<PAGE>

                                  EXHIBIT 10.36

                                                              September 26, 2005

STRICTLY PERSONAL AND CONFIDENTIAL

Mr. Robert L. Butchofsky
Acting Chief Executive Officer
c/o QLT Inc.
887 Great Northern Way
Vancouver, BC
V5T 4T5

Dear Bob:

                                  INTRODUCTION

      A dedicated executive management team is essential to protecting and
enhancing the best interests of QLT Inc. (the "Company" or "QLT") and its
shareholders. The Company wishes to provide its executives with compensation and
benefits arrangements which would come into effect in circumstances related to a
change in control which are competitive with those of other corporations, in
order to ensure the Company receives the benefit of the full attention and
dedication of the executives at all times, and notwithstanding any threatened or
pending change in control of the Company.

      The purpose of this Letter Agreement is to document the terms of the
severance package to which you as a Company executive shall be entitled if
material changes in the terms of your employment with the Company occur without
your consent, or if your employment with the Company is terminated, in
connection with a change in control of the Company. This letter agreement
replaces the letter agreement dated February 18, 2003 entered into between you
and the Company and also related to the events upon a change of control of the
Company.

            NOW THEREFORE in consideration of $10.00, the promises made by each
party to the other as set out in this Letter Agreement and other good and
valuable consideration, the receipt and sufficiency of which each of the parties
acknowledges, QLT and you agree as follows:

                                     PART I
                                   DEFINITIONS

1.1 DEFINITIONS. In this Letter Agreement:

     (a)  "AFFILIATE" has the meaning given to it in the Business Corporations
          Act (British Columbia);

     (b)  "BENEFIT PLANS" means the coverage under the Company's group benefit
          plan for employees which the Company provides to you and your eligible
          dependants, including all medical, dental, life and

<PAGE>

        other benefit plans but excluding short and long term disability
        coverage, out-of-province medical coverage and the RRSP contribution
        benefit;

     (c)  "BOARD" means the Company's Board of Directors;

     (d)  "CHANGE OF CONTROL" means any of the following events:

          (i)  MERGER. A merger, consolidation, reorganization or arrangement
               involving the Company other than a merger, consolidation,
               reorganization or arrangement in which stockholders of the
               Company immediately prior to such merger, consolidation,
               reorganization or arrangement own, directly or indirectly,
               securities possessing at least 65% of the total combined voting
               power of the outstanding voting securities of the corporation
               resulting from such merger, consolidation, reorganization or
               arrangement in substantially the same proportion as their
               ownership of such voting securities immediately prior to such
               merger, consolidation, reorganization or arrangement;

          (ii) TENDER OFFER. The acquisition, directly or indirectly, by any
               person or related group of persons acting jointly or in concert
               (other than the Company or a person that directly or indirectly
               controls, is controlled by, or is under common control with, the
               Company) of beneficial ownership of securities possessing more
               than 35% of the total combined voting power of the Company's
               outstanding securities pursuant to a tender offer made directly
               to the Company's stockholders;

          (iii) SALE. The sale, transfer or other disposition of all or
               substantially all of the assets of the Company other than a sale,
               transfer or other disposition to an Affiliate of the Company or
               to an entity in which stockholders of the Company immediately
               prior to such sale, transfer or other disposition own, directly
               or indirectly, securities possessing at least 65% of the total
               combined voting power of the outstanding voting securities of the
               purchasing entity in substantially the same proportion as their
               ownership of such voting securities immediately prior to sale,
               transfer or other disposition; or

          (iv) BOARD CHANGE. A change in the composition of the Board over a
               period of 24 consecutive months or less such that a majority of
               the Board members ceases to be comprised of individuals who
               either have been:

               (A)  Board members continuously since the beginning of such
                    period, or

               (B)  appointed or nominated for election as Board members during
                    such period by at least a majority of the Board members
                    described in subsection (A) above who were still in office
                    at the time the Board approved such appointment or
                    nomination.

     (e)  "INVOLUNTARY TERMINATION" means any one of the following:

          (i)  the termination of your employment by the Company or the giving
               of written notice to you by the Company of the intended
               termination of your employment, in either case for reasons other
               than cause, permanent disability or death, within the 24 month
               period following the occurrence of a Change of Control, or

<PAGE>

          (ii) your giving written notice to the Company, within 24 months after
               a Triggering Event, in which you advise that a Triggering Event
               has occurred and tender your resignation from employment with the
               Company;

     (f)  "SUCCESSOR" shall mean any corporation which is the legal successor to
          the Company, or which acquires substantially all of the assets of the
          Company, pursuant to a Change of Control;

     (g)  "TRIGGERING EVENT" shall mean, without your express written consent,
          the occurrence of any one or more of the following circumstances after
          a Change of Control:

          (i)  the assignment to you of any duties which are materially
               inconsistent, in an adverse respect, with your position,
               authority, duties or responsibilities prior to the Change of
               Control, or any other action by the Company or its Successor
               which results in a material diminution in such position,
               authority or responsibilities, except an isolated and inadvertent
               action not taken in bad faith and which is remedied by the
               Company or its Successor promptly after receipt of notice thereof
               from you;

          (ii) any reduction by the Company or a Successor in your base salary;

          (iii) a reduction by the Company or a Successor of 25% or more of your
               annual cash incentive compensation opportunity;

          (iv) the Company or a Successor's requiring you to, or notifying you
               that you will be required to, relocate to or be based at, or
               situate one day or more per week in, a location which is 100
               kilometers or more from the location where you were based
               immediately prior to the Change of Control;

          (v)  the failure by the Company or a Successor to continue,
               substantially as in effect immediately prior to the Change of
               Control, all of the Company's Benefit Plans, in which you
               participate (or substantially equivalent successor plans,
               programs, policies, practices or arrangements) or the failure by
               the Company or a Successor to continue your participation therein
               on substantially the same basis as existed immediately prior to
               the Change of Control;

          (vi) the failure of the Company to obtain an agreement from any
               Successor to assume and agree to perform this Letter Agreement,
               as contemplated in Section 3.5 of this Letter Agreement, and your
               Employment Agreement with the Company (the "Employment
               Agreement"); or

          (vii) any purported termination by the Company or a Successor of your
               employment other than for cause, permanent disability or death.

                                     PART II
                           CHANGE OF CONTROL BENEFITS

2.1 SEVERANCE PAYMENT. Upon the occurrence of an Involuntary Termination, you
shall receive a severance payment from the Company equal to the base salary,
maximum bonus entitlement, and maximum RRSP contribution to which you would have
been entitled in a 24 MONTH PERIOD (the "Severance Period"), calculated as
follows:

<PAGE>

     (a)  the rate of base salary will be that in effect at the time of the
          Involuntary Termination or as was in effect immediately prior to the
          occurrence of a Triggering Event, whichever rate is greater; and

     (b)  the maximum bonus entitlement will be calculated as the maximum amount
          available to you under the Company's cash incentive compensation plan
          at the time of the Involuntary Termination as if 100% of your
          individual goals (if applicable) and the corporate goals were met but
          not exceeded or the entitlement which was available to you immediately
          prior to the occurrence of a Triggering Event, whichever amount is
          greater, pro-rated for any portion of the Severance Period of less
          than a year; and

     (c)  a contribution to your RRSP, equal to that to which you would have
          been entitled had you been employed by the Company throughout the
          Severance Period, pro-rated for any period of less than a year, and
          subject to terms of the RRSP contribution provisions set out in your
          Employment Agreement with the Company.

2.2 OTHER COMPENSATION. In addition to the amounts paid under Section 2.1, upon
the occurrence of an Involuntary Termination, the Company shall:

     (a)  EXPENSES - reimburse you for all reasonable business related
          promotion, entertainment and/or travel expenses incurred by you during
          the course of your employment with the Company, subject to the expense
          reimbursement provisions set out in your Employment Agreement with the
          Company and the Company's Policy and Procedures Manual, as amended
          from time to time;

     (b)  VACATION - make a payment to you in respect of your accrued but unpaid
          vacation pay up to and including your last day of employment with the
          Company;

     (c)  RRSP - make a prorated contribution to your RRSP, the pro-ration to be
          with respect to the portion of the then current calendar year worked
          by you up to and including the last day of your employment with the
          Company and subject to the RRSP contribution provisions set out in
          your Employment Agreement with the Company;

     (d)  CASH INCENTIVE COMPENSATION EARNED PRIOR TO INVOLUNTARY TERMINATION -
          in addition to the payments under Section 2.1(b) above, the Company
          shall make a payment to you in respect of your entitlement to
          participate in the Company's cash incentive compensation plan in
          respect of the current calendar year, and the prior year if such
          payment has not yet been made, to be pro-rated with respect to the
          portion of the current calendar year worked by you up to and including
          your last day of employment with the Company and, in respect of the
          current calendar year, shall be calculated at the maximum annual bonus
          entitlement available to you under the Company's cash incentive
          compensation plan at the time of the Involuntary Termination as if
          100% of your individual goals (if applicable) and the corporate goals
          were met but not exceeded or the entitlement which was available to
          you immediately prior to the occurrence of any prior Triggering Event,
          whichever amount is greater;

<PAGE>

     (e)  BENEFITS - continue to provide you and your eligible dependants with
          coverage under the Company's Benefit Plans for a period of 30 days
          after your last day of employment with the Company and, at your
          request, for such further period (the aggregate of which shall not
          exceed the Severance Period) as the insurer shall permit, and for any
          period of the Severance Period during which such coverage is not
          maintained, the Company shall pay to you compensation in the amount of
          10% of your base salary, calculated in accordance with Section 2.1(a),
          provided that the Company's obligation to maintain coverage for you
          and your eligible dependants under this subsection will be conditional
          upon your and your eligible dependants remaining in Canada;

     (f)  MOVING EXPENSES - pay such moving expenses as may be reasonably
          incurred by you to relocate you and your family to a new location for
          future employment purposes or the location from which you traveled to
          Vancouver, as the case may be, including, in the event that you are
          unable to sell your home in Vancouver before you are required to pay
          costs of accommodation at your new location, the costs of such
          accommodation until you derive proceeds from the sale of you home in
          Vancouver, or six months, whichever period is longer, together with
          any additional relocation reimbursement to which you may then be
          entitled under the terms of your Employment Agreement with the
          Company, such expenses to be calculated and paid in accordance with
          terms of your Employment Agreement, provided that there is no
          duplication of payments pursuant to the Employment Agreement and this
          clause;

     (g)  OUT-PLACEMENT COUNSELLING - reimburse you for out-placement
          counselling services from a qualified counsellor to be agreed to by
          you and the Company to a maximum of CAD5,000 for services rendered to
          you in seeking alternative employment.

2.3 TIMING OF PAYMENT. The amounts set out in Sections 2.1 and 2.2 shall be paid
to you in a lump sum payment within 30 days of your Involuntary Termination,
except for the RRSP payments described in Section 2.1(c) and 2.2(d), which will
be payable in accordance with the terms of your Employment Agreement in the same
manner as if you were employed throughout the Severance Period.

2.4 NO DUPLICATION. The Company agrees that an Involuntary Termination by you,
as defined in subsection 1.1(e)(ii), shall constitute a termination of your
employment by the Company without cause pursuant to your Employment Agreement
and any other agreement in effect between you and the Company. In the event that
the severance payment and other compensation provisions set out in Sections 2.1
and 2.2 of this Letter Agreement and the severance payment provisions in your
Employment Agreement with the Company are both applicable, you agree that, upon
the Company's request, you shall give written notice to the Company with respect
to which agreement you wish to be paid out under and that you shall not be
entitled to severance pay under both agreements.

2.5 OPTIONS. Upon the occurrence of an Involuntary Termination, the provisions
of your Stock Option Agreement(s) with the Company shall govern all stock option
issues, including, without limitation, acceleration of vesting and the time
period remaining to exercise any vested options.

<PAGE>

2.6 ACKNOWLEDGEMENT. In the event of an Involuntary Termination, payment by the
Company of the amounts set out in Sections 2.1 and 2.2 or, if you elect to
receive severance under your Employment Agreement payment of the amounts set out
therein, in lieu of receiving a duplicative payment hereunder, shall be in full
and final satisfaction of all amounts that might otherwise be payable by the
Company to you by way of compensation for length of service, damages in lieu of
notice of termination or any other obligations arising under your employment
with the Company and the Company shall have no further obligations, statutory or
otherwise, arising out of or in respect of your employment and you shall execute
a complete and general release in the form set out in Schedule A as an express
condition of your right to receive the payments and benefits referred to in
Sections 2.1 and 2.2 or under your Employment Agreement, as the case may be. We
also both agree that the letter agreement dated February 18, 2003 entered into
between us is hereby terminated and is replaced by this letter agreement.

2.7 TERMINATION FOR CAUSE, PERMANENT DISABILITY OR DEATH. For greater certainty,
if your employment is terminated for cause, permanent disability or death or you
terminate your employment other than as an Involuntary Termination, you shall
not be entitled to payment of the amounts under this Letter Agreement and the
terms of your Employment Agreement with the Company shall govern.

2.8 WAIVER OF NON-COMPETITION COVENANT. Effective upon your Involuntary
Termination, the Company hereby waives any and all rights it has to insist upon
compliance with or to enforce any covenant, undertaking or agreement by you
under your Employment Agreement or otherwise, pursuant to which you have agreed
not to compete with the Company in your future employment or otherwise limit
your future employment opportunities. Your obligations of confidentiality to the
Company contained in your Employment Agreement shall remain in full force and
effect and are not altered by this Letter Agreement.

2.9 RIGHT TO WAIVE ANY AND ALL CONSIDERATION. In your discretion, upon your
written request to the Company made within 15 days of your Involuntary
Termination, you may elect to irrevocably waive your right to any of the
consideration payable by the Company pursuant to this Letter Agreement.

                                    PART III
                            MISCELLANEOUS PROVISIONS

3.1 TERM OF AGREEMENT. This Letter Agreement shall remain in effect for the term
of your employment with the Company and for a further six month period
thereafter, unless the parties mutually agree to an earlier termination,
provided that the expiry or termination of this Letter Agreement shall not
affect the rights and obligations of the parties arising under this Letter
Agreement prior to its termination or expiry.

3.2 LEGAL FEES. The Company shall pay, to the full extent permitted by law, all
legal fees and expenses which you may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company or its successors or
Affiliates, you or others of the validity or enforceability of, or liability
under, any provision of this Letter Agreement or any guarantee of performance
thereof (including as a result of any contest by you about the amount of any
payment pursuant to this Letter Agreement).

<PAGE>

3.3 WITHHOLDING TAXES. The Company may withhold from any amounts payable under
this Letter Agreement such federal, provincial, local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.

3.4 GENERAL CREDITOR STATUS. The benefits to which you may become entitled under
this Letter Agreement shall be paid, when due, from the general assets of the
Company. Your right (or the right of the executors or administrators of your
estate) to receive any such payments shall at all times be that of a general
creditor of the Company and shall have no priority over the claims of other
general creditors of the Company.

3.5 SUCCESSORS; BINDING AGREEMENT. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of its business and/or assets to assume and agree to
perform this Letter Agreement by express written agreement in the same manner
and to the same extent that it would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption and
agreement within 30 days of any such succession shall be a breach of this Letter
Agreement and shall entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled under this Letter
Agreement, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the date of the
Involuntary Termination.

3.6 DEATH. Notwithstanding anything else in this Letter Agreement, should you
die after becoming entitled to benefits under this Letter Agreement but before
receipt of all benefits to which you became entitled under this Letter
Agreement, then the payment of such benefits shall be made, on the due date or
dates hereunder had you survived, to the executors or administrators of your
estate.

3.7 GOVERNING LAW. The provisions of this Letter Agreement shall be governed by
and interpreted in accordance with the laws of the Province of British Columbia
and the laws of Canada applicable to this Letter Agreement. All disputes arising
under this Letter Agreement shall be referred to the Courts of the Province of
British Columbia, which shall have exclusive jurisdiction, unless there is
mutual agreement to the contrary.

3.8 NOTICE. The parties agree that any notice or other communication required to
be given under this Letter Agreement will be in writing and will be delivered
personally to the addresses set forth on page 1 of this Letter Agreement (or, in
your case, to the most recent address for you which the Company has on record),
or to such other addresses and persons as may from time to time be notified in
writing by the parties.

3.9 ENTIRE AGREEMENT. This Letter Agreement, the Employment Agreement and any
Stock Option Agreements you have with the Company constitute the entire
agreement between the Company and you with respect to the subject matter hereof,
and supersede all previous communications, understandings and agreements
(whether verbal or written) between the Company and you regarding the subject
matter hereof, including that certain letter dated February 18, 2003 from the
Company to you. To the extent that there is any conflict between the provisions
of this Letter Agreement, the Employment Agreement and any Stock Option
Agreements between you and the Company, the following provisions shall apply:

     (i)  If the conflict is with respect to an event, entitlement or obligation
          in the event of a Change of Control, the provisions of this Letter
          Agreement shall govern (unless you and the Company otherwise mutually
          agree).

<PAGE>

     (ii) If the conflict is with respect to an entitlement or obligation with
          respect to stock options of the Company, the provisions of the Stock
          Option Agreements shall govern (unless you and the Company otherwise
          mutually agree).

     (iii) In the event of any other conflict, the provisions of the Employment
          Agreement shall govern (unless you and the Company otherwise mutually
          agree).

3.10 SEVERABILITY OF PROVISIONS. If any provision of this Letter Agreement as
applied to either party or to any circumstance should be adjudged by a court of
competent jurisdiction to be void or unenforceable for any reason, the
invalidity of that provision shall in no way affect (to the maximum extent
permissible by law):

     (i)  The application of that provision under circumstances different from
          those adjudicated by the court;

     (ii) The application of any other provision of this Letter Agreement; or

     (iii) The enforceability or invalidity of this Letter Agreement as a whole.

If any provision of this Letter Agreement becomes or is deemed invalid, illegal
or unenforceable in any jurisdiction by reason of the scope, extent or duration
of its coverage, then the provision shall be deemed amended to the extent
necessary to conform to applicable law so as to be valid and enforceable or, if
the provision cannot be so amended without materially altering the intention of
the parties, then such provision shall be stricken and the remainder of this
Letter Agreement shall continue in full force and effect.

3.11 CAPTIONS. The captions appearing in this Letter Agreement have been
inserted for reference and as a matter of convenience and in no way define,
limit or enlarge the scope or meaning of this Letter Agreement or any provision.

3.12 AMENDMENTS. Any amendment to this Letter Agreement shall only be effective
if the amendment is in writing and is signed by the Company and by you.

3.13 REMEDIES. All rights and remedies provided pursuant to this Letter
Agreement or by law shall be cumulative, and no such right or remedy shall be
exclusive of any other. A party may pursue any one or more rights or remedies
hereunder or may seek damages or specific performance in the event of another
party's breach hereunder or may pursue any other remedy by law or equity,
whether or not stated in this Letter Agreement.

<PAGE>

3.14 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Letter Agreement shall
confer upon you any right to continue in the employment of the Company for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Company or you, which rights are hereby expressly reserved by
each, to terminate your employment at any time in accordance with the terms of
your Employment Agreement.

     Please indicate your acceptance of the foregoing provisions of this Letter
Agreement by signing the enclosed copy of this Letter Agreement and returning it
to the Company.

QLT INC.

By:   /s/ E. Duff Scott
    ------------------------------------
    E. Duff Scott, Chairman of the Board

ACCEPTED AND AGREED TO this 8th day of November, 2005 by:

Signature:    /s/ Robert. L. Butchofsky
            ------------------------------
            Robert L. Butchofsky