Document:

Exhibit 10.4

 

[****]    Represents
material which has been redacted pursuant to a request for confidential
treatment pursuant to Rule 24B-2 under the Securities Exchange act of
1934, as amended.

 

AMENDMENT AND ASSIGNMENT AGREEMENT

 

This
AMENDMENT AND ASSIGNMENT AGREEMENT (this “Amendment”) is made as of
June 11, 2003, by and among Photogen Technologies, Inc. (“Photogen”), a
Nevada corporation with its principal place of business at 140 Union Square
Drive, New Hope, PA 18938, Cardinal Health 411, Inc. (f/k/a RedKey, Inc., an
Ohio corporation doing business as Cardinal Health Sales and Marketing
Services) (“Cardinal Health”), with a place of business at 7000 Cardinal Place,
Dublin, Ohio 43017, Cardinal Health 105, Inc. (f/k/a CORD Logistics, Inc.)
(“CORD”), an Ohio corporation with its principal place of business at 15 Ingram
Boulevard, LaVergne, TN 37086, and Alliance Pharmaceutical Corp. (“Alliance”),
a New York corporation with its principal place of business at 6175 Lusk Boulevard, San Diego, CA
92121. Cardinal Health and CORD are collectively referred to herein as the
“Cardinal Companies.”

 

Background

 

A.                                   Cardinal
Health and Affiance are parties to that certain agreement dated
February 28, 2002 (the “Service Agreement”) whereby Cardinal Health
provides a contract sales force consisting of Representatives, Managers and
Clinical Science Liaisons (as defined in the Service Agreement) to Detail
certain pharmaceutical products for Alliance in exchange for the payment of
Service Fees as defined therein. Capitalized terms which are not otherwise
defined herein shall have the respective meanings given such terms in the
Service Agreement.

 

B.                                     CORD
and Alliance are parties to that certain Exclusive Distribution Agreement dated
April 1, 2002 (the “Distribution Agreement”) whereby CORD acts as
Alliance’s exclusive distribution agent to customers in the United States,
District of Columbia and Puerto Rico.

 

C.                                     The
Service Agreement allows Alliance to defer payment of a portion of the Service
Fees (the “Deferred Fees”) in the form of a loan by Cardinal Health to
Alliance, subject to the terms of the Service Agreement.

 

D.                                    The
current balance of the Deferred Fees due and owing under the Service Agreement
is in excess of [****].

 

E.                                      Alliance
intends to sell its Imagent® Ultrasound Contrast Agent
(“Imagent”) to Photogen (“Imagent Sale”) and to help facilitate such sale,
Alliance and Photogen have asked the Cardinal Companies to consent to the
amendment and assignment of the Service Agreement and the Distribution
Agreement from Alliance to Photogen effective as of the date of the closing of
the Imagent Sale (the “Closing Date”).

 

F.                                      The
Cardinal Companies hereby consent to the amendment and assignment of the
Service Agreement and the Distribution Agreement to Photogen and agree to continue
to provide the services, including without limitation the Detailing Services,
provided in the Service Agreement and the Distribution Agreement from the date
hereof, subject to the terms and conditions of those agreements as amended by
this Amendment.

 

NOW,
THEREFORE, in consideration of and reliance on the respective representations,
warranties and covenants contained herein and other good and valuable
consideration, the sufficiency of which are hereby acknowledged and intending
to be legally bound hereby, the parties hereto agree as follows:

 

I.                                         Service
Agreement.

 

1.                                       Current
Service Fees. Cardinal Health will continue to provide services to Alliance
in connection with the Imagent product under the Service Agreement, and
Photogen will be responsible for 

 

1

 

[****]    Represents
material which has been redacted pursuant to a request for confidential
treatment pursuant to Rule 24B-2 under the Securities Exchange act of
1934, as amended.

 

and
pay the Service Fees (the “Current Service Fees”) along with the sales force,
training and all other expenses accruing thereunder (the “Current Expenses”),
effective from and after April 14, 2003, and continuing until the Closing
Date. Cardinal Health will invoice Photogen for the Current Service Fees and
the Current Expenses on a monthly basis, and Photogen shall pay each invoice
within thirty (30) days of the invoice date.

 

2.                                       Assumption
and Assignment of Service Agreement. As of the Closing Date, Alliance
assigns, and Cardinal Health hereby consents to such assignment, all of its
rights and obligations under the Service Agreement to Photogen, and as of the
Closing Date, Photogen accepts such assignment and assumes all of Alliance’s
rights and obligations under the Service Agreement.

 

3.                                       Payment
of Excess Deferred Fees. If Photogen completes an equity and/or debt cash
financing in a series of one or more related transactions in an aggregate
amount of not less than [****] subsequent to the execution of this Amendment
(“Financing Transaction”), then within five (5) days of closing the Financing
Transaction, Photogen will pay Cardinal Health all outstanding balances owed to
Cardinal Health through April 13, 2003 (including, without limitation, the
balance of Deferred Fees) in excess of [****]. The parties agree and
acknowledge that as of April 13, 2003, the total amount of Deferred Fees
owed to Cardinal Health is [****].

 

4.                                       Amendment
of Service Agreement. As of the Closing Date, Photogen and Cardinal Health
agree to amend the Service Agreement as follows:

 

(i)                                     Section 1.1(g)
of the Service Agreement is hereby deleted in its entirety and replaced with
the following:

 

(g) “Gross Sales” means all sales of the Product for
uses in the cardiology area by Vendor and/or the Company, its agents,
Affiliates, distributors, assignees, licensees or any other third party, less reasonable  and customary reductions for
credits, returns and chargebacks as any of the foregoing are actually granted,
allowed or incurred in the ordinary course of business.

 

(ii)                                  The
first sentence of Section 2.6 of the Service Agreement is hereby deleted
in its entirety and replaced with the following:

 

In the event of a Representative vacancy due to
resignation, reassignment, or termination of a Representative, or because
Company has hired a Representative in accordance with Section 3.3, Vendor
shall use its best efforts to fill any such vacancy within a six (6) week
period.

 

(iii)                               Section 2.10
of the Service Agreement is hereby deleted in its entirety. In the event Photogen
elects to use the medical education services or any other services provided by
other Cardinal Health affiliates, Photogen and Cardinal Health may mutually
agree to such terms separately.

 

(iv)                              Section 3.1(a)
of the Service Agreement is hereby deleted in its entirety and replaced with
the following:

 

(a)                                  Current
Payments and Deferred Fees.

 

(i)                                     Beginning
April 14, 2003 and continuing until such time as the Financing Transaction
is closed, Company will be required to pay the Service 

 

2

 

[****]    Represents
material which has been redacted pursuant to a request for confidential
treatment pursuant to Rule 24B-2 under the Securities Exchange act of
1934, as amended.

 

Fees and Territory Operating Expenses and all other
amounts due to Vendor following receipt of an invoice from Vendor. Vendor will
provide weekly invoices to Company and payment of each such invoice shall be
due as provided in Section 3.1(b).

 

(ii)                                  Subject
to the requirement in Section 3.1(a)(i) that all Service Fees and
Territory Operating Expenses be paid in full each month until the Financing
Transaction is closed, Vendor will defer the Service Fees, Territory Operating
Expenses and other amounts due to Vendor in accordance with the terms of the
Agreement and this Amendment, provided however that Cardinal Health will not
defer any Service Fees, Territory Operating Expenses or other amounts due to
Vendor (a) after the eighteenth month of the New Term (defined below), and (b)
in an amount exceeding $3,000,000 of principal plus unpaid Interest. For
purposes of this Agreement, the Service Fees and Territory Operating Expenses
and other amounts deferred pursuant to the terms and conditions of this
Section 3.1 (a) shall be defined as the “Deferred Fees.”

 

(iii)                               Beginning
on the first day of the nineteenth (19th) Month of the New Term, or
when the principal of the Deferred Fees plus any accrued but unpaid Interest
(as hereinafter defined) equal [****], whichever is sooner, Company shall no
longer be entitled to defer any portion of the Service Fees, Territory
Operating Expenses or other fees and shall pay such Service Fees and expenses
in full as they become due pursuant to the terms of this Agreement. In no event
shall the Deferred Fees plus accrued but unpaid Interest exceed [****].

 

(iv)                              Beginning
on the first day of the nineteenth (19th) month of the New Term, Company
shall pay the Deferred Fees in eighteen (18) monthly installments, in the
manner described below, unless this Agreement has been terminated pursuant to
Article XIV, in which case the entire balance of the Deferred Fees plus
accrued Interest shall be immediately due and payable. In addition, Company
shall pay such invoices in accordance with Section 3.1(b) below. The
eighteen (18) monthly installments shall consist of the following:

 

(A)                              The
first seventeen (17) monthly installments shall be paid in equal amounts
calculated as if the Deferred Fees were being paid in twenty four (24) equal
monthly installments of principal of the Deferred Fees plus accrued Interest as
set forth  on Vendor’s invoice; and

 

(B)                                The
eighteenth (18th) monthly installment shall be in
an amount equal to the balance of the then outstanding principal of the
Deferred Fees plus accrued Interest.

 

(v)                                 The
Deferred Fees shall accrue interest at the rate of [****] annually, compounded
quarterly (“Interest”).

 

(vi)                              Company
shall have the right to prepay the Deferred Fees, in whole or in part, at any
time without penalty. No prepayment of the principal balance of the Deferred Fees
shall extend or modify the timing of the next installment of Interest or
principal and Interest due under this Agreement, and any partial prepayment
shall be applied to the last payments to become due under this Agreement (in 

 

3

 

[****]    Represents
material which has been redacted pursuant to a request for confidential
treatment pursuant to Rule 24B-2 under the Securities Exchange act of
1934, as amended.

 

reverse order of maturity). Each payment made by Company
to Vendor shall be applied, to the extent of such payment, in the following
manner: (a) first, to the amount of accrued but unpaid Interest as of the date
of such payment; and (b) second, against the unpaid principal balance of the
Deferred Fees.

 

(vii)                           If at
any time Photogen shall have cash on hand less than the outstanding principal
of the Deferred Fees and accrued but unpaid Interest plus [****], then Cardinal
Health shall have the right to immediately cease the deferral of the Services
Fees and related expenses under the Service Agreement. This evaluation by
Vendor will occur at each [****] increment of the Deferred Fee balance.
Photogen will supply Vendor with the reasonable and necessary financial
information in order for Vendor to conduct this evaluation.

 

(viii)                        If any
payment of Deferred Fees and/or Interest is not paid when due, then a late
charge in an amount equal [****] of such payment shall become immediately due
to Vendor as liquidated damages for failure to make prompt payment. Such charge
shall be payable in any event not later than the due date of the next
subsequent installment of Interest or principal and Interest.

 

(v)                                 Section 3.3(a)
of the Service Agreement is hereby deleted in its entirety and replaced with
the following:

 

(a)                                  For
so long as the Company is not in default under the Agreement, Company has the
option to hire Representatives as its own employees upon payment of a fee to
Vendor equal to [****] of the Representatives’ annual base salary (“Buyout
Fee”). Such Buyout Fee will be reduced proportionally on a month to month basis
until no Buyout Fee is due upon expiration of the New Term

 

(vi)                              The
second sentence of Section 3.6 of the Service Agreement is hereby deleted
in its entirety and replaced with the following:

 

The Gross Sales Threshold
is as follows:

 

	
  Year

  	
   

  	
  Gross
  Sales Threshold

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2002

  	
   

  	
  [****]

  	
   

  
	
  2003

  	
   

  	
   

  	
  [****]

  	
   

  
					

 

(vii)                           The
parties agree that they will negotiate in good faith commercially reasonable
gross sales threshold percentages applicable to the Royalty (as defined
therein) and the actual gross sales threshold set forth in Section 3.6 for
the years after 2003 based on reasonable and attainable sales forecasts.

 

(viii)                        Pursuant
to Section 14.1 of the Service Agreement, Cardinal Health and Photogen
hereby agree to extend the term of the Service Agreement to a date three (3)
years from the Closing Date (the “New Term”); provided,  however,
that the term of the Service Agreement shall be automatically extended for an
additional year unless either party gives the other party at least thirty (30)
days prior written notice of its intention not to extend the term; and provided,
furtherr that the term of the Service Agreement shall not be
automatically extended for a total of more than two additional years.

 

4

 

[****]    Represents
material which has been redacted pursuant to a request for confidential
treatment pursuant to Rule 24B-2 under the Securities Exchange act of
1934, as amended.

 

(ix)                                Section 17.12
is hereby deleted in its entirety and replaced with the following:

Without limiting Vendor’s rights under law or in
equity, Vendor and its affiliates, parent or related entities, collectively or
individually, may exercise a right of set-off against any and all amounts due to
Vendor from Company. For purposes of this Section 7.6, Vendor, its
affiliates, parent or related entities shall be deemed to be a single creditor.

 

5.                                       Payment
of Deferred Fees and Unpaid Fees. As soon as practicable after the Closing
Date, Photogen shall seek stockholder approval for the issuance of additional
shares of Photogen’s common stock (“Common Stock”) in connection with the
Imagent Sale. Upon stockholder approval, Photogen shall issue to Cardinal
Health (or its designated affiliate), as full satisfaction of [****] of
Deferred Fees then owed to Cardinal Health by Photogen as successor to Alliance
under the Service Agreement that number of shares of Common Stock (the “Payment
Shares”) determined by dividing (i) [****]. Photogen shall use its reasonable
best efforts to register the Payment Shares for resale by Cardinal Health (or
its respective designated affiliates), respectively, under the Securities Act
of 1933, as amended.

 

6.                                       Services.
Upon full execution of this Amendment, Cardinal Health will begin the process
of recruiting and hiring Representatives and Managers in such numbers as are
mutually agreed to by the parties. The parties further agree promptly to
negotiate in good faith an increase in the Service Fees to pay the higher
salaries necessary due to Company’s more stringent hiring criteria. As of the
Closing Date, Cardinal Health will promote Mark Rowen to the position of Zone
Manager, and will assign or recruit and hire a new National Sales Manager.

 

II.                                     Distribution
Agreement.

 

7.                                       CORD
Service Fees. CORD will continue to provide services to Alliance in
connection with the Imagent product under the Distribution Agreement, and
Photogen will be responsible for and pay the fees thereunder (the “CORD Service
Fees”), effective from and after April 14, 2003, and continuing until the
Closing Date. CORD will invoice Photogen for the CORD Service Fees on a monthly
basis, and Photogen shall pay each invoice within ten (10) days of the invoice
date. Upon execution of this Amendment, Photogen will pay [****] of all
outstanding amounts due and payable to CORD as of the Closing Date, and CORD
will send to Photogen a current list of accounts. On the 90th day
after the execution of this Amendment, Photogen will pay the remaining [****]
of all outstanding amounts due and payable to CORD as of the Closing Date.

 

8.                                       Assumption
and Assignment of Distribution Agreement. As of the Closing Date, Alliance
assigns, and CORD hereby
consents to such assignment, all of its rights and obligations under the
Distribution Agreement to Photogen, and as of the Closing Date, Photogen
accepts such assignment and assumes all of Alliance’s rights and obligations
under the Distribution Agreement.

 

9.                                       Amendment
of Distribution Agreement. As of the Closing Date, Photogen and CORD agree
to amend the Distribution Agreement as follows:

 

(i)                                     Section 6.1
of the Distribution Agreement is hereby amended to provide that Initial Tenn
(as defined therein) shall be one year.

 

(ii)                                  Section 6.2(a)
of the Distribution Agreement is hereby amended to provide that either party
may terminate the Distribution Agreement upon thirty days written notice to the
other party.

 

5

 

[****]    Represents
material which has been redacted pursuant to a request for confidential
treatment pursuant to Rule 24B-2 under the Securities Exchange act of
1934, as amended.

 

(iii)                               Exhibit
A of the Distribution Agreement, Operating Guidelines, is hereby amended by
deleting Sections 1.0, Warehousing, 2.0, Receiving, 3.0, Inventory, 4.0,
Distribution, 5.0, Transportation, and 11.0, Chargebacks, thereof.

 

(iv)                              The
parties agree and acknowledge that as of the date hereof the total amount of
unpaid fees under the Distribution Agreement is [****] (the “Unpaid Fees”).

 

III.                                 General
Provisions

 

10.                                 Termination.
Cardinal Health shall have the right to terminate this Amendment for itself and
on behalf of CORD upon written notice to Photogen (i) if Photogen notifies
Cardinal Health that it does not intend to consummate the Imagent Sale or (ii),
if the Closing Date has not occurred by July 31, 2003, on July 31,
2003. Upon the termination of this Amendment in accordance with the preceding
sentence, this Amendment shall be of no further force and effect; provided,
however, that the obligations in Sections 1 and 7 shall survive
termination until all of the Current Service Fees, Current Expenses, and CORD
Service Fees are paid in full. Except with respect to the full payment of the
Current Service Fees, Current Expenses, and CORD Service Fees described in  the preceding sentence, if
this Amendment is terminated prior to consummation of the Imagent Sale, then
Photogen shall have no further obligations to the Cardinal Companies hereunder
or under the Service Agreement or Distribution Agreement.

 

11.                                 Miscellaneous.

 

(i)                                     Entire
Agreement. This Amendment, the Service Agreement and the Distribution
Agreement (collectively, the “Cardinal Agreements”) set forth the entire understanding
of the parties hereto with respect to the transactions contemplated hereby. Any
and all previous negotiations, agreements and understandings between or among
the parties regarding the subject matter hereof, whether written or oral, are
superseded by the Cardinal Agreements. Each of the Cardinal Companies, on the
one hand, and Photogen, on the other hand, agrees and acknowledges that, except
as specifically set forth herein, none of them shall have any liability or
obligation to the other for any past or current liability or obligation of
Photogen to the Cardinal Companies or the Cardinal Companies to Photogen,
respectively, or for any past, current or future liability or obligation of
Alliance to the Cardinal Companies.

 

(ii)                                  Assignment
and Binding Effect. This Amendment and the rights of the parties hereunder
may not be assigned without the prior written consent of the other party
(except by operation of law) and shall
inure to the benefit of and be binding upon the parties hereto and their
respective executors, heirs, personal representatives, successors and assigns.

 

(iii)                               Notices.
Any notice, request, demand, waiver, consent, approval or other communication
which is required or permitted hereunder shall be in writing and shall be
deemed given on the day established by the sender as having been delivered
personally; on the day delivered by a private courier as established by the
sender by evidence obtained from the courier; or on the third day after the
date mailed, by certified or registered mail, return receipt requested, postage
prepaid. To constitute a valid written notice, such communications must be
addressed as set forth above or to such other address or to the attention of
person or persons as the recipient party has specified by prior written notice
to the sending party (or in the case of counsel, to such other readily ascertainable
business address as such counsel may hereafter maintain). If more than one
method for sending notice as set forth above is used, the earliest notice date
established as set forth above shall control.

 

(iv)                              Governing
Law. This Amendment shall be construed and interpreted in accordance 

 

6

 

with the laws of
the State of Ohio, without regard to its provisions concerning conflict of laws
that would cause the laws of another jurisdiction to govern.

 

(v)                                 No
Benefit to Others. The representations, warranties, covenants and
agreements contained in this Letter of Intent are for the sole benefit of the
parties hereto and their affiliates, successors and assigns, and they shall not
be construed as conferring  any rights on any other persons.

 

(vi)                              Counterparts.
This Amendment may be executed in two or more counterparts, each of which shall
be binding as of the date first written above, and all of which shall
constitute one and the same instrument. Each such copy shall be deemed an
original, and it shall not be necessary in making proof of this Letter of
Intent to produce or account for more than one such counterpart.

 

(vii) Severability.
Any provision of this Amendment which is invalid or unenforceable in any
jurisdiction shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

IN
WITNESS WHEREOF, this Amendment has been executed by the parties hereto on the
day and year first written above and the undersigned hereby represent that they
are executive officers of their respective companies and have the authority to
bind such company to the terms and conditions of this Amendment.

 

	
   

  	
  PHOTOGEN TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/ Brooks Boveroux

  	
   

  
	
   

  	
  Name:  Brooks Boveroux

  
	
   

  	
  Title:  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  CARDINAL HEALTH 411, INC.

  
	
   

  	
  (f/k/a REDKEY, INC. doing business as Cardinal
  Health Sales and Marketing Services)

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Anthony J. Cherichella

  	
   

  
	
   

  	
  Name:  Anthony J. Cherichella

  
	
   

  	
  Title:  CFO

  
	
   

  	
   

  
	
   

  	
  CARDINAL HEALTH 105, INC.

  
	
   

  	
  (f/k/a CORD LOGISTICS, INC.)

  
	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/ Anthony J. Cherichella

  	
   

  
	
   

  	
  Name:  Anthony J. Cherichella

  
	
   

  	
  Title:  CFO

  
	
   

  	
   

  
	
   

  	
  ALLIANCE PHARMACEUTICAL CORP.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/ Duane Roth

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
								

 

7Exhibit 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.

 

2

 

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.

 

3

 

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.

 

4

 

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.

 

5

 

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.

  

 

6

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