Document:

SETTLEMENT
        AGREEMENT

       

      This
        Settlement Agreement (the “Agreement”) is made and entered into as of September
        19, 2005 (the “Effective Date”), by and between Alliance Pharmaceutical Corp.
        (the “Alliance”) and Imcor Pharmaceutical Co. (formerly Photogen Technologies,
        Inc.) (“Imcor”). Alliance and Imcor may be referred to herein individually as a
“Party” and together as the “Parties.”

       

       

      RECITALS

       

      A.  On
        June
        10, 2003, Alliance and Imcor entered into an Asset Purchase Agreement pursuant
        to which, among other things, Alliance assigned and sold to Imcor certain
        assets
        related to Alliance’s imaging and diagnostic imaging business (the “Imagent
        Assets”), and Imcor assumed certain liabilities related to such Imagent Assets
        (the “Asset Purchase Agreement”). Capitalized terms not otherwise defined herein
        shall have the meanings ascribed to them under the Asset Purchase
        Agreement.

       

      B.  Alliance
        and Imcor are co-plaintiffs in that certain litigation referred to as
Imcor
        Pharmaceutical Co. and Alliance Pharmaceutical Corp. v. Amersham Health
        Inc.
        (“Amersham”), Civil Action No. 03 CV 2853 currently pending in the United States
        District Court for the District of New Jersey (the “Amersham
        Litigation”).

       

      C.  Certain
        disputes have now arisen between the Parties as to their respective rights
        and
        obligations under the Asset Purchase Agreement and with respect to the Amersham
        Litigation.

       

      D.  The
        Board
        of Directors of Alliance and the Board of Directors of Imcor have each
        determined that it is in the best interests of their respective stockholders
        and
        creditors to settle the dispute in accordance with the terms and conditions
        set
        forth in this Agreement.

       

      E.  In
        entering into this Agreement, neither Party concedes the sufficiency or validity
        of any claims, counterclaims, or defenses that have been asserted or could
        be
        asserted by either of them.

       

       

      AGREEMENT

       

      In
        consideration of the foregoing recitals (which are incorporated herein by
        this
        reference) and the covenants and conditions set forth below, the Parties
        hereby
        agree as follows.

       

      1.  Settlement.
        The
        Parties intend for this Agreement and the related transactions to constitute
        a
        full and final resolution and settlement of the disputes that have arisen
        between Alliance and Imcor arising from, or otherwise related to, the Asset
        Purchase Agreement and/or the Amersham Litigation. Further, this Agreement
        is
        being entered into for settlement purposes pursuant to California Evidence
        Code
§1152, Federal Rule of Evidence 408 and any similar statute or rule in any
        applicable jurisdiction.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      2.  Termination
        of Continuing Obligations Under the Asset Purchase
        Agreement.
        As of
        the Effective Date and subject to the terms of this Agreement, the Parties
        hereby agree that the continuing rights and obligations of each Party under
        the
        Asset Purchase Agreement are hereby terminated and shall be of no further
        force
        or effect. Such continuing rights and obligations include, but are not limited
        to, Section 1.2(g) (Equity Conversion), Section 1.3 (Earnout), including,
        without limitation, Alliance’s release of any and all rights and obligations set
        forth in subsection (g) thereof pursuant to which Imcor shall re-license
        to
        Alliance the Imagent Assets in the event Imcor’s Board of Directors determines
        that it is not in Imcor’s best interests to allocate its efforts and resources
        towards the promotion of the Imagent Assets and the Imagent Products (the
        “Alliance Imagent License Rights”), Article VII (Survival of Representations and
        Warranties; Indemnification) and any royalty rights either Party may be entitled
        to under the Asset Purchase Agreement (collectively, the “Continuing
        Obligations”).

       

      3.  Economic
        Arrangements.

       

      3.1  Amersham
        Litigation.
        With
        respect to the Amersham Litigation, the Parties agree to enter into a settlement
        agreement with Amersham upon substantially the same terms most recently proposed
        by Amersham, including, without limitation, a cash payment of $1,200,000.
        The
        Amersham settlement agreement shall specify that Amersham will pay $1,000,000
        of
        such amount directly to Imcor in satisfaction of Imcor’s claims in the Amersham
        Litigation and that Amersham will pay $200,000 directly to Alliance in
        satisfaction of any and all of Alliance’s claims in the Amersham Litigation
        under the Asset Purchase Agreement.

       

      3.2  Sale
        of Imagent Assets.

       

      (a)  Imcor
        shall use commercially reasonable efforts to promptly seek to sell, license,
        enter into a joint venture relationship or enter into another strategic
        transaction involving the disposition of the remainder of the Imagent Assets
        to
        a third-party in its sole discretion and subject to shareholder and other
        required approvals (an “Imagent Transaction”), but will confer with Alliance
        with respect to the terms and targets for potential joint venture, license
        or
        other strategic relationships, as well as the method of offering the Imagent
        Assets for sale and potential buyers. The reasonable third-party fees and
        expenses directly related to an Imagent Transaction shall be shared between
        the
        Parties in proportion to the amounts received by each Party as a result of
        such
        Imagent Transaction as set forth in subsection (b) below. The definitive
        agreement entered into with any third-party relating to an Imagent Transaction
        shall provide that any and all proceeds that Alliance is entitled to from
        the
        Imagent Transaction as provided for in subsection (b) below shall be remitted
        by
        the buyer thereof directly to Alliance. The Parties hereby acknowledge and
        agree
        that Alliance’s right to receive payments directly from the buyer in an Imagent
        Transaction pursuant to this Section 3.2, and any payments made directly
        to
        Alliance by any such buyer are solely the right and property of Alliance.
        Imcor
        shall have no interest whatsoever in payments made (or to be made) directly
        to
        Alliance nor in Alliance’s right to receive such payments. In the event a buyer
        erroneously delivers to Imcor any funds belonging to Alliance, Imcor shall
        hold
        such funds in a segregated bank account in trust solely for the benefit of
        Alliance which it shall forthwith deliver to Alliance. If Imcor files a
        voluntary bankruptcy petition, or has an involuntary bankruptcy petition
        filed
        against it, or becomes subject to an assignment for the benefit of creditors,
        creditors’ trust, or related proceeding, Alliance’s right to receive payments
        from any Imagent Transaction buyer, or any such funds held in trust by Imcor,
        shall not become property of Imcor or Imcor’s bankruptcy estate as the right of
        Alliance to receive payments herewith is its sole and separate right, is
        not a
        right of Imcor, and is not property of Imcor’s bankruptcy estate within the
        meaning of 11 U.S.C. 541(a), and Alliance’s right to recover such payments shall
        not be subject to the automatic stay imposed under 11 U.S.C. § 362 in any
        bankruptcy case filed by or against Imcor. Should a bankruptcy petition be
        filed
        by or against Imcor, or should Imcor become subject to an assignment for
        the
        benefit of creditors, creditors’ trust, or similar proceeding, Alliance will
        continue to have its independent right to pursue, recover and receive any
        payments directly from a buyer due it under this Section 3.2 since, and any
        funds held in trust by Imcor for the benefit of Alliance, it being acknowledged
        that Imcor has no property interest, or any interest whatsoever, in payments
        to
        be made directly to Alliance (or held in trust by Imcor for the benefit of
        Alliance), and such payments and funds shall not become property of Imcor’s
        bankruptcy estate.

       

      
        
          
          

        

        
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      (b)  The
        proceeds from an Imagent Transaction shall be allocated between the Parties
        as
        follows:

       

      (i)  The
        first
        $1,450,000 in proceeds from an Imagent Transaction shall be divided on a
        dollar-for-dollar basis as follows: ninety percent (90%) to Imcor and ten
        percent (10%) to Alliance until such time as Alliance has been paid
        $100,000;

       

      (ii)  The
        proceeds from an Imagent Transaction from $1,450,001 to $5,000,000 shall
        be
        divided on a dollar-for-dollar basis as follows: seventy percent (70%) to
        Imcor
        and thirty percent (30%) to Alliance; and

       

      (iii)  The
        proceeds from an Imagent Transaction above $5,000,000 shall be divided on
        a
        dollar-for-dollar basis as follows: sixty-six and seven-tenths of a percent
        (66.7%) to Imcor and thirty-three and three-tenths of a percent (33.3%) to
        Alliance.

       

      3.3  Schering
        and Transaction Liability.
        To the
        extent that an Imagent Transaction results in any liability to Schering
        Aktiengesellschaft (“Schering”) under the terms of that certain License
        Agreement originally dated as of September 23, 1997, as amended and restated
        as
        of February 22, 2002, by and between Alliance and Schering, as assigned to
        and
        assumed by Imcor, or any transaction fees and expenses, such amount payable
        by
        each Party shall be determined based upon the ratios set forth as
        follows:

       

      (i)  Any
        liability to Schering or for transaction fees or expenses related to the
        first
        $1,450,000 in proceeds from an Imagent Transaction shall be divided on a
        dollar-for-dollar basis and promptly paid as follows: ninety percent (90%)
        by
        Imcor and ten percent (10%) by Alliance until such time as Alliance has paid
        $100,000;

       

      (ii)  Any
        liability to Schering or for transaction fees or expenses related to an Imagent
        Transaction with proceeds from $1,450,001 to $5,000,000 shall be divided
        on a
        dollar-for-dollar basis and paid as follows: seventy percent (70%) by Imcor
        and
        thirty percent (30%) by Alliance; and

       

      (iii)  Any
        liability to Schering or for transaction fees or expenses related to an Imagent
        Transaction with proceeds above $5,000,000 shall be divided on a
        dollar-for-dollar basis and paid as follows: sixty-six and seven-tenths of
        a
        percent (66.7%) by Imcor and thirty-three and three-tenths of a percent (33.3%)
        by Alliance.

       

      
        
          
          

        

        
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      4.  Imcor
        Release.
        Except
        as expressly set forth in this Agreement for and in consideration of the
        mutual
        covenants set forth herein, which are hereby excluded from and survive this
        general release, Imcor, on its own behalf and on behalf of its grantees,
        agents,
        representatives, assignees, assignors, attorneys or any other entity in which
        Imcor has a controlling interest (collectively, the “Imcor Releasors”), hereby
        releases and forever discharges by this Agreement Alliance, and each of its
        past
        and present agents, employees, representatives, officers, directors,
        stockholders, attorneys, accountants, insurers, receivers, advisors,
        consultants, partners, partnerships, parents, divisions, subsidiaries,
        affiliates, assigns, successors, heirs, predecessors in interest, joint
        ventures, and commonly-controlled corporations (collectively, the “Alliance
        Releasees”) from and against any and all liabilities, causes of action, charges,
        complaints, suits, claims, obligations, costs, losses, damages, rights,
        judgments, attorneys’ fees, expenses, bonds, bills, penalties, fines, and all
        other legal responsibilities of any form whatsoever, whether known or unknown,
        whether suspected or unsuspected, whether fixed or contingent, liquidated
        or
        unliquidated, including, but not limited to, those arising from or otherwise
        related to: (i) the Asset Purchase Agreement or any document related thereto
        and
        any of the Continuing Obligations of the Parties thereunder, (ii) the Amersham
        Litigation, (iii) any act or omission occurring prior to the Effective Date
        by
        any Alliance Releasee, (iv) the use and occupancy of the premises located
        at
        6175 Lusk Boulevard, San Diego, CA 92121 (the “Premises”), and (v) the use of
        the other Party’s personnel, including in each case those arising under any
        theory of law, whether common, constitutional, statutory or other or of any
        jurisdiction, foreign or domestic, whether known or unknown, whether in law
        or
        in equity, which any Imcor Releasor had or may claim to have against any
        of them
        (collectively referred to as the “Imcor Released Claims”); provided,
        however,
        that
        the foregoing shall not release or impair any claims to enforce the provisions
        of this Agreement.

       

      5.  Alliance
        Release.
        Except
        as expressly set forth in this Agreement, for and in consideration of the
        mutual
        covenants set forth herein, which are hereby excluded from and survive this
        general release, Alliance on its own behalf, and on behalf of its grantees,
        agents, representatives, assignees, assignors, attorneys or any other entity
        in
        which the Alliance has a controlling interest (collectively, the “Alliance
        Releasors”) hereby releases and forever discharges by this Agreement Imcor, and
        each of its past and present agents, employees, representatives, officers,
        directors, stockholders, attorneys, accountants, insurers, receivers, advisors,
        consultants, partners, partnerships, parents, divisions, subsidiaries,
        affiliates, assigns, successors, heirs, predecessors in interest, joint
        ventures, and commonly-controlled corporations (collectively, the “Imcor
        Releasees”) from and against any and all liabilities, causes of action, charges,
        complaints, suits, claims, obligations, costs, losses, damages, rights,
        judgments, attorneys’ fees, expenses, bonds, bills, penalties, fines, and all
        other legal responsibilities of any form whatsoever, whether known or unknown,
        whether suspected or unsuspected, whether fixed or contingent, liquidated
        or
        unliquidated, including, but not limited to, those arising from or otherwise
        related to: (i) the Asset Purchase Agreement or any document related thereto
        and
        any of the Continuing Obligations of the Parties thereunder, (ii) the Amersham
        Litigation, (iii) any act or omission occurring prior to the Effective Date
        by
        any Imcor Releasee, (iv) the use and occupancy of the Premises, and (v) the
        use
        of the other Party’s personnel, including in each case, those arising under any
        theory of law, whether common, constitutional, statutory or other or of any
        jurisdiction, foreign or domestic, whether known or unknown, whether in law
        or
        in equity, which any Alliance Releasor had or may claim to have against any
        of
        them (collectively referred to as the “Alliance Released Claims”); provided,
        however,
        that
        the foregoing shall not release or impair any claims to enforce the provisions
        of this Agreement.

       

      
        
          
          

        

        
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      6.  Adequate
        Consideration.
        The
        Parties hereby acknowledge and agree that this Agreement and the covenants
        provided hereunder constitute full, fair and adequate consideration and
        compensation for the releases granted in Sections 4 and 5, above. Each party
        agrees that the fair value of the consideration it is receiving under this
        Agreement equals or exceeds the fair value of the consideration it is
        delivering. 

       

      7.  Unknown
        Claims.
        Each
        Party acknowledges that it may hereafter discover facts different from, or
        in
        addition to, those which said Party now believes to be true with respect
        to the
        release of claims. Each Party agrees that the foregoing release shall be
        and
        remain effective in all respects notwithstanding such different or additional
        facts or discovery thereof, and that this Agreement contemplates the
        extinguishment of all such claims and causes of action. 

       

      8.  Covenant
        Not to Sue.
        Each of
        the Parties, for itself and for its heirs, successors, agents, assigns and
        affiliates and any person or entity claiming by, through or under it, further
        agrees, promises, and covenants that they have not, will not, nor will any
        person, organization or any other entity acting on their behalf, file, charge,
        claim, sue, participate in, join or cause or permit to be filed, charged
        or
        claimed, any action for damages or other relief (including injunctive,
        declaratory, monetary or other) against the other Parties released hereunder,
        their affiliates and successors and their respective officers, directors,
        employees, agents, and representatives, past and present, with respect to
        any
        Imcor Released Claims or Alliance Released Claims, as the case may
        be.

       

      9.  Civil
        Code Section 1542 Waiver.
        With
        respect to the Imcor Released Claims and the Alliance Released Claims, as
        the
        case may be, it is further understood and agreed that notwithstanding California
        Civil Code Section 1542, which presently provides:

       

      “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
        release by each Party contained herein extends to all claims of every nature
        and
        kind whatsoever, known and unknown.

       

      Each
        Party hereby waives any and all rights that it may have under Section 1542
        as it
        presently reads or as it shall hereinafter be amended. In connection with
        this
        waiver, each Party acknowledges that it is aware that it may hereafter discover
        claims presently unknown or unsuspected or facts in addition to or different
        from those it now knows or believes to be true with respect to the Imcor
        Released Claims or Alliance Released Claims, as the case may be. Nevertheless,
        it intends through this Agreement to release fully, finally, and forever,
        in the
        manner described herein, all Imcor Released Claims or Alliance Released Claims,
        as the case may be. Accordingly, the releases contained herein shall remain
        in
        effect as a full and complete release of the Imcor Released Claims or Alliance
        Released Claims, as the case may be, in accordance with its terms
        notwithstanding the discovery or existence of any such additional facts or
        different claims relating thereto.

       

      
        
          
          

        

        
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      10.  No
        Admission of Liability.
        This
        Agreement is intended to and does compromise disputed claims and shall not
        be
        construed as an admission of liability by any Party of any claim made by
        the
        other Party. 

       

      11.  Independent
        Investigation; Voluntary Agreement.
        Each
        Party has made such investigation of the facts pertaining to this Agreement,
        and
        of all other matters pertaining thereto, as the Party deems
        necessary.

       

      12.  Non-Disparagement.
        The
        Parties acknowledge that their professional reputations are extremely important
        in the community at large. As such, neither Party nor its officers at the
        vice
        president level or higher will take any actions or make any statements that
        are
        disparaging of the other Party (including its current directors, officers,
        employees, consultants or any parent, subsidiary or successor-in-interest
        of a
        Party). Furthermore, the Parties agree that they will not make or publish
        any
        statement, written or oral, that becomes or reasonably could be expected
        to
        become publicly known, or instigate, assist or participate in the making
        or
        publication of any such statement, which would libel or slander the other
        Party
        or its current officers, directors, employees, consultants or any parent,
        subsidiary or successor-in-interest of a Party. The Parties hereby acknowledge
        and agree that this non-disparagement clause is a material term of this
        Agreement.

       

      13.  Attorney’s
        Fees.
        In the
        event that either Party brings an action, arbitration or proceeding to enforce,
        interpret or construe this Agreement (including an alleged violation of the
        confidentiality provisions of this Agreement), the prevailing Party in such
        action, arbitration or proceeding shall be entitled to recover its reasonable
        attorneys’ fees and costs from the other Party.

       

       

      14.  Representations
        and Warranties.
        The
        Parties to this Agreement, and each of them, represent and warrant
        that:

       

      14.1  Each
        Party has received independent legal advice from its attorneys with respect
        to
        the advisability of making the settlement provided for in this
        Agreement.

       

      14.2  Each
        Party declares that prior to the execution of this Agreement, they apprised
        themselves of sufficient relevant information, through sources of their own
        selection, in order that they might intelligently exercise their own judgment
        in
        deciding whether to execute it, and in deciding on the contents hereof.

       

      14.3  No
        Party
        (nor any officer, agent, partner, employee, representative, or attorney for
        any
        Party), has made any statement or representation to any other Party regarding
        any fact relied upon in entering into this Agreement, except as set forth
        herein, and each Party does not rely upon any statement, representation or
        promise of any other Party (or any officer, agent, partner, employee,
        representative, or attorney of or for any Party), in executing this Agreement,
        or in making the settlement provided for herein, except as set forth
        herein.

       

      
        
          
          

        

        
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      14.4  Each
        Party to this Agreement has made such independent investigation of the facts
        pertaining to this Agreement, and of all matters pertaining to it, as it
        deems
        necessary.

       

      14.5  Each
        Party, or its responsible officers, has read this Agreement and understands
        the
        contents hereof, and any individual executing this Agreement is legally
        competent to execute this Agreement, and any person executing this Agreement
        in
        a representative capacity of any of the Parties is authorized and empowered
        to
        do so and thereby has the authority to bind the Party on whose behalf this
        Agreement is signed.

       

      14.6  The
        Parties will execute all such further and additional documents as shall be
        reasonably necessary to carry out the provisions of this Agreement.

       

      14.7  Each
        Party represents and warrants that this Agreement and the transactions
        contemplated herein (i) are not made or incurred with the intent to hinder,
        delay or defraud any person to whom such Party has been, is now, or may
        hereafter become indebted; and (ii) are not entered into with the intent
        to
        incur, or with the belief that such Party would incur, debts beyond its ability
        to pay as such debts mature.

       

      15.  No
        Prior Assignment of Rights.
        Each
        Party is the sole owner of the Imcor Released Claims and Alliance Released
        Claims, respectively, being released by it hereby and such Party has not
        assigned or otherwise transferred, voluntarily or involuntarily, any such
        Imcor
        Released Claims or Alliance Released Claims, as the case may be.

       

      16.  Assertion
        of Agreement as Bar to Proceedings.
        This
        Agreement may be asserted by any of the Imcor Releasees or Alliance Releasees,
        as the case may be, as a defense and complete bar to any action, claim, cross
        claim, cause of action, arbitration or other proceeding that may be brought,
        or
        could have been brought, instituted or taken by, against, or involving any
        of
        the Imcor Releasors, Alliance Releasors, or anyone acting or purporting to
        act
        on behalf of any of the same with respect to any Imcor Released Claims or
        Alliance Released Claims, as the case may be. 

       

      17.  Entire
        Agreement.
        This
        Agreement contains the entire understanding of the Parties with respect to
        the
        subject matter hereof and supersedes all prior and contemporaneous agreements,
        understandings, discussions and representations, oral or written, with respect
        to such matters, which the Parties acknowledge have been merged into such
        documents, exhibits and schedules.

       

      18.  Notices.
        Any and
        all notices or other communications or deliveries required or permitted to
        be
        provided hereunder shall be in writing and shall be deemed given and effective
        on the earliest of (a) the date of transmission, if such notice or communication
        is delivered via facsimile (provided the sender receives a machine-generated
        confirmation of successful transmission) at the facsimile number specified
        in
        this Section prior to 6:30 p.m. (New York City time) on a business day, (b)
        the
        next business day after the date of transmission, if such notice or
        communication is delivered via facsimile at the facsimile number specified
        in
        this section on a day that is not a business day or later than 6:30 p.m.
        (New
        York City time) on any business day, (c) the business day following the date
        of
        mailing, if sent by U.S. nationally recognized overnight courier service,
        or (d)
        upon actual receipt by the Party to whom such notice is required to be given.
        The address for such notices and communications shall be as
        follows:

       

      
        
          
          

        

        
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          If to the Alliance: Alliance
          Pharmaceutical Corp.

      

      4660
        La
        Jolla Village Drive, Suite 825 

      San
        Diego, California 92122

      Facsimile
        No.: (858) 410-5343

      Telephone
        No.: (858) 410-5200

      Attention:
        Duane Roth, Chief Executive Officer

       

                                                      
        With a copy to:    Foley
        & Lardner LLP

      402
        W.
        Broadway, 23rd
        Floor

      San
        Diego, CA 92101

      Facsimile
        No.: (619) 234-3510

      Telephone
        No.: (619) 685-4615

      Attention:
        Kenneth D. Polin, Esq.

       

                                                      
        If to Imcor:          
        Imcor
        Pharmaceutical Co.

      4660
        La
        Jolla Village Drive, Suite 540

      La
        Jolla,
        CA 92037

       

                                                      
        and
        to:                 
        Imcor
        Pharmaceutical Co.

      P.O.
        Box
        2389

      La
        Jolla,
        CA 92037

      Facsimile:
        (858) 410-5601

      Telephone
        No.: (858) 410-5602

      Attention:
        B. Jack DeFranco

       

                                                        With
        a copy to:   Grippo
        & Elden LLC

                                                                                      
        111
        S. Wacker Drive

                                                                                      
        Chicago,
        IL 60606

                                                                                      
        Facsimile
        No.: (312) 558-1195

                                                                                      
        Telephone
        No.: (312)-704-7733

                                                                                   
           Attention:
        Matthew I. Hafter

      

      or
        such
        other address as may be designated in writing hereafter, in the same manner,
        by
        such Person.

       

      19.  Amendments;
        Waivers.
        Except
        as expressly set forth herein, no provision of this Agreement may be waived
        or
        amended as between the Parties hereto except in a written instrument signed
        by
        the Parties. No waiver of any default with respect to any provision, condition
        or requirement of this Agreement shall be deemed to be a continuing waiver
        in
        the future or a waiver of any subsequent default or a waiver of any other
        provision, condition or requirement hereof, nor shall any delay or omission
        of
        either Party to exercise any right hereunder in any manner impair the exercise
        of any such right. 

       

      
        
          
          

        

        
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      20.  Construction.
        The
        headings herein are for convenience only, do not constitute a part of this
        Agreement and shall not be deemed to limit or affect any of the provisions
        hereof. The language used in this Agreement will be deemed to be the language
        chosen by the Parties to express their mutual intent, and no rules of strict
        construction will be applied against any Party. This Agreement shall be
        construed as if drafted jointly by the Parties, and no presumption or burden
        of
        proof shall arise favoring or disfavoring any Party by virtue of the authorship
        of any provisions of this Agreement or any of the documents contemplated
        hereby.

       

      21.  Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of the Parties and
        their successors and assigns. 

       

      22.  Governing
        Law; Dispute Resolution.
        All
        questions concerning the construction, validity, enforcement and interpretation
        of this Agreement shall be governed by and construed and enforced in accordance
        with the internal laws of the State of New York, without regard to the
        principles of conflicts of law thereof. In the event that a dispute arises
        between the Parties concerning this Agreement or the transactions contemplated
        herein, each Party agrees to designate an executive officer to negotiate
        within
        five business days after receipt of written notice of the dispute. The notice
        shall specify in reasonable detail the nature and circumstances of the dispute.
        Each Party’s representatives shall confer concerning the dispute for a period of
        thirty (30) days, and neither Party shall commence any legal action concerning
        the dispute until the expiration of such period (other than equitable action
        seeking non-monetary relief if necessary solely to preserve the
        status-quo).

       

      23.  Execution.
        This
        Agreement may be executed in two or more counterparts, all of which when
        taken
        together shall be considered one and the same agreement and shall become
        effective when counterparts have been signed by each Party and delivered
        to the
        other Party, it being understood that both Parties need not sign the same
        counterpart. In the event that any signature is delivered by facsimile
        transmission, such signature shall create a valid and binding obligation
        of the
        Party executing (or on whose behalf such signature is executed) with the
        same
        force and effect as if such facsimile signature page were an original
        thereof.

       

      24.  Severability.
        If
        any
        provision of this Agreement is held to be invalid, illegal or unenforceable
        in
        any respect, the validity and enforceability of the remaining terms and
        provisions of this Agreement shall not in any way be affected or impaired
        thereby and the Parties will attempt to agree upon a valid, legal and
        enforceable provision that is a reasonable substitute therefore, and upon
        so
        agreeing, shall incorporate such substitute provision in this
        Agreement.

       

      25.  Arm’s
        Length Negotiations.
        This
        Agreement is being entered into in good faith by the Parties and was negotiated
        through arm’s length bargaining.

       

      26.  Public
        Announcements.
        The
        Parties shall consult with each other prior to issuing any press releases,
        filing any Current Reports on Form 8-K or otherwise making any public statements
        with respect to this Agreement and the transactions contemplated hereby.
        Neither
        party shall issue any such press release, file such 8-K or make any other
        public
        statement without the agreement of the other Party, such agreement not to
        be
        unreasonably withheld; provided,
        however,
        in no
        event shall a Party be prevented from issuing a press release, filing an
        8-K or
        making any other public statement that such has been advised by counsel may
        be
        required by law.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the Parties have executed this Settlement Agreement as of
        the
        Effective Date.

       

      
        	 	 	 
	 	ALLIANCE
                PHARMACEUTICAL CORP.
	 
 	 
 	 
 
	 	By:  	/s/ Duane
                Roth 
	 	
                
Duane
                Roth, Chief Executive Officer
	 	 

      

       

      
        	 	 	 
	 	IMCOR
                PHARMACEUTICAL CO.
	 
 	 
 	 
 
	 	By:  	/s/ Brian
                Gallagher
	 	
                
Brian
                Gallagher, Chairman of the Board of
                Directors
	 	 

      

      
         

        [Signature
          Page to Settlement Agreement]

      

      

      

      
        
          
          

        

        
          10SECTION 1307 LOAN AGREEMENT

      THIS AGREEMENT, made and entered into as of the ___ day of July, 1998, by
and between LIPH, LLC, a limited liability company duly created, organized, and
existing under and by virtue of the Laws of the State of New York and having its
principal office at One Huntington Quadrangle, Suite 4C01, Melville, New York,
11747 (hereinafter referred to as "Lender"), and MDNY HEALTHCARE, INC., a
corporation duly created, organized, and existing under and by virtue of the
Laws of the State of New York and having its principal office at One Huntington
Quadrangle, Suite 4C01, Melville, New York 11747 (hereinafter referred to as
"Borrower").

                              W I T N E S S E T H:

      WHEREAS, Borrower desires to borrow the sum of $1.0 million and Lender is
willing to lend said sum to Borrower upon the terms, provisions and conditions
hereinafter set forth; and

      WHEREAS, the Insurance Law of the State of New York, Section 1307
(Contingent liability for borrowings) provides that a domestic insurer or health
maintenance organization may, without pledging any of its assets, borrow funds
pursuant to said Section 1307 upon the approval of the Superintendent of
Insurance of the State of New York.

      NOW THEREFORE, in consideration of the premiums and for other good and
valuable consideration, and intending to be legally bound hereby, Lender and
Borrower agree as follows:

      1. Upon approval of this Agreement by the Superintendent of Insurance of
the State of New York, Pursuant to Section 1307 of the New York Insurance Law,
Lender agrees to lend to Borrower, and Borrower agrees to borrow from Lender,
the sum of ONE MILLION DOLLAWS ($1,000,000) (THE "Loan"). Upon receipt of such
approval, Lender shall promptly disburse the full amount of the Loan to Borrower
in good and immediately available funds.

<PAGE>

      2. Interest shall accrue on the principal amount of the Loan at a per
annum rate equal to the Prime Rate (as defined in this Section 2) in effect on
the date hereof, adjusted as of each Interest Payment Date (as defined below in
Section 3), until the Loan has been repaid in full. "Prime Rate" means the rate
of interest publicly announced by Citibank N.A., New York, New York, or any
successor to such bank, as its prime rate from time to time. Notwithstanding the
foregoing, the per annum rate of interest on the Loan shall at no time exceed
that rate then permitted pursuant to the provisions of Section 5-501 of the
General Obligations Law of the State of New York and as further defined in
Section 14-a of the Regulations of the Department of Banking of the State of New
York, as amended.

      3. Accrued interest on the principal amount of the Loan shall be due and
payable to Lender on the first day of each calendar quarter, commencing with the
calendar quarter beginning on October 1, 1998 (each, an "Interest Payment
Date"), and the principal amount of the Loan shall be repaid to Lender in a lump
sum of July 1, 1999; provided, however, that in no event shall any principal or
interest payment in respect of the Loan be made except in accordance with the
provisions of Sections 4 and 6 hereof; and provided, further, that no default in
respect of the Loan shall have occurred or be deemed to have occurred if any
principal or interest payment that would otherwise be due and payable is not
made by reason of the provision of Sections 4 and 6 hereof.

      4. Notwithstanding anything to the contrary contained herein, repayment of
the principal of, and payment of accrued interest on, the Loan shall only be
made out of free and divisible surplus of the Borrower and all such amounts to
be paid or repaid will be subject to the prior approval of the Superintendent of
Insurance of the State of New York.

      5. The Loan made pursuant to this Agreement shall not form a part of the
Borrower's legal liabilities and shall not be a basis of any setoff, but, until
repaid, all statements published or filed with the Superintendent of Insurance
of the State of New York by Borrower shall show, as a footnote thereto, the
amount thereof then remaining unpaid.

      6. In the event of the liquidation of the Borrower, repayment of any
outstanding principal balance of the Loan and payment of any accrued and unpaid
interest then due and owing shall be paid to Lender out of any assets remaining
after the payment of all policy obligations and all other liabilities of the
Borrower but before distribution of assets to shareholders.

<PAGE>

      7. All payments of principal and interest payable by Borrower in respect
of the Loan shall be made to Lender at its offices at One Huntington Quadrangle,
Suite 4C01, Melville, New York 11747, or as otherwise directed by Lender in
writing. All interest payments shall be computed on the basis of a year of 365
days, in each case for the actual days elapsed (including the first day but
excluding the last) occurring in the period for which such interest is payable.
All payments in respect of the Loan shall be made in such coin or currency of
the United States as at the time of payment shall be legal tender for the
payment of public and private debts.

      8. This Agreement, and all of the comments and conditions hereinabove
contained, shall be binding upon and inure to the benefit of Lender and Borrower
and their respective successors, or assigns, and on request of Lender, Borrower
shall furnish to Lender such note, loan certificate, or other evidence of this
indebtedness, as Lender may request.

      9. This Agreement, and the rights and obligations of the parties
hereunder, shall be construed in accordance with, and governed by, the
provisions of Section 1307 of the New York Insurance Law.

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused these premiums to be
executed by their proper corporation officers as of the day and year first above
written.

BORROWER:

ATTEST:

/s/                                          By: /s/
------------------------------------             -------------------------------
      Secretary                                     President
                                                    Board of Director MDNY

LENDER:

ATTEST:

/s/                                          By: /s/
------------------------------------             -------------------------------
    Secretary                                         President
    Treasurer, LIPH

<PAGE>

                    AMENDMENT TO SECTION 1307 LOAN AGREEMENT

      THIS AGREEMENT, made and entered into this _ day of April, 1999, by and
between LIPH, LLC, a limited liability company duly created, organized and
existing under and by virtue of the Laws of the State of New York and having its
principal office at One Huntington Quadrangle, Suite 4C01, Melville, New York
(hereinafter referred to "Lender"), and MDNY HEALTHCARE, INC., a corporation
duly created, organized, and existing under and by virtue of the Laws of the
State of New York and having its principal office at One Huntington Quadrangle,
Suite 4C01, Melville, New York 11747 (hereinafter referred to as "Borrower"),
amends a certain prior agreement, made and entered into on or about July 9, 1998
between the parties, by which the Lender, in accordance with the terms of
section 1307 of the Insurance Law, loaned to the Borrower the sum of $1.0
million.

                              W I T N E S S E T H:

      WHEREAS, the prior agreement, in accordance with the terms of section 1307
of the Insurance Law, required Borrower to repay Lender principal and interest
on the loan out of free and divisible surplus of the Borrower at rates of
interest specified in the prior agreement, subject to the prior approval of the
Superintendent of Insurance of the State of New York; and

      WHEREAS, no payments have been made and the amount owed has been properly
recorded on Borrower's financial statements and required financial filings; and

      WHEREAS, the parties have agreed that it would be in their mutual best
interest to include a provision of the loan that would permit the loan to be
converted to equity.

      NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, and intending to be legally bound hereby, Lender and
Borrower agree as follows:

      1. Upon approval of the Agreement by the Superintendent of Insurance of
the State of New York, if such approval is necessary, the prior agreement is
amended to provide that the Lender shall have the unilateral right to convert
all or a portion of the above-described loan to an equity investment in Borrower
at any time while at least some principal and interest have remain unpaid.

<PAGE>

      2. In the event that Lender exercises the option to convert all or a
portion of the loan (including outstanding principal and interest) to equity,
the Borrower shall issue to Lender in Class A shares of Borrower an amount of
shares equal to the amount so converted. The valuation of the shares shall be
undertaken by the Board of Borrower, upon advice from an investment advisor, to
provide the Lender with the appropriate number of shares representing the value
of the converted principal and interest, calculated as of the date of the loan.

      3. In the event that any principal or interest has been repaid by the time
that the Lender exercises this option, the amount of any shares issued to Lender
will be reduced by such payments. In the event that only a portion of the
outstanding principal and interest has been converted by Lender, the amount of
any shares issued to Lender will correspond to the amount so converted.

      4. This Amendment to the prior agreement and the rights and obligations of
the parties hereunder, shall continue to be construed in accordance with, and
governed by, the provisions of Section 1307 of the New York Insurance Law and
other applicable provisions of Law.

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed by their proper corporate officers as of the day and year first above
written.

BORROWER:

ATTEST:

/s/                                          By: /s/
------------------------------------             -------------------------------
       Secretary                                        President

LENDER:

ATTEST:

/s/                                          By: /s/
------------------------------------             -------------------------------
      Secretary                                         President

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