paragraph shall survive only for a period of
          five (5) years from the date the Parties have entered into this
          Agreement.

6.  DOCUMENT ACCESSIBILITY AND STORAGE.

              a.   Within five (5) business days from Shionogi's receipt of a
                   written request from MBI, Shionogi shall make available to
                   MBI during regular business hours at Shionogi's corporate
                   office in Osaka, Japan, Clinical Data and other documentary
                   information, exclusive of any document subject to the
                   attorney-client privilege and/or attorney-work product
                   privilege


                                     Page 5 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

                   ("Privileged Document"), pertaining to AlbunexR and in
                   Shionogi's possession, custody or control.  Notwithstanding
                   the foregoing, any Privileged Document shall be made
                   available to MBI only if the Privileged Document constitutes
                   safety- or efficacy-related data pertaining to AlbunexR and
                   such data is not otherwise made available by Shionogi to
                   MBI.  In the event Shionogi waives the attorney-client
                   privilege by reason of it producing a Privileged Document to
                   a third party, Shionogi shall immediately notify MBI and
                   make such document available to MBI in the manner stated
                   above.

              b.   Within fourteen (14) calendar days from the date that the
                   Parties enter into this Agreement, Shionogi shall provide to
                   MBI a copy of the NDA and all correspondence exchanged
                   between Shionogi, on the one hand, and the MHW, on the other
                   hand, to obtain NDA Approval.

              c.   Shionogi shall remain the custodian of all Clinical Data and
                   other documentary information pertaining to AlbunexR, which
                   is in Shionogi's possession, custody or control.  In the
                   event that Shionogi should desire to discard all or any
                   portion of such Clinical Data or other documentary
                   information pertaining to AlbunexR, Shionogi shall tender
                   notice of the same to MBI in accordance with Paragraph 17,
                   below, and shall afford MBI twenty (20) calendar days within
                   which to notify Shionogi whether MBI will elect to take
                   possession of such documents which Shionogi desires to
                   discard ("Election").  If MBI makes such Election, Shionogi
                   shall


                                     Page 6 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

                   make such documents available to MBI, F.O.B. at Shionogi's
                   corporate offices in Osaka, Japan.  If MBI fails to make a
                   timely Election, or to take possession of such documents
                   within thirty (30) calendar days from the date of MBI's
                   timely Election, Shionogi may discard such documents without
                   further notification to MBI.

              d.   The provisions of this paragraph shall survive only for a
                   period of five (5) years from the date the Parties have
                   entered into this Agreement.


                                     Page 7 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

7.  DATA, APPROVALS, LICENSES.

              a.   MBI shall work diligently to procure a New Licensee and have
                   that New Licensee apply to the MHW for a new Import License
                   as soon as practicable.  Shionogi shall make available to
                   the New Licensee during regular business hours at Shionogi's
                   corporate offices in Osaka, Japan, all Clinical Data in
                   Shionogi's possession, custody or control, within five (5)
                   business days from Shionogi's receipt of a written request
                   from the New Licensee.  In addition, Shionogi shall
                   cooperate in transferring the NDA Approval to a New Licensee
                   until the NDA Approval transfer is effected, provided that
                   the New Licensee has submitted to the MHW a notice of
                   transfer of NDA Approval and has applied for a new Import
                   License by September 30, 1996.  If the New Licensee has
                   applied to the MHW for transfer of NDA Approval and a new
                   Import License within the specified period, Shionogi shall
                   cooperate to preserve its NDA Approval and its Import
                   License until the transfer of the NDA Approval can legally
                   be effected or until December 31, 1996, whichever occurs
                   first.

              b.   If, despite reasonable efforts by MBI to procure a New
                   Licensee, MBI is unable to do so by September 30, 1996,
                   Shionogi shall agree to a one-time extension to and
                   including November 15, 1996, for the New Licensee to apply
                   for a transfer of NDA Approval and to apply for a new Import
                   License ("Extension").  If the Extension is exercised,
                   Shionogi shall cooperate to preserve its NDA Approval and
                   its Import License until the


                                     Page 8 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

                   transfer can be legally effected and shall continue to
                   cooperate with any subsequent transfer of the NDA Approval
                   until February 14, 1997.  In no event shall Shionogi's
                   obligations to cooperate extend beyond February 14, 1997.

              c.   With respect to AlbunexR, Shionogi makes no representation
                   regarding any actions by the MHW or any other governmental
                   agencies, including whether the MHW shall allow the transfer
                   of its NDA Approval, or the application for a new Import
                   License to the New Licensee.

8.  FS069 ASSIGNMENT.  Shionogi hereby assigns to MBI any and all of its rights
    to FS069 under the License Agreement.  Shionogi makes no representation
    regarding any actions by the MHW, or any other governmental agency, which
    may be taken with respect to FS069.

9.  ALBUNEXR SALES SUPPORT.  Shionogi shall continue to meet AlbunexR Demand
    within Japan until MBI has secured a New Licensee for Japan, provided,
    however, that if a New Licensee has not applied to the MHW for transfer of
    the NDA Approval or has not filed an application for a new Import License
    within the period (including the Extension period) provided in Paragraph 7,
    above, Shionogi shall be under no further duty to supply AlbunexR to users
    in Japan or otherwise meet AlbunexR Demand.  Under no circumstance is
    Shionogi at any time required to engage in any further promotion or
    advertising of AlbunexR.  Under no circumstance shall Shionogi's agreement
    in Paragraph 7, above, to cooperate to preserve its NDA Approval and its
    Import License, obligate Shionogi in any way to meet AlbunexR Demand after
    December 31, 1996.


                                     Page 9 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

10. TERMINATION OF LICENSE AGREEMENT.

              a.   The Parties hereby acknowledge the termination of the
                   License Agreement and all licenses granted to Shionogi
                   thereunder, and the return to MBI of all rights and licenses
                   thereunder, except for a short-term, revocable,
                   non-exclusive grant of rights to Shionogi for the sole
                   purpose of permitting Shionogi to undertake its duties under
                   Paragraphs 6, 7 and 9, above.  The limited rights maintained
                   by Shionogi under this paragraph shall terminate upon the
                   MHW's transfer of Shionogi's NDA Approval and the granting
                   of a new Import License to a New Licensee, or February 14,
                   1997, whichever occurs first.


              b.   Shionogi shall continue to make reports on AlbunexR
                   quarterly sales required under the License Agreement and on
                   any adverse event on which Shionogi is notified by any
                   doctor.

11. DISMISSAL.  Concurrently with the execution of this Agreement, Shionogi and
    MBI shall dismiss all Demands for Arbitration with prejudice and shall
    execute and file a Stipulation to Dismiss Arbitration with Prejudice, in
    the form attached hereto as Exhibit "B", with the American Arbitration
    Association, which stipulation will, when filed, be sufficient to effect
    such a dismissal of the Arbitration with prejudice as to the Parties, and
    each of them.  The Parties shall do all other things reasonably necessary,
    including signing any additional documents, in order to accomplish such
    dismissal.

12. MUTUAL RELEASES.

              a.   Subject to the obligations imposed upon the Parties by this
                   Agreement,


                                    Page 10 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

                   Shionogi and MBI hereby release and absolutely and forever
                   discharge each other, and all of their respective past and
                   present parent companies, affiliated companies, directors,
                   officers, shareholders, employees, agents, representatives,
                   attorneys, successors and assigns, of and from any and all
                   claims, demands, damages, debts, liability, accounts,
                   reckonings, obligations, costs, expenses, liens, actions and
                   causes of action, whether known or unknown, suspected or
                   unsuspected (all of which sometimes are referred to
                   collectively as the "Released Claims") which they now have,
                   own or hold or at any time heretofore ever had, owned or
                   held or could, should or may hereafter have, own or hold
                   including, but not limited to, those arising out of or
                   related to the allegations in the Parties' respective
                   Demands for Arbitration or alleged conduct and business
                   practices referred to in the Demands for Arbitration and in
                   the Arbitration itself.

              b.   The Parties respectively acknowledge that they are familiar
                   with Section 1542 of the California Civil Code, which
                   provides as follows:

                        "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
                        CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
                        AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
                        HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
                        THE DEBTOR."

                   The Parties waive and relinquish any rights and benefits
                   which they have or


                                    Page 11 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

                   may have under Section 1542 of the California Civil Code to
                   the full extent they may lawfully waive all such rights and
                   benefits pertaining to the subject matter of this Agreement.
                   The parties hereto acknowledge that they are aware that they
                   may hereafter discover facts in addition to or different
                   from those which they now know or believe to be true with
                   respect to the subject matter of this Agreement, but that it
                   is their intention hereby to fully, finally, and forever
                   settle and release any and all Released Claims, known and
                   unknown, suspected and unsuspected, which do now exist, may
                   exist, or heretofore have existed between them, and further
                   acknowledge that in furtherance of such intention, the
                   releases given in this Agreement shall be and remain in
                   effect as full and complete releases notwithstanding the
                   discovery or existence of any such additional or different
                   facts.

              c.   Shionogi hereby acknowledges that the payments under 
                   Paragraph 4, above, will, when received in their entirety 
                   by Shionogi, constitute full and complete satisfaction and 
                   discharge of any and all Released Claims referenced in 
                   Paragraph 12(a), above.

              d.   The Parties acknowledge and agree that the sole
                   consideration for executing this Agreement and 
                   for releasing the Released Claims is the payment by 
                   MBI and receipt by Shionogi of the sums due under
                   Paragraph 4, above, and the exchange of releases set forth
                   in this paragraph.

13. INDEMNIFICATION.  The releases and dismissal with prejudice set forth
    hereinabove shall


                                    Page 12 of 22

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                            Settlement Agreement and Mutual Release
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                                  Molecular Biosystems, Inc.

    not extend to the indemnification provisions contained in Article XI,
    Section 11.5, subdivisions (c) and (d), of the License Agreement relating
    to patent infringement and products liability claims, respectively, or to
    any representation or warranty made in this Agreement.  In the event
    Shionogi transfers its Clinical Data and/or NDA Approval to a New Licensee
    designated by MBI, MBI agrees to indemnify Shionogi from liability based on
    any and all claims asserted by the New Licensee against Shionogi, except to
    the extent that such liability arises out of activities undertaken by
    Shionogi after the date of transfer of the NDA Approval to the New Licensee
    or after February 14, 1997, whichever occurs first.

14. CONFIDENTIALITY.  The Parties agree to keep the terms of this Agreement
    confidential, other than as reasonably necessary to the Parties' respective
    employees, accountants, attorneys, or other professional representatives,
    or as each of the Parties may be legally required to disclose such terms by
    appropriate governmental authorities, and only then by reason of the
    issuance of a court order, subpoena, or request having the force of law.
    Provided, however, each party shall be allowed to announce or disseminate
    that this Agreement allows MBI to re-acquire the exclusive licensing and
    other rights to manufacture and market Albunex-Registered Trademark-
    in the Far East for $8,500,000.00 to be paid in installments.  The 
    provisions of this paragraph shall survive only for a period of five (5)
    years from the date the Parties have entered into this Agreement.

15. REPRESENTATIONS AND WARRANTIES OF SHIONOGI.  Shionogi represents and  
    warrants to MBI:

              a.   that at all times subsequent to the execution of the License
                   Agreement and prior to the execution of this Agreement,
                   Shionogi has, to the best of its


                                    Page 13 of 22


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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

                   knowledge, filled all material orders it received for
                   Albunex-Registered Trademark- and provided information
                   about Albunex-Registered trademark- in response to any 
                   material inquiries about ultrasound contrast imaging agents.

              b.   that it maintains an NDA Approval for the sale of 
                   Albunex-Registered Trademark- within Japan and has a license
                   from the MHW to import Albunex-Registered Trademark-
                   to Japan both of which are current and in full force as of 
                   the date of the Agreement.

              c.   that it does not now or never has had any reason to believe
                   that any written report made to MBI by Shionogi under the
                   License Agreement contains false information.

              d.   that at all times subsequent to the execution of the License
                   Agreement and prior to the execution of this Agreement,
                   Shionogi has conducted all Albunex-Registered Trademark-
                   -related business in Japan in a manner that has not violated
                   any applicable law, rule or regulation of any Japanese 
                   governmental authority;

              e.   that Shionogi is a business entity validly organized under
                   the laws of Japan;

              f.   that Shionogi and the individual executing the Agreement on
                   Shionogi's behalf are empowered and authorized to make,
                   execute, deliver and perform this Agreement and the actions
                   contemplated by it;

              g.   that Shionogi's execution and delivery of this Agreement and
                   its performance hereunder have been duly authorized by all
                   necessary action; and

              h.   that this Agreement, when executed, shall constitute the
                   legal, valid and binding obligation of Shionogi, enforceable
                   against it in accordance with its


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                            Settlement Agreement and Mutual Release
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                   terms.

16. REPRESENTATIONS AND WARRANTIES OF MBI.  MBI represents and warrants to
    Shionogi:

              a.   that MBI is a business entity validly organized under the
                   laws of Delaware;

              b.   that MBI and the individual executing the Agreement on 
                   MBI's behalf are empowered and authorized to make, execute,
                   deliver and perform this Agreement and the actions 
                   contemplated by it;

              c.   that MBI's execution and delivery of this Agreement,
                   including execution and delivery of the 
                   Stipulated Judgment, and MBI's performance hereunder
                   have been duly authorized by all necessary action; and

              d.   that this Agreement, when executed, shall constitute the
                   legal, valid and binding obligation of MBI, enforceable
                   against MBI in accordance with its terms.

17. NOTICES.  All notices, requests, demands, processes and other communications
    hereunder shall be in writing and shall be deemed to have been duly given
    if: (1) personally delivered, when receipt is acknowledged; or delivered by
    an internationally-recognized overnight courier service, when received; or
    facsimile transmission, upon completion of transmission, if transmission is
    during the recipient's normal business hours and receipt of transmission is
    confirmed by the recipient; and (2) addressed as follows:


                                    Page 15 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.


              TO SHIONOGI:

              Shionogi & Co., Ltd.
              1-8, Doshomachi 3-chome, Chuo-ku
              Osaka 541, JAPAN
                        Telephone:  06-202-2161
                        Facsimile:  06-229-0987

              Attention:     Mr. Yoshihiko Shiono
                             President

              WITH A COPY TO:

              Julia Tachikawa, Esq.
              1299 Ocean Avenue, Fifth Floor
              Santa Monica, California 90401
                        Telephone:  (310) 319-3250
                        Facsimile:  (310) 458-6290


              TO MBI:

              Molecular Biosystems, Inc.
              10030 Barnes Canyon Road
              San Diego, California 92121-2789
                        Telephone:  (619) 452-0681
                        Facsimile:  (619) 452-6187

              Attention:     Kenneth J. Widder, M.D.
                             Chairman and Chief Executive Officer


                                    Page 16 of 22

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                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

              WITH A COPY TO:

              Craig P. Colmar, Esq.
              Johnson and Colmar
              300 South Wacker Drive, Suite 1000
              Chicago, Illinois  60606
                        Telephone:  (312) 922-1980
                        Facsimile:  (312) 922-9283

18. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.  The Representations and  
    Warranties made in Paragraphs 15 and 16, above, shall survive only for a
    period of five (5) years from the date the Parties have entered into this
    Agreement.

19. COSTS AND EXPENSES.  The Parties shall bear their own respective costs and
    expenses associated with their respective claims under the License
    Agreement including, but not limited to, their respective attorneys' fees
    and Arbitration fees incurred in connection with this Agreement, the
    Demands for Arbitration, or any other matter relating or leading up to the
    Arbitration.

20. CHOICE OF LAW, VENUE AND SUBMISSION TO JURISDICTION.  This Agreement, its
    interpretation and enforcement shall be governed by the laws of the state
    of California without regard for California's choice of law provisions.
    Venue for any action arising out of this Agreement shall be in the Central
    District of the Los Angeles County Superior Court.  Shionogi and MBI shall
    submit to the personal jurisdiction of the Los Angeles County Superior
    Court for any such action.

21. CLAIMS NOT ASSIGNED.  Each of the Parties represents and warrants that it
    is the sole and lawful owner of all claims it is releasing under Paragraph
    12, above, and that it has not heretofore assigned or transferred, or
    offered to transfer, any such claims to any person,


                                    Page 17 of 22

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                            Settlement Agreement and Mutual Release
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    corporation or entity.

22. NO ADMISSION OF LIABILITY.  This Agreement reflects a compromise of
    disputed claims.  It does not constitute and is not to be construed as an
    admission of liability by either of the Parties.

23. SUCCESSORS, ETC.  The terms of this Agreement shall be binding upon and
    shall inure to the benefit of each of the Parties and their respective
    partners, agents, representatives, attorneys, insurers, employees,
    licensees, predecessors, successors, heirs, assigns, directors, officers,
    shareholders, executors, administrators, and/or any other person or persons
    who may in any fashion claim an interest in the subject matter hereof
    through either of the Parties.

24. INDEPENDENT COUNSEL.  Shionogi and MBI each hereby warrants and represents
    to the other that it has consulted with and has been represented by
    independent counsel in making the settlement, release, and other matters
    provided for in this Agreement, and with respect to the advisability of
    executing this Agreement.  Each of the Parties, together with its
    attorneys, has made such investigation of the facts pertaining to this
    Agreement and to the settlement and releases provided for in this Agreement
    as it has deemed necessary, and, in entering into this Agreement, each of
    the Parties has relied upon its investigations and the investigations of
    its attorneys and representatives and has not relied upon any
    representations by any representative of the other party, except as to
    those representations set forth in Paragraphs 15 and 16, above.

25. ATTORNEYS' FEES.  In the event of any action, suit or other proceeding
    brought by one of the Parties concerning the negotiation, interpretation,
    validity, performance or breach of


                                    Page 18 of 22

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                            Settlement Agreement and Mutual Release
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    this Agreement, the prevailing party shall recover all of such party's
    actual attorneys' fees, expenses and costs, not limited to costs of suit,
    incurred in each and every such action, suit or other proceeding, including
    any and all appeals or petitions relating thereto, and the collection of
    such fees, expenses and costs.

26. AMENDMENTS.  This Agreement will not be amended, modified or supplemented
    nor any term or condition hereof waived except in a writing signed by the
    authorized representatives of each of the Parties.

27. CAPTIONS.  The captions of sections of this Agreement are for convenience
    and reference only and are not to be considered in construing this
    Agreement.

28. CONSTRUCTION OF AGREEMENT.  All Parties to this Agreement acknowledge that
    they and their counsel have reviewed and revised this Agreement and that
    the normal rules of construction to the effect that any ambiguities are to
    be resolved against the drafting party shall not be employed in the
    interpretation of this Agreement or any amendments hereto.  This Agreement
    shall not be construed either for or against any party hereto but shall be
    given a reasonable interpretation in accordance with the plain meaning of
    its terms and the intent of the Parties as reflected in this Agreement.

29. ENTIRE AGREEMENT.  The Parties agree that this Agreement shall be final and
    binding upon the Parties, their successors and assigns, and any changes in
    this Agreement, whether by additions, deletions, waivers, amendments or
    modifications, may be made only in writing and signed by both of the
    Parties.  This Agreement and the Exhibits annexed hereto constitute a
    single, integrated written contract expressing the entire agreement of the
    Parties concerning the subject matter hereof.  No covenants, agreements,
    representations


                                    Page 19 of 22

<PAGE>

                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

    or warranties of any kind whatsoever have been made by either party hereto,
    except as specifically set forth in this Agreement.  All prior discussions
    and negotiations with respect to the subject matter hereof have been and
    are merged and integrated into, and are superseded by, this Agreement.

30. SEVERABILITY.  If any provision of this Agreement is held unenforceable or
    in conflict with the laws of any jurisdiction, the provision shall be
    regarded as severable from this Agreement and the remaining provisions
    shall remain in full force.

31. COOPERATION.  The Parties shall cooperate with one another in signing such
    documents and instruments as may be necessary or desirable in performing
    this Agreement.

32. COUNTERPARTS.  This Agreement may be executed in one or more counterparts,
    all of which taken together shall constitute one and the same instrument.
    Facsimile signatures shall be deemed original until original signatures are
    supplied.


                                    Page 20 of 22

<PAGE>

                            Settlement Agreement and Mutual Release
                               between Shionogi & Co., Ltd. and
                                  Molecular Biosystems, Inc.

         IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed and delivered in their respective names by their authorized
representatives as of the date and year first above written.


                             MOLECULAR BIOSYSTEMS, INC.



                             By: /s/ Kenneth J. Widder
                                -----------------------------------
                                       Its Authorized Officer
                                           Kenneth J. Widder, M.D.
                                    Chairman and Chief Executive Officer

                             SHIONOGI & CO., LTD.



                             By: /s/ Yoshihiko Shiono
                                -----------------------------------
                                       Its Authorized Officer
                                             Yoshihiko Shiono
                                              President

APPROVED AS TO FORM:

LeBOEUF, LAMB, GREENE & MACRAE
725 S. Figueroa Street
Los Angeles, California  90017-5436

By: /s/ Dean Hansell
   --------------------------
         Dean Hansell


ROGERS & WELLS
444 South Flower Street
Los Angeles, California 90071-2901

By: /s/ Terry O. Kelly
   --------------------------
         Terry O. Kelly


                                    Page 21 of 22