Field quantization in unstable optical systems is treated by expanding the vector potential in terms of non-Hermitean (Fox-Li) modes. We define non-Hermitean modes and their adjoints in both the cavity and external regions and make use of the important bi-orthogonality relationships that exist within each mode set. We employ a standard canonical quantization procedure involving the introduction of generalized coordinates and momenta for the electromagnetic (EM) field. Three-dimensional systems are treated, making use of the paraxial and monochromaticity approximations for the cavity non-Hermitean modes. We show that the quantum EM field is equivalent to a set of quantum harmonic oscillators (QHOs), associated with either the cavity or the external region non-Hermitean modes, and thus confirming the validity of the photon model in unstable optical systems. Unlike in the conventional (Hermitean mode) case, the annihilation and creation operators we define for each QHO are not Hermitean adjoints. It is shown that the quantum Hamiltonian for the EM field is the sum of non-commuting cavity and external region contributions, each of which can be expressed as a sum of independent QHO Hamiltonians for each non-Hermitean mode, except that the external field Hamiltonian also includes a coupling term responsible for external non-Hermitean mode photon exchange processes. The non-commutativity of certain cavity and external region annihilation and creation operators is associated with cavity energy gain and loss processes, and may be described in terms of surface integrals involving cavity and external region non-Hermitean mode functions on the cavity-external region boundary. Using the essential states approach and the rotating wave approximation, our results are applied to the spontaneous decay of a two-level atom inside an unstable cavity. We find that atomic transitions leading to cavity non-Hermitean mode photon absorption are associated with a different coupling constant to that for transitions leading to photon emission, a feature consequent on the use of non-Hermitean mode functions. We show that under certain conditions the spontaneous decay rate is enhanced by the Petermann factor.